Welcome - Mach 2013
Dear Readers,
Welcome to the March 2013 issue of REV. I’m pleased to report that the newest section of our Real Estate Valuation website, the Appraisal Education Directory, is growing every week. It is the first FREE national directory designed to connect appraisers with local schools and appraisal organization chapters across the country offering classroom QE and CE appraisal courses/seminar — not just our courses/seminars, but any appraisal course or seminar. If you have yet to do so, I encourage you to visit the directory today.
As always, if you have appraisal questions, please feel free to email me at askhenryharrison@revmag.com; for technical issues or other general questions regarding the publication, email our new editor, H Alex Harrison at webmaster@revmag.com.
Sincerely,
HSH
askhenryharrison@revmag.com
P.S, For information about free listings and advertising in our publications email: webmaster@revmag.com
Photo credit: Dezeen Magazine.
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Editorial
When will the Housing Market return to Normal?
by Henry S. Harrison
Last June, I answered an “Ask Henry” question from a reader: “When will the Residential Real Estate recession end?” My answer was that I thought that it would end beyond the term of whoever was elected President in November 2012. Between June and when Barack Obama was reelected President, the news media was full of press releases and commentator predictions that the country was well on its way to a real estate recovery.
On February 12, 2013, I listened to the President’s State of the Union Address. Here is what he said about the real estate recovery:
“Our housing market is healing, our stock market is rebounding, and consumers, patients, and homeowners enjoy stronger protections than ever before… Together, we have cleared away the rubble of crisis, and can say with renewed confidence that the state of our Union is stronger…Part of our rebuilding effort must also involve our housing sector. Today, our housing market is finally healing from the collapse of 2007. Home prices are rising at the fastest pace in six years, home purchases are up nearly 50 percent, and construction is expanding again… These initiatives in manufacturing, energy, infrastructure, and housing will help entrepreneurs and small business owners expand and create new jobs. But none of it will matter unless we also equip our citizens with the skills and training to fill those jobs. And that has to start at the earliest possible age…We’ll work with local leaders to target resources at public safety, education, and housing.”
Rave
Hi Henry,
I've been a reader of your magazine for twelve years, and have always enjoyed it. I have not read it in quite awhile, as I have been buried with things to do - but tonight I made time to sit down and savor it, as I have always enjoyed doing.
Two things I really like - first of all, the long all on one page design is so much nicer than the link back and forth between pages design. I liked it immensely - stay with this design!
And secondly, as I have only seen the picture of you that was taken in about 1965 or so (?) I had my doubts you were a real person, and if you were, you must be over 120 years old, as you never ever put a picture of yourself anywhere, save for the one file photo that is used exclusively. Now, in the latest edition, I see you do indeed exist, along with your wife Ruth, and your fine looking Son H Alex. You certainly look more "scholarly" in your recent picture. Your wife is beautiful, and your Son - now you have someone that can write a legal column - ! What a bonus!
Although I have not been around as long as some appraisers (only 12 years), I remember getting a folder from Forms and Worms the first day of my first appraisal class, here in Denver. I have purchased several books over the years, and have always appreciated that the books were totally complete, and I was thus able to learn and accelerate in my field very fast because of that.
If I were you, I'd get rid of your stock picture and make a new one with all three of you in it. Your audience is around your age, so we don't mind gray hair. It's a package deal - and your package is better than mine... so don't hide.
The best to everyone - and keep up the good work. Things are always improving.
To Success, and Nothing Less,
Rick Stillman
www.RickStillman.com
Ask Henry
Hi Henry,
On Christmas Eve evening I received a call from someone needing an appraisal. They wanted to put their house up for collateral to get a relative out of jail, and they needed an appraisal for the properties worth. The caller wanted it that evening. I was unable to provide the service as I had a house full of company, however I got to thinking about the request.
At that time of night I assume they were not interested in a full URAR report. I use the ClickForm software and can locate a Short Appraisal form and Desk Top Appraisal form. A Restricted Appraisal did not seem adequate.
Do you know what type of appraisal would have been acceptable for a bail hearing or to post bond assuming there is no MLS listing on the property? I will probably never get another call like this, but was just wandering what I could have done for the caller.
Thanks,
Jennifer
Dear Jennifer,
I have done some appraisals on short notice, but none like this. My lawyer friends, who do bail hearing work, tell me that it can be quite profitable. We tend to forget that the type of report that is needed — according the USPAP — should be determined as part of the "Scope of Work" communication that takes place between the appraiser and the client. This should include not only the type of report but more importantly the type of appraisal. Keep in mind that there is nothing in the USPAP that requires you to inspect the property. That said, you must always make a credible appraisal so you are going to have to include a credible description of the property and its condition.
Unfortunately, there is no standard about the type of appraisal required for a bail hearing. A good source for this information would be the bail bondsman. I don't think I would want to be in a situation where you had been paid for your appraisal, only to find that it was not what the court would accept.
My advice to you and other appraisers who might like to develop this type of work is to develop a relationship with the bail bondsmen in your area. If you have a lawyer friend who does this kind of work, they might be a good person to introduce you to some bail bondsmen (or women).
HSH
askhenryharrison@revmag.com
REV has partnered with VanEd.com to offer convenient and affordable online course and seminars. Now through 3/31/13, VanEd is offering 30% off online offerings for REV subscribers.
Architecture
NYC Micro-Unit Apartment Competition Winner
by H Alex Harrison, Esq.
adAPT NYC is a pilot program that was launched in July 2012 through a Request for Proposals to develop a new model of housing – micro-units. The proposals were evaluated on several criteria, including innovative micro-unit layout and building design. The MMNY proposal excelled in this category, with features like generous 9’-10” floor-to-ceiling heights and Juliette balconies that provide substantial access to light and air. The micro-units developed as part of this pilot will measure between 250 and 370 square feet.
Modular by design, the 55 micro-unit construction is reminiscent of the famous Habitat 67, designed by Moshe Safdie, which debuted at the 1967 Worlds Fair in Montreal, Canada. Safdie's design for Habitat 67 began as a thesis project for his architecture program at McGill University. Habitat 67 comprises 354 identical, prefabricated concrete forms arranged in various combinations, reaching up to 12 stories in height. Together, these units create 146 residences of varying sizes and configurations, each formed from one to eight linked concrete units.
The biggest difference between Habitat 67 and MMNY’s transforming use of interior space. In lieu of fixed spaces, MMNY apartments offer a novel and innovative use of “programmable space,” which allows occupants to adjust the size and use of a room depending on their needs throughout the day.
As micro-apartment living becomes more trendy, the appraisal industry will likely see an increase in appraisals of this type.
To view a video walkthrough of the My Micro NY concept, click here.
Appraisal Education Directory
Don’t see courses in your area? Please refer a school! We want the directory to offer the most comprehensive appraisal education directory online. Just email our editor H Alex, with the school name and some contact info and we will be sure to get their classroom courses and seminars into our directory ASAP.
JOIN OUR FREE MAILING LIST to be notified with updates, breaking news, and exclusive content!
Schools & Appraisal Chapters --> Submit up to 3 classroom listings for free! For more information, click here.
In The News
All 50 states Present on Latest
Improving Housing Markets Index
Market Watch, Valuation Review
Monday, February 18, 2013 – The number of improving housing markets continued to expand for a sixth consecutive month to a total of 259 metropolitan areas on the National Association of Home Builders (NAHB)/First American Improving Markets Index (IMI) for February. This is up from 242 markets listed as improving in January, and includes entrants from all 50 states and the District of the Columbia.
“Just over 70 percent of the 361 metros covered by the IMI are listed as improving this month,” said NAHB Chief Economist David Crowe. “That's a far cry from when we initiated this index with just 12 improving metros in September of 2011 for the purpose of highlighting places that didn't fit the mold of the national headlines. Today, the story is about how widespread the recovery has become as conditions steadily improve in markets nationwide.”
The IMI identifies metro areas that have shown improvement from their respective troughs in housing permits, employment and house prices for at least six consecutive months. A total of 20 new metros were added to the list and three were dropped from it this month.
Read the entire article at Valuation Review, by clicking here.
Ask Henry
Dear Henry,
I was recently contacted by a bank I have done appraisal reports for 12 years – mostly 1004 reports for secondary marketing, some 2055 reports for in house lending – the E-mail asked what we would charge to do some evaluations for renewal loans. To me, the word “evaluation” is a play on words and the same as an appraisal.
After the last few years of being questioned on every blank on the form, griding listings, extra comps etc. It is a shock to the system to be asked to do an evaluation of which we make up the form. I have heard of some appraisers in a nearby town and competing appraisers doing some evaluations with the greenhorn trainee.
Is this acceptable with the rules we live under?
Wendell Sears
wsears@centurytel.net
Dear Wendel,
The USPAP defines an appraisal as: "APPRAISAL: (noun) the act or process of developing an opinion of value; an opinion of value. adjective) of or pertaining to appraising and related functions such as appraisal practice or appraisal services.
Comment: An appraisal must be numerically expressed as a specific amount, as a range of numbers, or as a relationship (e.g., not more than, not less than) to a previous value opinion or numerical benchmark (e.g., assessed value, collateral value).....The use of other nomenclature for an appraisal, appraisal review, or appraisal consulting assignment (e.g., analysis, counseling, evaluation, study, submission, or valuation) does not exempt an appraiser from adherence to the Uniform Standards of Professional Appraisal Practice."
It seems clear to me that whenever you provide an opinion of value you must make an appraisal that conforms the all the USPAP requirements for making an appraisal. However, you do have a choice as to what reporting form to use. If the lender / client is going to be the only user of the report, then you may chose to use a Restricted Appraisal Report, which requires a lot less information. However, this does not excuse you from doing everything needed to make an appraisal.
I have been told that a few states allow "evaluations" that to not meet the USPAP requirements for an appraisal. Since enforcement of the USPAP is up to the individual state, and not the Appraisal Foundation, appraisers in those states may chose to make Evaluations. You should call the Appraisal Commission in your state and ask them the same question you are asking me. I’d be curious to hear their response!
Article
Homonyms to Worry About
by Dr. Poly Syllabic
A major challenge for foreign speakers of English is that it is replete with homonyms: words that sound alike, but have entirely different meanings. In fact, homonyms plague nearly everyone who tries to write coherently in English. They are easy to confuse, and hard to spot when proofreading.
The worst examples are shown below. It behooves you to print this list out and keep it close, especially for the person who is your designated office proofreader. Don't have one? Get one! Like a designated driver, a designated proofreader will keep you from making the grammar errors that reduce your credibility and lower client confidence.
Please feel free to send in other examples of homonyms or other annoying grammar errors that confuse appraisers and the public, for us to publish!
Regards!
Dr. Poly Syllabic
HOMONYMS TO WORRY ABOUT
THEY’RE = They are | THEIR = belonging to them | THERE = in a location
Their house is over there; they're replanting the garden.
YOU’RE = you are | YOUR = belonging to you
You're in a great market; it may be time to sell your house!
IT’S = It is | ITS = belonging to it
It's time for the league to change pitchers. Its best new starter is Andrews.
WE’RE = we are | WERE = happening in the past | WHERE = a place/location
We're all going to Disney, where we met last year. When we were there, we stayed in a super hotel.
COULD’VE = could have | COULD OF = simply incorrect. Use “could've,” but only if you really must!
We could've won the lottery, but missed by one number.
LOOSE = not tight | LOSE = not winning
His tie was loose and his hair was mussed, but he still didn't lose the poker hand.
EFFECT = result | AFFECT = act upon
The effect of the recession was to affect all the prices in the neighborhood.*
* Exception, in Psychology, when it is a noun, synonymous with "emotional state": His affect was troubling as it was very flat and unresponsive.
Ask Henry
Dear Henry,
Do you have an explanation as to why Fannie Mae allows the cost approach to be used for determining adequacy of insurance limits? Let me explain.
“The lender wants to be sure the property owner carries adequate insurance to protect the lender.”
If this were the case, why would the lender request the cost approach? The cost approach is a new construction based estimate, not the cost to rebuild after a loss. It may be more accurate to say that lenders need documentation to satisfy Fannie Mae requirements to sell their mortgages into the secondary market. The estimate from the cost approach will satisfy Fannie Mae, but that wouldn’t be adequate insurance to protect the borrower or the lenders’ collateral. The insurance industry has different cost guides.
- Marshall & Swift/Boeckh – RCT & BVS (not the same cost guide as the MVS books)
- Xactware – 360-Value
- e2Value
These are all reconstruction based replacement cost estimating tools. Borrowers that are advised to set their insurance limits based on the “replacement cost” estimate in the cost approach section of the real estate appraisal will be underinsured. They won’t have enough to fully recover from a total loss, and they’ll be in jeopardy of a coinsurance penalty on any partial losses.
So I ask again, can you explain why Fannie Mae allows the cost approach to be used for determining adequacy of insurance limits?
Regards,
J. Nixon
Dear John,
Fannie Mae & Freddie Mac do not require the Cost Approach but permit its use when the appraiser thinks it is necessary. If in your scope of work dialogue with the lender/client a cost approach is asked for I see nothing to prevent you from providing it. I do believe that the reproduction cost you provide could be useful to the lender. I don't understand why using the reproduction cost would result in the property being under insured. There are a variety of ways homeowner insurance policies are written concerning what definition of value will be used to determine the amount of a claim or the amount of insurance needed. Many insurance policies are based on the Actual Cash Value of the improvements. This is the depreciated value of the improvements. It does not include the value of the site and site improvements. Some policies are based on the Replacement Cost of the improvements. Usually this is less than the reproduction cost. The URAR starts the cost approach with an estimate of the "Reproduction Cost."
Welcome - Winter 2013
Dear Readers,
Enjoy the latest issue of the magazine. We have some new Ask Henry's, an article on the recently announced FHA reforms, and a glimpse of new construction in China that is sure to wow the environmentalists of the group. As always, if you have appraisal questions, please feel free to email me at askhenryharrison@revmag.com; for technical issues or other general questions regarding the publication, email our new editor, H Alex Harrison at webmaster@revmag.com.
Sincerely,
HSH
askhenryharrison@revmag.com
P.S, For information about free listings and advertising in our publications email: webmaster@revmag.com Photo credit: Lake Washington Cruises.
Ask Henry
Hi Mr. Harrison,
I inspected a home in one of the 5 Boroughs of NYC. The improvements to the property include a two family large structure that appeared to be brand new construction. I spoke to the developer who stated that in the construction process, they had left part of the old foundation. In other words, the old structure had been completely demolished, aside for part of the original foundation walls, and the new existing structure was put up in its place. This was done for tax purposes, as the NY tax dept considers this a 'renovation' not a new construction, and therefore, the taxes would not be drastically increased. The old structure was built in 1920. The new structure in 2012. My question is, if the entire new structure (above grade) and part of the foundation were built in 2012 and only a small amount of the foundation was built in 1920, What is the actual age of the structure?
Thank you for taking time to answer my question!
Nechama Arnold
Dear Nechama,
Since this is important information, the USPAP says you must provide it somewhere in your appraisal or in on addenda form. You actually have answered your own question: “The part of the foundation is 90 years old and the house is (new or less then 1 year)” is a perfectly adequate response. What stumps many appraisers is how to get this information on to the form being used. This depends on which form fill program you use. Depending upon the program, you might put into the box "90/1”, or “*”, or "see comments”.
If your form fill program does not let you indicate that an answer is incomplete, you should send a complaint to your software provider. If you use an addenda, which is often the best way to provide any special information, it is a good idea to put a statement on the first page of the form such as “Important information about this appraisal is included in the addenda.” This prevents anyone from removing the addenda from the report.
There is no number that will accurately reflect the actual age when different parts of the building were constructed at different times. However, you should reflect your estimate of the effective age in a single number.
You also might want to make a comment in your appraisal as to why this was done as it does effect the value of the property.
News
12/19/12 - The Federal Housing Administration’s Acting Commissioner, Carol J. Galante, announced Dec. 18 that she would implement substantial reforms to shore up the government mortgage program, which reported Nov. 14 that it was $16.3 billion in the red, Mortgage Daily reported.
The changes Galante will implement include limiting borrowers with credit scores less than 620 to a 43 percent total debt-to-income ratio. Borrowers with high debt-to-income ratios will be subject to manual underwriting and potentially to higher down payment requirements. The change is expected to cut claim rates by 20 percent.
The FHA also will eliminate its standard, fixed-rate home-equity conversion mortgages — a reverse mortgage program that allowed seniors to draw a large lump sum at closing, ranging from 62 to 77 percent of the property’s appraised value. Many seniors now are unable to keep up with payments and facing foreclosure.
Additional changes include reducing FHA market share by cutting loan-to-value ratios to 95 percent on loans greater than $625,000 and more closely scrutinizing borrowers with prior foreclosures.
“I've been working closely with (U.S. Department of Housing and Urban Development) Secretary (Shaun) Donovan and Acting Commissioner Galante over the past few weeks on ways we can put FHA on sound financial footing,” Sen. Bob Corker, R-Tenn., said in a news release, Mortgage Daily reported. Corker is member of the Senate Banking, Housing and Urban Affairs Committee. “While this is only a first step, I am encouraged that Acting Commissioner Galante has committed to structural reforms that we both believe put FHA in a much stronger position,” he said.
Read the full story here.
Ask Henry
Dear Henry,
Have you run across many lenders requesting the Cost Approach for insurance values when the intended use is for mortgage transaction? They are wanting the CA for properties where the result is not a credible result (very old homes).
It even states in the certification that the intended use is for mortgage financing, not insurance.
How would you handle this?
Tammy VanScoy
Office Manager
Daugherty Appraisers, Inc.
Dear Tammy,
I find nothing in the USPAP that prevents you from doing what the client requests as part of their scope of work. Some appraisers disagree with this opinion. They seem to base their opinion on the statement on most Fannie Ma/Freddie Mac forms that says: “INTENDED USE: The intended use of this appraisal report if for the lender/client to evaluate the property that is the subject of this appraisal for a mortgage finance transaction.” From the sound of your question it seems to me that this is what the lender is trying to do. The lender wants to be sure the property owner carries adequate insurance to protect the lender.
The only thing I could find in the current USPAP are Frequently Asked questions #174 and #292. They to me, support my position.
Article
No Spellchecker Will Help You:
How You Can Avoid Text Disasters
by Dr. Poly Syllabic
Dear Friends,
As an editor and technical advisor for the past 30+ years — both for my husband, real estate appraisal author Henry S. Harrison; and our daughter, Kate Lambert Harrison, CEO of GreenBrideGuide.com — I feel uniquely qualified to report on the state of written materials in our ever-more complex computerized era.
It's simple: much of the text material I read each day is incredibly, egregiously, annoyingly flawed!
In this age of spellcheckers and auto-fill, Siri and sexting, writing often becomes a process of "guesstimation" on the part of our computer helpers, and a current lack of skill on the part of many younger assistants and clerks.
I'm here to tell you that there are moments every day — in your correspondence, preparation of slides and PowerPoint presentations, and that press release your company wants sent out immediately to 2,000 reporters online — when no spellchecker can help you.
Reed this send tense and you'll sea rite of way what I mean.
In short, so many words in English are homonyms that a spellchecker can easily be fooled into misspelling a common word, and the only way I know to catch these errors is a very old trick: READ ALOUD.
Yes: after you've written and polished that excellent p.r. release, read it aloud. Read it to a colleague, read it to your six year old daughter, or even to your Golden Retriever -- but do not fail to read it out loud. Hearing what you've written is one tried and true method for catching those "idiot mistakes" that make your company look sloppy.
Bottom line: If you don't think spelling and grammar errors can damage your image, think again.
Regards,
Dr. Poly Syllabic
Editor’s Note: Dr. Poly Syllabic is a new blog that REV will publish on a semi-annual basis written by our former editor, Ruth Lambert. For grammar or writing questions, feel free to contact Ruth at ruth2@revmag.com.
News
10-31-12 - Bank of America was hit with a $1 billion civil mortgage fraud lawsuit Oct. 24 in which Manhattan U.S. Attorney Preet Bharara alleged the bank ran a scheme to defraud Fannie Mae and Freddie Mac, USA Today reported.
According to the lawsuit, Countrywide Financial, which was purchased by Bank of America in 2008, ran a program known internally as “Hustle” or “High Speed Swim Lane,” which pushed mortgages through the approval process without checking for fraud, misstatements and inaccuracies or missing information.
Bharara’s lawsuit, filed in U.S. District Court in New York, is the sixth such case filed against the nation’s biggest banks in the last 18 months by the Manhattan U.S. Attorney’s office.
Lawrence Grayson, spokesman for Bank of America, told USA Today that “at some point, Bank of America can’t be expected to compensate every entity that claims losses that actually were caused by the economic downturn.”
However, federal prosecutors said that it was fraud and not a bad economy that caused Bank of America to allegedly sell unqualified mortgages to Fannie and Freddie in order for them to be packaged into mortgage-backed securities. The lawsuit alleged that Countrywide employees were given bonuses between 2007 and 2009 based on the volume of mortgages they processed. The suit also claimed that the bank’s executives were aware of the faulty mortgages being issued; a January 2008 internal review indicated that 58 percent of “Hustle” loans defaulted, USA Today reported.
The complaint also noted that Fannie and Freddie failed to review the mortgages before purchase, instead relying on the bank’s statements regarding the quality of the loans.
Bank of America has denied all allegations.
Read the full article here.
Architecture
Urban Forest is a commercial high-rise building that takes the form of an urban mountain with over 70 floors, each one different and unique. Each floor is an abstract curved shape, layered slightly off-center to give the facade an organic look as it rises up into the sky. A central cylindrical core structure supports all the floors and hosts the mechanical systems and elevators.
Each floor is also covered in floor-to-ceiling glass windows, providing expansive views of the city. A walk-around balcony of differing widths hosts the green garden space, as well as pools, trees, and courtyards. Some floors are nothing but open space, while others contain offices or residential space. Each floor is seen as a separate and unique level of the urban forest and is meant to combine both nature and the urban metropolis.
Read more at SkyScraper Page Forum
Ask Henry
Hi Henry,
The subject is vinyl and a comp is brick veneer. Should an adjustment be made?
Thanks,
Susan
Dear Susan,
Most adjustments, including the one that you are asking about, depend upon how buyers in the market area of the subject property react to the difference between the subject property and the comparable sale. In some market areas there may be little difference in value between these two types of siding materials. In the market area where I live, brick veneer is more desirable than vinyl. Therefore, it would be necessary to make a downward adjustment to the comparable sale with brick veneer siding to reflect this difference.
Welcome - Fall 2012
Welcome to the Fall 2012 Online Edition of Real Estate Valuation Magazine.
Real Estate Valuation Magazine started in 1986. Since then, we have published over 100 issues—75 printed editions through the Spring of 2003, and 25 online issues since then. For the past 15 years, my wife and longtime collaborator, Ruth Lambert, has been the editor of REVMAG, assisted by our son, H Alex Harrison, who has been REV’s webmaster since we launched the site in 2003.
With this issue, Ruth is retiring from a long and successful career at REV Magazine. In June 2013, Ruth is receiving her MFA in Creative Writing from Goddard College (also my alma mater for my Masters in Adult Education). Thereafter, Ruth plans to start her next career as an author and teacher. Many of you know Ruth, and I am sure you will join us in wishing her well in her new endeavors.
We will continue publishing and writing for the magazine as in the past. H Alex is stepping in as Editor, effective this issue, and will continue on as REV’s webmaster.
H Alex is our youngest child (of four) and only son. He earned his J.D. from Northeastern University School of Law and B.A. from Sarah Lawrence College. He has worked for REV as webmaster since 2003, and I welcome his vision of REV as we launch a series of new initiatives in 2013 to embrace the digital age.
Many REV readers are former students of mine, which pleases me, as real estate appraisal education is now my primary occupation. I continue to write and update my books as needed, and we have expanded our online education in collaboration with Van Ed (www.vaned.com) in Denver, CO.
My newest seminar, “Basic Home Construction,” has just received AQB approval. It is suitable for both Appraisers and Realtors. It will be available shortly, for both classroom and online presentation. The course is based on my best-selling product knowledge book, HOUSES: The Illustrated Guide to Construction, Design and Systems, which has sold over 500,000 copies since its first publication in 1973. (HOUSES is currently being revised; an updated version will be published in 2013.)
What’s New: Starting with the next issue, REVMAG is launching a free national Appraisal Education Directory. This Directory will list available classroom and online appraisal courses and continuing education seminars on a state-by-state basis, by date. The Directory will be continuously updated based on information we receive from schools and appraisal chapters around the country. The Appraisal Education Directory is the first of its kind, offering a single centralized location for Real Estate Professionals in every state to find basic and continuing ed courses quickly and easily.
REVMAG is poised to grow! We look forward to hearing from you, our readers, about what you want us to focus on, what features you especially enjoy and appreciate, and what's working well for you. Enjoy this latest issue of the magazine! Be sure to sign up for our free email newsletter by entering your email address in the sign up box on the right. It is the easiest way to stay up-to-date regarding everything we offer.
Well wishes and accolades can be sent directly to Ruth (ruth2@revmag.com); any questions or suggestions should go to our new editor, H Alex Harrison (webmaster@revmag.com); and I always welcome personal messages and your appraisal questions as well. Please email me at: askhenryharrison@revmag.com
Just as our former Editor starts on her new path, REVMAG too is growing and changing every day.
HSH
askhenryharrison@revmag.com
P.S. For information regarding advertising opportunities and FREE p.r. in our Blog and email newsletters, please click here: ADVERTISING
Editorial
When Will the Residential Real Estate Recession End? (Part II)
On October 11th, the Federal Reserve lowered its forecast for growth slightly this year and forecast that the economy would grow slightly in 2013. I stated in my June Editorial (below, dated 6/03/12) that the key to the overall economic recovery, and especially to the recovery of the residential housing market, is new construction.
Here are the annual housing starts as reported by the US Census:
You don’t have to be an economist to understand what these figures are saying. To me, this table shows that all things being equal, we can absorb about 1,500 million single family houses per year, and starting in 1999, we started to over build. To absorb these extra houses, lenders sold homes to people who previously would not have qualified to buy them.
Once we absorb these extra houses, we should be able to build and absorb another 1,500,000 houses per year. Think what this will do for the economy! Millions of new jobs just to build the houses and millions more to produce what goes into them.
The bottom line is that it is hard to sell news when comparable used houses can be purchased at a much lower price. So far I don’t see much happening to rehabilitate and sell off the houses that have been foreclosed, plus at least another million houses that will be foreclosed in the next few years.
So to repeat my forecast made below from June 2012: In spite of what you read as part of the election campaign rhetoric, nothing much is going to happen in the next few years to improve the overall housing market. Keep in mind that as there will be local markets that buck the national trend and will improve sooner, and others that will improve slower.
Ask Henry
Dear Mr. Harrison,
While inquiring why my workload has slowed down, I was just informed by Streetlinks AMC that Chase has placed me on a banned list. Streetlinks cannot tell me why or for what reason. All they are saying is to get in touch with Chase.
I have tried 7 different numbers for Chase, Chase Financial, Chase Home Lending etc. and they are all telling me there is no appraisal department and no way to help me get this resolved. I even went into a Chase branch. Chase is telling me to go back to the AMC to find out who the contact person is. Naturally, Streetlinks does not give out that info and are directing me back to Chase, who directs me back to the AMC who directs me back to Chase who directs me back to the AMC and on and on and on.
I never received any notification from Chase explaining why they are banning me. It seems unfair that I can be placed on a 'do not use' list without any explanation or any chance to rebut what they felt is wrong with the appraisal. I’m not afforded any appeal, and I was informed that they share these lists. 10 years as an appraiser and not one single complaint, and now this and no one can tell me why or how? This is my livelihood! I have a mortgage and bills like everyone else. I cannot afford to not work.
Any help, suggestions, numbers to call...ANYTHING that you can offer that can help me resolve this would be truly and deeply appreciated.
Frustrated and unfairly treated,
Your Fan
P.S. I know it was with Streetlinks because they were the only AMC I was doing any work with.
Dear Fan,
Your situation is, unfortunately, not an isolated example of this unfair type of treatment. The easiest thing to do is hire an attorney to represent you. Other things that you can do is file complaints with the Appraisal Commission, or Banking Commission in your state.
Good luck, but I am not very hopeful that you will get satisfactory results no matter what you do.
Article
Number of Certified Appraisers on the Rise
Source: Appraisal Buzz
Excerpt: “Even with the myriad challenges in today's residential and commercial real estate markets, the percentage of appraisers with a certification is at an all-time high, according to Appraisal Institute research. However, because more than half of appraisers in the U.S. are age 51-65, and since many have left the industry in recent times, there needs to be a concerted and strategic effort to attract younger individuals into the profession.
The Appraisal Institute has analyzed the Appraisal Subcommittee National Registry data since 2006 using a consistent methodology, and the long-term trend is now clearer:
The number of appraisers continues to decrease at a rate of about 3 percent per year; Appraisal firms decreased the number of trainees dramatically over past two to three years; and The appraiser population could decrease 25 to 35 percent over the next 10 years due to age attrition and fewer new entrants....While the overall number of appraisers is decreasing, the number of certified general and residential appraisers is on the upswing.”
Comment: Interesting analysis. Well worth reading. Don't be “put off" by the AI promoting itself towards the end of the article. To read the article in full, click here.
Ask Henry
Hi Henry,
I have a question: If an appraiser works for a bank and reviews a property by another appraiser, then does an appraisal on the same property, and is an expert witness in court for the bank -- is that legal or illegal? Does that violate USPAP?
Please advise.
Thank you,
Christine
Dear Christine,
There is nothing in the USPAP that directly addresses this question. I am unaware of anything that would make this illegal. xThe USPAP does permit an appraiser to appraise the same property for more than one client. I think this would apply in your situation too. However, the USPAP does have rules about confidentially which would prohibit you from using any confidential information that appeared in the appraisal you reviewed for the bank.
Even so , I would not do it as it sounds to me like you would be looking for trouble. Trying to explain to a judge why you did this, which appears to be a conflict by giving as your reason that it is O.K. because of the USPAP is not a position I would like to be in. You should always think twice about appraising the same property for two different clients unless you feel that one will never have anything to do with the other. I don't even like being in the position of asking the first client for permission to do an appraisal for a second. You maybe bumping into the Confidentially rules by revealing to one client that someone else in interested in their property.
Book Review
by Steven J. Herzog, MAI
With Eunice H. Park
Soft Cover • 106 Pages • $45.00
Publication Date: 2012
Appraisal Institute
200 W Madison, St
Chicago, Il 60606
phone: 312 355-4400
www.appraisalinstitute.org
The first 16 pages of The Appraisal of Water Rights are an illustrated guide to the complex water rights situation in California, with maps and pictures of its vast water collection and distribution systems. While interesting, it has little to do with water rights appraising in the rest of the USA.
Next is a primer on “The Nature of Water Rights.” It cautions that, “It would be presumptuous and dangerous for the appraiser to think that the rules for one state could be applied to another without first performing extensive research.” However, no guidance is offered as to how to go about doing this research.
Seven types of water rights are described: Prescriptive rights, Pueblo rights, Groundwater rights, Riparian rights, Appropriative rights, Contractual entitlements, and Federal Reserve. This provides good introductory information about each of these types of rights.
Chapter 2 starts with the quotation: “You can transfer water if it is your water and not somebody else’s water, provided the transfer does not injure another water right holder or unreasonably affect instream beneficial use.” The chapter then goes on to explain the basics of transferring water.
It is important to understand that this book does not address how value is affected when a property abuts or is near water. In many markets, this is considered an amenity that may substantially add to the value of the property. However, this book is focused on how to buy, sell and transfer water rights.
What this book does is let the reader understand the complexities of water right transfer and valuation. However, the only way I can conceive that most appraisers could take such an assignment is to associate themselves with another appraiser well experienced doing this type of work.
News
SAN DIEGO, SEPT. 13, 2012 – DataQuick®, a provider of advanced real estate information solutions powered by data, analytics and decisioning, announced today that Frank V. McMahon has been named executive chairman of DataQuick.
In this new role, McMahon will play an active part in the management of many of DataQuick’s most significant client relationships and the development and execution of strategic priorities. He will participate in many of DataQuick’s growth initiatives, including the company’s plans to expand Rels Title. In addition, McMahon will continue to work with John Walsh, president of DataQuick, and the company’s senior management team on product development, operational, partner and client initiatives.
McMahon will continue to serve as a member of the Advisory Board of Decision Insight Information Group (DIIG), the holding company that owns DataQuick as well as Marshall & Swift/Boeckh (MSB), Decision Insight Information Group–Europe and Access Point Information Canada.
“Frank has provided invaluable insight and direction to DataQuick and the other DIIG businesses as an Advisory Board Member,” said Chris Cartwright, chief executive officer of DIIG. “His expanded role will allow him to leverage his extensive industry experience to help DataQuick meet the needs of our clients and grow more effectively.”
McMahon has served as a consultant to TPG Capital, DIIG’s parent company, since 2010. Prior to this, he served as CEO of the Information Solutions Group at The First American Corp. for two years and as vice chairman and CFO of the company for two years. Despite challenging economic and market conditions in 2008 and 2009, the Information Solutions Group grew under McMahon’s leadership achieving GAAP EBITDA of $484 million in 2009. Prior to 2006, McMahon spent 20 years as an investment banker with Merrill Lynch and Lehman Brothers.
McMahon graduated with a bachelor of science degree in Economics from Villanova University and a masters of business administration from the Fuqua School of Business at Duke University.
About DataQuick
San Diego-based DataQuick, a Decision Insight Information Group Company, delivers advanced information solutions powered by higher quality data, innovative analytics and automated decisioning across a national footprint. The company drives better decision making and improved profitability for the real estate, mortgage lending and secondary investor markets. DataQuick’s integrated solutions include property data and analytics, appraisals and non-appraisal evaluations, flood determinations, mortgage credit reports, automated valuation models, automated decisioning software, title insurance and property information, property research portals and marketing tools. For more information, visit the company’s website at www.dataquick.com, on LinkedIn or on Twitter at @DataQuick.
About Decision Insight Information Group
Decision Insight Information Group, located in the U.S., Canada and Europe, delivers a comprehensive range of information, infrastructure and decision support products and services for financial and legal professionals. Operating at the heart of the property industry, Decision Insight Information Group manages complex information solutions and provides clarity on decision making for buying, selling, conveyancing, financing and insurance. Decision Insight Information Group companies include MSB and DataQuick in the U.S., Access Point Information Canada, SearchFlow, xit2 and Decision Insight Hub in the UK, Millar & Bryce in Scotland, Rochford Brady Group in the Republic of Ireland, Wertweiser, a joint venture with HVB Bank, in Germany, and Decision First, a joint venture with First Title, in the UK. Decision Insight Information Group has 1,100 employees in 16 offices. For more information, visit www.decisioninsightgroup.com. Decision Insight Information Group is a TPG Capital portfolio company.
Ask Henry
Dear Henry,
I am appraising an unique property. It is located in an area that has very few duplex's. There are no resent sales in the subject's city. I know I can go to a similar neighborhood to get comps however the neighborhoods are in a different city with different tax base. This area of South Florida has many different cities within a 10 mile area. How far can I go from the subject property and still be considered a comparable neighborhood?
Thank You for you help,
E.
Dear E.,
There are no USPAP requirements that limit the distance you can go to find the best comparable sales. Actually, it is just the opposite because it is a violation of the USPAP to limit your search for the best comparable sales based on instructions from the client. However, it is O.K. for a client to ask you to explain why you needed to go some unusual distance to find the most comparable sales.
Sometimes the market area in which the best comparable sales are located is very limited because it is near a university, hospital, or public transportation, etc. An opposite example is when a typical wealthy buyer, who is working in New York City, considers buying a mansion in Long Island NY, Morristown NJ or Greenwich CT, then you may end up looking for comparable sales in three different states.
Article
New USPAP Frequently Asked Questions & Answers
Effective Date: January 1st, 2012 - December 31st, 2013
If you look carefully at the 2012-2013 Uniform Standards of Appraisal Practice you find a separate section of 159 pages answering 321 questions. It reminds me of when I walk into an attorney’s office and looked at their book shelves. The number of books that interpret the Connecticut statutes were far greater then the number of books that contain the statutes.
When I receive an “Ask Henry” question the first thing I do is look up the subject it covers in this FAQ section of the current USPAP. Often I am able to use what I find as the basis for my answer. (If you have the electronic version of the USPAP it is easy to look for a subject by using the search function).
After publishing the current USPAP (2012-2013), the Appraisal Foundation continues to publish answers to frequently asked questions. You can see these questions and all the 2011 questions at www.appraisalfoundation.org. (On the right side of their home page click on the “Appraisal Standards Board (ASB) – USPAP Q&As” tab which will take you to eight new 2012 questions and seven 2011 questions.)
Below is a list of the 2012 USPAP Questions and my summary of these questions and answers:
Ask Henry
I have been doing lender work for the past 13 years and would like to get more involved in doing non-lender work including estate work, trusts, divorce, bankruptcy, tax appeals, gifting, etc. Do you know of any good books or courses that cover any or all of this?
Thanks,
Steve H.
Dear Steve,
There are some good books and articles covering this subject. I suggest you contact the Lum Library and ask them for help.
Lum Library
550 West Van Buren St
Suite 1000 Chicago IL
606087
tel: (312) 355-4100. You can also send your question to them by email: ailibrary@appraisalinstitute.org
Editorial
When Will the Residential Real Estate Recession End?
Soon, later or never? I predict it will last beyond the term of whomever is elected president this fall.
In 2005, my neighbor, the Yale economist Robert Shiller, predicted in “Irrational Exuberance, 2nd Edition” that the Housing Bubble would soon burst. He was called Dr. Doom in the media, and ignored by most people, especially those in government who might have done something to avert the pending crisis.
The bubble did not burst all at once, as in a stock market crash, but rather, values fell more gradually in some markets and much faster in others, proving once again that there is no "national" real estate market in the country, but rather many different markets, each highly dependent upon location (location, location, location).
Now we are coming up to a national election in the fall of 2012 and we keep hearing murmurs that the end is in sight. This may be true in some localities, like the San Francisco Bay area, but I believe it is wishful thinking in most places in the United States. During 2011, over a million houses were actually foreclosed or sold via short sales. Almost double that number entered into the foreclosure process. The current slow down in foreclosures is not due to the improved economy but rather to a slow down caused by the courts, who are now insisting that the foreclosure documents be legally correct. (Revelations of widespread fraud in document preparation has led to what is probably a temporary reprieve for many homeowners who are currently under water.) There are now about 100 million detached single family homes in the United States of which nearly 15 million are underwater. Furthermore millions of them are vacant.
Here is my own experience, which I believe is typical for Florida and many other parts of the country. The house that we purchased three years ago was built in 1995, at a cost including the site of about $225,000. At its peak in 2005, it was worth about $375,000. We bought it for $130,000 and today it would sell for about $110,000. The cost to build it today would be about the same as in 1995, that it, about $225,000. In our solvent 55+ development with nearly 800 units, about 10% of the houses are on the market. This figure has been constant for the past three years, because as fast as houses are being sold, others come on the market. There are practically no new houses being built in our market area. And there is nothing on the horizon that I can see that is going to significantly change this picture in the near future.
I know two families whose homes have been in foreclosure for over a year. Neither of them make any payments on their mortgage, or pay any taxes. If they were served papers today, it would take six months to a year to actually foreclose their homes and get them out. The lender would then have to fix up the houses, which both have deferred maintenance, and will likely take a 25% to 50% loss on both properties. Their neighbors who have been making their payments all along feel like fools whenever they learn that a delinquent homeowner is not only not being foreclosed on, but often having their mortgage renegotiated with more favorable terms. It makes those folks who are "playing by the rules" feel duped by the system.
I don’t see any quick fix to this problem. What will happen if the government forces the banks to "write down" the mortgages for delinquent homeowners — and doesn't do something similar for those people who've been making their payments all along, even though the value of their home has fallen below the unpaid amount of their mortgage?
I know from what I hear first hand and read that these two examples are duplicated in millions of situations throughout the country. When the bubble burst, those of us who predicted it would take at least 10 years for a recovery were accused of being "gloom and doomers." I predict that in 2015, we will be thought of as too optimistic!