318) Condominium Or Not
05/14/08 Keyword: condo
Dear Henry,
A lender wants me to use a 1004 form for a dwelling zoned condominium. I am refusing to do this because of the pertinent data that will not be included. Who is correct?
Julie jrvitucci@ptd.net
Dear Julie,
When the appraisal is being done for Fannie Mae or Freddie Mac you should try to guide the lender to use a form that will be acceptable to them. However, it is up to the Lender/Client, as part of the scope of work, to determine what type of report they want.
Of course, you don't have to agree to do the job if you don't like their decision.
In you specific question I do not think it is the zoning that determines if the property is a condominium. It is how the property is improved and if it is in the condominium form of ownership.
H2
A lender wants me to use a 1004 form for a dwelling zoned condominium. I am refusing to do this because of the pertinent data that will not be included. Who is correct?
Julie jrvitucci@ptd.net
Dear Julie,
When the appraisal is being done for Fannie Mae or Freddie Mac you should try to guide the lender to use a form that will be acceptable to them. However, it is up to the Lender/Client, as part of the scope of work, to determine what type of report they want.
Of course, you don't have to agree to do the job if you don't like their decision.
In you specific question I do not think it is the zoning that determines if the property is a condominium. It is how the property is improved and if it is in the condominium form of ownership.
H2
317) Personal Photos
05/13/08 Keyword: comp
photos
Hi Henry,
In a recent appraisal seminar, there was a question about difficulty regarding photographs of people when taking interior photos. Removing pictures from the wall in someone’s living room can be a sticky wicket. I suggested using a photo editor to just cut the center of the wall photos out. The instructor said it was altering the photos. Therefore, it was not allowed.
Am I missing something? I sent an interior photo with an appraisal one time. It had a photo on the wall depicting a person that I didn’t notice. The reviewer returned the appraisal report for correction. I cut the center of the photograph out (with the image) leaving the picture frame. Then I resent the report. The underwriter reviewer said that would be fine and accepted the report.
What do you think?
NWBR
Dear Friend,
I do not think that what you've learned about photographs is correct. It is true you cannot take a picture of a person and then sell it for commercial purposes. I doubt that applies to someone who happens to be in one of your appraisal photos, or (as in this case) in a picture on the wall, and who is not even identified.
As far as not taking a photo of a picture on someone's wall — frankly, that sounds pretty far out to me. Did you get any written material that contains the source of this "requirement"?
H2
In a recent appraisal seminar, there was a question about difficulty regarding photographs of people when taking interior photos. Removing pictures from the wall in someone’s living room can be a sticky wicket. I suggested using a photo editor to just cut the center of the wall photos out. The instructor said it was altering the photos. Therefore, it was not allowed.
Am I missing something? I sent an interior photo with an appraisal one time. It had a photo on the wall depicting a person that I didn’t notice. The reviewer returned the appraisal report for correction. I cut the center of the photograph out (with the image) leaving the picture frame. Then I resent the report. The underwriter reviewer said that would be fine and accepted the report.
What do you think?
NWBR
Dear Friend,
I do not think that what you've learned about photographs is correct. It is true you cannot take a picture of a person and then sell it for commercial purposes. I doubt that applies to someone who happens to be in one of your appraisal photos, or (as in this case) in a picture on the wall, and who is not even identified.
As far as not taking a photo of a picture on someone's wall — frankly, that sounds pretty far out to me. Did you get any written material that contains the source of this "requirement"?
H2
316) Fraudulent Appraisal
05/12/08 Keyword: USPAP
Violation | fraud
Dear Henry:
I ran into an interesting situation on a current appraisal order. The property (8.24 acres) has two units on it. One is the subject to be appraised. The other is a finsihed (but vacant) apartment above a barn, with seperate utilities meters. The zoning is single-family residential (2 acres minimum). The client wants me to not mention the second vacant structure. The bank he is dealing with wants it on a Form 1025 (but the zoning will not allow that). My own thought is to treat it as two single-family structures, but then how do I handle the property?
Help!
Larry KowittL@aol.com
Dear Larry,
The USPAP prohibits you from making an appraisal that you think may be used to mislead someone. That is what this sounds like to me.
H2
I ran into an interesting situation on a current appraisal order. The property (8.24 acres) has two units on it. One is the subject to be appraised. The other is a finsihed (but vacant) apartment above a barn, with seperate utilities meters. The zoning is single-family residential (2 acres minimum). The client wants me to not mention the second vacant structure. The bank he is dealing with wants it on a Form 1025 (but the zoning will not allow that). My own thought is to treat it as two single-family structures, but then how do I handle the property?
Help!
Larry KowittL@aol.com
Dear Larry,
The USPAP prohibits you from making an appraisal that you think may be used to mislead someone. That is what this sounds like to me.
H2
315) Comparables from Files
05/11/08 Keyword: comps
Dear Henry --
I am appraising several condo conversions in the same building, in an area where there are very few. The only conversions suitable as comps are in another building that I did the appraisals for. Is it in violation of USPAP to use my own work as comps?
NWBR
Dear Friend,
The only data you can't use from you own appraisals is information about the subject property that you were given in confidence by the owners or client. In real life, this is quite rare.
If in doubt, you should ask the original client for permission, or see if the data is actually confidential and not also obtainable from an MLS service, assessor's records, etc. If the information is in the public domain, it is not confidential.
H2
I am appraising several condo conversions in the same building, in an area where there are very few. The only conversions suitable as comps are in another building that I did the appraisals for. Is it in violation of USPAP to use my own work as comps?
NWBR
Dear Friend,
The only data you can't use from you own appraisals is information about the subject property that you were given in confidence by the owners or client. In real life, this is quite rare.
If in doubt, you should ask the original client for permission, or see if the data is actually confidential and not also obtainable from an MLS service, assessor's records, etc. If the information is in the public domain, it is not confidential.
H2
314) Comparable Sales
05/10/08 Keyword: comps
Dear Henry,
I am in the process of completing home appraisals for a bank for a "revocable Trust and Conservatorship. Is it appropriate to use "bank owned" sales or should I exceed the 1 mile limit in order to find concventional or FHA sales. Most of the "bank owned homes" are selling for cash at a much lower price. Bank owned homes are usually foreclosurers and are considered "stress sales".
CHARLES HARVEY CHJRASSOCIATE@AOL.COM
P.S. Again, thanks for all of the information you provide in your publications and your books!
Dear Charles,
I believe it is best to use both "bank owned sales" and regular sales when they both exist in your market area. Who gave you the "1 mile limit?" I believe it is up to the appraiser to look wherever they believe the best comparable sales are located. It is not appropriate for the client to tell the appraiser where to look or what kind of comparable sales to use. While a radius of 1 mile might be preferred if there were a lot of good comps, it is not a hard and fast rule by any means.
H2
I am in the process of completing home appraisals for a bank for a "revocable Trust and Conservatorship. Is it appropriate to use "bank owned" sales or should I exceed the 1 mile limit in order to find concventional or FHA sales. Most of the "bank owned homes" are selling for cash at a much lower price. Bank owned homes are usually foreclosurers and are considered "stress sales".
CHARLES HARVEY CHJRASSOCIATE@AOL.COM
P.S. Again, thanks for all of the information you provide in your publications and your books!
Dear Charles,
I believe it is best to use both "bank owned sales" and regular sales when they both exist in your market area. Who gave you the "1 mile limit?" I believe it is up to the appraiser to look wherever they believe the best comparable sales are located. It is not appropriate for the client to tell the appraiser where to look or what kind of comparable sales to use. While a radius of 1 mile might be preferred if there were a lot of good comps, it is not a hard and fast rule by any means.
H2
313) FHA Application Nightmare
05/09/08 Keyword: FHA
Dear Henry and Ruth,
I sent in my FHA Application paperwork via fax with the test back in late November 2007. Seventeen weeks later —yes, 17 !! — my name was still not on the list and I had not received a denial letter. I contacted every number at their webpage. Since I sent in my paperwork there was a change that meant no test and no faxes. So, I sent my new paperwork without the test, by certified mail, and the Post Office shows delivery confirmation on 4/07/2008
Now that they are changing again, do you think it will take another 17 weeks for a reply? Not trying to be crappy but I am doing NO business and am really hurting. Got any suggestions?
Thanks,
Chris
Dear Chris,
Unfortunately, when the FHA gets swamped, as they have in this situation, the best they can think of doing is starting over and not worrying about the piles of unanswered stuff that is hanging around somewhere in their offices. Maybe some day they will get to it. Frankly, I have my doubts.
My suggestion is to start over on the first day of the online application process, on May 5th, and hope that you are one of the first to be replied to. Maybe you should stay up the night before and send it in at 12:01 AM! Here's the link: http://www.hud.gov/offices/hsg/sfh/appr/apr_rost.cfm
H2
I sent in my FHA Application paperwork via fax with the test back in late November 2007. Seventeen weeks later —yes, 17 !! — my name was still not on the list and I had not received a denial letter. I contacted every number at their webpage. Since I sent in my paperwork there was a change that meant no test and no faxes. So, I sent my new paperwork without the test, by certified mail, and the Post Office shows delivery confirmation on 4/07/2008
Now that they are changing again, do you think it will take another 17 weeks for a reply? Not trying to be crappy but I am doing NO business and am really hurting. Got any suggestions?
Thanks,
Chris
Dear Chris,
Unfortunately, when the FHA gets swamped, as they have in this situation, the best they can think of doing is starting over and not worrying about the piles of unanswered stuff that is hanging around somewhere in their offices. Maybe some day they will get to it. Frankly, I have my doubts.
My suggestion is to start over on the first day of the online application process, on May 5th, and hope that you are one of the first to be replied to. Maybe you should stay up the night before and send it in at 12:01 AM! Here's the link: http://www.hud.gov/offices/hsg/sfh/appr/apr_rost.cfm
H2
312) Foreclosure Value
05/08/08 Keyword: forclosure
| value
Dear H2,
Have always enjoyed your publications over my thirty some years in the business. Maybe you can help me now: I have been trying to find a definition for foreclosure value. It appears to be a supplemental term and does not appear in USPAP. Many thanks!!!
Joan M Conrad c21rksappraisals@epix.net
Dear Joan,
I do not know of any published definition of "Foreclosure Value." I suspect this is because there are so many variables that determine what a property is worth that has been foreclosed. For example, a house sold on the courthouse steps by the sheriff in Florida would have a different value than a similar house in "strict foreclosure" in Connecticut. What you need to do is ask your client for what they mean by "foreclosure value" and then write a definition and have your client — as part of the scope of work discussion — agree that they will accept your definition.
H2
Have always enjoyed your publications over my thirty some years in the business. Maybe you can help me now: I have been trying to find a definition for foreclosure value. It appears to be a supplemental term and does not appear in USPAP. Many thanks!!!
Joan M Conrad c21rksappraisals@epix.net
Dear Joan,
I do not know of any published definition of "Foreclosure Value." I suspect this is because there are so many variables that determine what a property is worth that has been foreclosed. For example, a house sold on the courthouse steps by the sheriff in Florida would have a different value than a similar house in "strict foreclosure" in Connecticut. What you need to do is ask your client for what they mean by "foreclosure value" and then write a definition and have your client — as part of the scope of work discussion — agree that they will accept your definition.
H2
311) 2055 for Mixed Use
Dear Henry:
I just received an order to appraise a mixed use property on a 2055 - exterior only inspection report. I have never been asked to do this and frankly I'm having my doubts as whether is is legal.
Thanks
Debra ddilley13@comcast.net
Dear Debra,
There is nothing illegal about using anything you want as an appraisal report. However it does have to comply with the USPAP. There is nothing in the USPAP that requires any inspection of the property. However, the USPAP requires that you make a credible appraisal and this, in turn, requires that you have reliable information about the property.
Also you can't make an appraisal if you believe its purpose is to deceive someone. You need to have a scope of work discussion with the client and try to find out why they want you to use this form and only make an exterior inspection. If you are satisfied with their answer and you think you can do it on the 2055 and they are willing to pay you the fee you require, then I suppose you could do the assignment.
H2
[Editor's Note: Anyone doing appraisals on the 2055 form needs Henry's book on the subject to protect themselves from added liability. Buy now and save $30, click here.]
I just received an order to appraise a mixed use property on a 2055 - exterior only inspection report. I have never been asked to do this and frankly I'm having my doubts as whether is is legal.
Thanks
Debra ddilley13@comcast.net
Dear Debra,
There is nothing illegal about using anything you want as an appraisal report. However it does have to comply with the USPAP. There is nothing in the USPAP that requires any inspection of the property. However, the USPAP requires that you make a credible appraisal and this, in turn, requires that you have reliable information about the property.
Also you can't make an appraisal if you believe its purpose is to deceive someone. You need to have a scope of work discussion with the client and try to find out why they want you to use this form and only make an exterior inspection. If you are satisfied with their answer and you think you can do it on the 2055 and they are willing to pay you the fee you require, then I suppose you could do the assignment.
H2
[Editor's Note: Anyone doing appraisals on the 2055 form needs Henry's book on the subject to protect themselves from added liability. Buy now and save $30, click here.]
310) Mansions
05/06/08 Keyword: mansions
Hi Henry,
I am anticipating an assignment to appraise what I am told is the largest house in the state, with all of the expected ammenities. I look forward to the assignment, but must admit that I am scratching my head as far as how to effectively research for comparable sales.
I think I remember hearing that this is the type of work that you used to do and would appreciate any direction.
Best regards,
Bruce bjones@gaglianoappraisal.com
Dear Bruce,
Before I retired from appraising and became a full-time appraisal author, I specialized in mansions and I traveled all over the USA doing them. The first thing you must do is figure out the highest and best use of the land, which often is not as a mansion. If you decide it is still going to be used as a mansion, then you have to look for other mansion sales in similar markets. If the highest is best use is say for a country day school, then you look for school sales as comparables.
Good luck! I think you will find this an interesting assignment.
H2
I am anticipating an assignment to appraise what I am told is the largest house in the state, with all of the expected ammenities. I look forward to the assignment, but must admit that I am scratching my head as far as how to effectively research for comparable sales.
I think I remember hearing that this is the type of work that you used to do and would appreciate any direction.
Best regards,
Bruce bjones@gaglianoappraisal.com
Dear Bruce,
Before I retired from appraising and became a full-time appraisal author, I specialized in mansions and I traveled all over the USA doing them. The first thing you must do is figure out the highest and best use of the land, which often is not as a mansion. If you decide it is still going to be used as a mansion, then you have to look for other mansion sales in similar markets. If the highest is best use is say for a country day school, then you look for school sales as comparables.
Good luck! I think you will find this an interesting assignment.
H2
309) Fannie/Freddie Changes
05/05/08 Keyword: Fannie Mae
| Freddie
Mac
Hi Henry,
I've just had a moment to stop and read your recent questions and answers - which I always look forward to. I'm actually writing to express my frustration over the results that the Fannie/Freddie changes have bestowed upon us to date. Our largest client (which we have worked with for many years) just switched to ServiceLink, an appraisal management company, to avoid any appearance of lender pressure.....and what a horror it has become. We are in a resort area in southwest Florida and have enjoyed reasonable appraisal fees over the years. We were just contacted by this management company only to be informed that their #1 rated appraiser in one of our counties that we provide service to is being paid $170 per report and the highest fee paid is $225. Do you think that they are going to draw the "top of the line" appraisers at these fees?
Prior to approval, they feel the need to check your criminal background as well to explore your credit status. We are fingerprinted here in Florida, so they would know if we were criminals and our credit has nothing to do with an appraisal report. I hope that helps those appraisers that wonder if our industry will be damaged or destroyed. There's no doubt in my mind....as we are already living the nightmare.
Thanks for letting me vent. I've been in this business for almost twenty years and this is the hardest hit we've come across yet. What do you think about this whole mess?
Carol M. Krakoff krakoff@mindspring.com
Dear Carol,
I agree with much of what you say. See my editorial in the new SPRING 2008 issue of REV Magazine. It will be posted on our website shortly -- probably by the time you read this online. [Click here: Henry's Editorial: www.revmag.com/spring2008/04.html )
Many lenders are considering changing to management companies and this is certainly going to affect many appraisers. There is no simple answer to this problem.
H2
I've just had a moment to stop and read your recent questions and answers - which I always look forward to. I'm actually writing to express my frustration over the results that the Fannie/Freddie changes have bestowed upon us to date. Our largest client (which we have worked with for many years) just switched to ServiceLink, an appraisal management company, to avoid any appearance of lender pressure.....and what a horror it has become. We are in a resort area in southwest Florida and have enjoyed reasonable appraisal fees over the years. We were just contacted by this management company only to be informed that their #1 rated appraiser in one of our counties that we provide service to is being paid $170 per report and the highest fee paid is $225. Do you think that they are going to draw the "top of the line" appraisers at these fees?
Prior to approval, they feel the need to check your criminal background as well to explore your credit status. We are fingerprinted here in Florida, so they would know if we were criminals and our credit has nothing to do with an appraisal report. I hope that helps those appraisers that wonder if our industry will be damaged or destroyed. There's no doubt in my mind....as we are already living the nightmare.
Thanks for letting me vent. I've been in this business for almost twenty years and this is the hardest hit we've come across yet. What do you think about this whole mess?
Carol M. Krakoff krakoff@mindspring.com
Dear Carol,
I agree with much of what you say. See my editorial in the new SPRING 2008 issue of REV Magazine. It will be posted on our website shortly -- probably by the time you read this online. [Click here: Henry's Editorial: www.revmag.com/spring2008/04.html )
Many lenders are considering changing to management companies and this is certainly going to affect many appraisers. There is no simple answer to this problem.
H2
308) Extra Comps
05/04/08 Keyword: comps
Dear Henry,
Recently I have been asked to provide two additional comparables & two current or pending listings. Seven comps in my opinion is ridiculous! I have been providing them at an additional fee; however, should I really just ask them to get another appraisal?
-Kiersten kiergerow@hotmail.com
Dear Kiersten,
As part of the scope of work discussion, the client may ask for as many comparable sales as they are willing to pay for. If they change the number after the scope of work has been established, you have the right to adjust your fee. That said, it is up to you to decide which comparable sales give the best indication of the value of the subject property and how much weight you will give the additional comparable sales (which may be none). Finally, only you can decide when too much work is not worth the fee.
H2
Recently I have been asked to provide two additional comparables & two current or pending listings. Seven comps in my opinion is ridiculous! I have been providing them at an additional fee; however, should I really just ask them to get another appraisal?
-Kiersten kiergerow@hotmail.com
Dear Kiersten,
As part of the scope of work discussion, the client may ask for as many comparable sales as they are willing to pay for. If they change the number after the scope of work has been established, you have the right to adjust your fee. That said, it is up to you to decide which comparable sales give the best indication of the value of the subject property and how much weight you will give the additional comparable sales (which may be none). Finally, only you can decide when too much work is not worth the fee.
H2
307) Tax Appeal
05/03/08 Keyword: tax appeal
Henry,
this is, perhaps, a different question. I'm a home owner trying to battle personal property tax. I have many hours invested. My county real estate appraiser chose the cost approach vs. MRA(regression analysis) vs. Market Value. On all of the comparables for my property, however, he used the Market Value approach.
My valuation is $17K higher using the cost replacement method. Is the Cost replacement approach the most beneficial to an appraiser allowing more flexibility to establish a higher valuation than the other two methods? Also, would you argue that my property was valued with one method and the comparables valued with a significantly different method?
Please provide some information to me and names of appraisers in the Wichita, KS area. Thank you and best regards
Dr. Kate Coleman drkatecoleman@aol.com
Dear Dr. Kate,
Assessors often use methods that may not reflect the best practices when estimating the value of a property.
From your description, I think you should take a tax appeal. Ask around and find an attorney in your area who is experienced in doing tax appeals, and let the attorney recommend the appraiser.
H2
this is, perhaps, a different question. I'm a home owner trying to battle personal property tax. I have many hours invested. My county real estate appraiser chose the cost approach vs. MRA(regression analysis) vs. Market Value. On all of the comparables for my property, however, he used the Market Value approach.
My valuation is $17K higher using the cost replacement method. Is the Cost replacement approach the most beneficial to an appraiser allowing more flexibility to establish a higher valuation than the other two methods? Also, would you argue that my property was valued with one method and the comparables valued with a significantly different method?
Please provide some information to me and names of appraisers in the Wichita, KS area. Thank you and best regards
Dr. Kate Coleman drkatecoleman@aol.com
Dear Dr. Kate,
Assessors often use methods that may not reflect the best practices when estimating the value of a property.
From your description, I think you should take a tax appeal. Ask around and find an attorney in your area who is experienced in doing tax appeals, and let the attorney recommend the appraiser.
H2
306) Assessed Value
05/02/08 Keyword: value
Dear Henry,
Can I value the site/land lower than what the assessor has the land valued at in county tax records?
Name withheld by request
Dear Friend,
There is no reason that you cannot appraise a property lower or higher than the assessor's opinion of its value.
H2
Can I value the site/land lower than what the assessor has the land valued at in county tax records?
Name withheld by request
Dear Friend,
There is no reason that you cannot appraise a property lower or higher than the assessor's opinion of its value.
H2
305) Partial Interest
05/01/08 Keyword: narrative
appraisal
Dear Henry,
I am appraising a fractional portion of a lot. Owner A wants to purchase approximately 1500 s.f. from Owner B, that owns the parcel directly behind. The portion being appraised runs directly through the backyard of Owner A. I have a surveyer's map and have found numorous paired sales but need to know the best way to report this. Which form do you recommend, or should it be just a narrative? Any help would be great.
John Van Nest john@scappraisal.com
Dear John,
I think you should use a narrative report rather than a form report.
The best technique is to do a "before and after" appraisal of the subject property. The difference would be the value of the piece being taken.
This is what you would have to do for a condemnation appraisal.
H2
I am appraising a fractional portion of a lot. Owner A wants to purchase approximately 1500 s.f. from Owner B, that owns the parcel directly behind. The portion being appraised runs directly through the backyard of Owner A. I have a surveyer's map and have found numorous paired sales but need to know the best way to report this. Which form do you recommend, or should it be just a narrative? Any help would be great.
John Van Nest john@scappraisal.com
Dear John,
I think you should use a narrative report rather than a form report.
The best technique is to do a "before and after" appraisal of the subject property. The difference would be the value of the piece being taken.
This is what you would have to do for a condemnation appraisal.
H2
304) Retrospective Appraisal
04/25/08 Keyword: retrospective
appraisal
Dear Henry,
A client asked me to verify a "fair condition" on a retrospective valuation! How are we to know the condition of a property from 1 year ago? It is in fair condition now; I see no indication that the condition would be significantly better from a year ago.
Brian cyberrealestate@gmail.com
Dear Brian,
You can't do a retrospective appraisal unless you can obtain an accurate description of the property and information about the market area as of the retrospective date. You have to locate people who have this information and be satisfied that it is correct.
I once received a big fee for appraising a house that had been hit by an airplane and razed two years before. I was easily able to get pictures of the house before it was damaged beyond repair, and a good description of its exterior and interior condition. It just took a little detective work.
H2
A client asked me to verify a "fair condition" on a retrospective valuation! How are we to know the condition of a property from 1 year ago? It is in fair condition now; I see no indication that the condition would be significantly better from a year ago.
Brian cyberrealestate@gmail.com
Dear Brian,
You can't do a retrospective appraisal unless you can obtain an accurate description of the property and information about the market area as of the retrospective date. You have to locate people who have this information and be satisfied that it is correct.
I once received a big fee for appraising a house that had been hit by an airplane and razed two years before. I was easily able to get pictures of the house before it was damaged beyond repair, and a good description of its exterior and interior condition. It just took a little detective work.
H2
303) Basic Appraisal Procedures
Hello Mr. Harrison --
My question is what is the best book to show you the techniques to do the sales comparison approach, time adjustments, comparable listing and pending sales, ect.
Thanks.
Alfredo zayas Zayas5@yahoo.com
Dear Alfedo,
My new book Basic Appraisal Procedures should help you. It is available from Form and Worms www.formsandworms.com or 1-800-243-4545.
H2
My question is what is the best book to show you the techniques to do the sales comparison approach, time adjustments, comparable listing and pending sales, ect.
Thanks.
Alfredo zayas Zayas5@yahoo.com
Dear Alfedo,
My new book Basic Appraisal Procedures should help you. It is available from Form and Worms www.formsandworms.com or 1-800-243-4545.
H2
302) Background Check
04/21/08 Keyword: scams
Dear H2,
I recently received two emails supposedly from the AMC Valuations Services requesting $39.00 for them to perform a background check as requested by some (they failed to name who) of their Relocation clients.
I am at a loss to understand why they need a background check on an appraiser, other than the obvious that we go into the transferee's home to conduct our inspections for the appraisal...and we take interior pictures.
I watch the national and local evening news regularly and I have yet to see the alarming rise in home burglaries committed by appraisers who were apparently casing the home while performing their appraisal service.
Perhaps we are going to get a Relocation ID card as a result of this background check but that would be redundant as we are all supposed to be carrying our state issued ID card. Well, I am still at a loss but my suspicions are that Valuation Services is a subsidiary of a larger company having interests in a background check company...and they're slow since we haven't had any major terrorists attack recently.
I for one am not going to pay anyone $39.00 to check my background. I once held a top secret clearance from the Untied States Navy — that's good enough for me! What do you think?
Mark E Lehman ml8ball@mris.com
Dear Mark,
This sounds fishy to me. As we know, email scams abound. At a minimum I would ask for references from them before I paid them anything; I suspect that would end their interest in you immediately.
H2
I recently received two emails supposedly from the AMC Valuations Services requesting $39.00 for them to perform a background check as requested by some (they failed to name who) of their Relocation clients.
I am at a loss to understand why they need a background check on an appraiser, other than the obvious that we go into the transferee's home to conduct our inspections for the appraisal...and we take interior pictures.
I watch the national and local evening news regularly and I have yet to see the alarming rise in home burglaries committed by appraisers who were apparently casing the home while performing their appraisal service.
Perhaps we are going to get a Relocation ID card as a result of this background check but that would be redundant as we are all supposed to be carrying our state issued ID card. Well, I am still at a loss but my suspicions are that Valuation Services is a subsidiary of a larger company having interests in a background check company...and they're slow since we haven't had any major terrorists attack recently.
I for one am not going to pay anyone $39.00 to check my background. I once held a top secret clearance from the Untied States Navy — that's good enough for me! What do you think?
Mark E Lehman ml8ball@mris.com
Dear Mark,
This sounds fishy to me. As we know, email scams abound. At a minimum I would ask for references from them before I paid them anything; I suspect that would end their interest in you immediately.
H2
301) "AS IS" vs. "SUBJECT TO"
Dear Henry,
I recently completed an appraisal for a mortgage broker. The property is located in LA County and purchase price is $345k. Seller is the bank/ reo. The home is listed as a "fixer upper" in the MLS. The home is lacking any flooring, has chipped paint, some broken drywall, kitchen has broken cabinetry and lacks appliances, and there are cracked bathroom mirrors. Also, landscape needs to be re-established and properly maintained.
I used 6 comps in the report. 4 of 6 comps were REOs and this area is REO driven. All recent listings and pendings in this market are either REO or "short sales". The condition of 3 of the comps was similar to subject property, per their MLS descriptions, and I gave them a similar "fair" rating. They sold between $360,000-380,000 while the homes in "average" condition were selling between $400,000-450,000.
Today the broker comes back and wants me to change my report to indicate that the subject is in "average" condition and include in a cost to cure. I told them that I cannot indicate that the subject is average, because it wasn't. They have been pressuring me all day to change this rating because I am killing their deal, as the broker said to me. Why would the underwriter deny a loan based on a property being in fair condition? This is a bank owned sale transaction and it is selling for less than even the listings in the area, mainly due to its condition. Am I just the scapegoat for the lender? I am sticking to my guns and not changing my condition rating, because I reported the actual condition of the subject and not what anyone else is telling me to do, so they can fund a loan. What else can I do?
-Mike
Dear Mike,
The client has two choices. They can order an "as is" appraisal which is what you have given them, disclosing the current condition of the property. They can also ask you to include a list of what has to be done to put it into better condition. Alternatively, they can order a "subject to" appraisal. A "subject to" appraisal provides an estimate of value as of the effective date of the appraisal with the assumption — which you must document as such— that the needed work will be done in the future. With this appraisal, you would supply a list of what has to be done and an estimate of the cost to do the work.
Your client seems to want to have it both ways, which is not permitted by the USPAP.
H2
I recently completed an appraisal for a mortgage broker. The property is located in LA County and purchase price is $345k. Seller is the bank/ reo. The home is listed as a "fixer upper" in the MLS. The home is lacking any flooring, has chipped paint, some broken drywall, kitchen has broken cabinetry and lacks appliances, and there are cracked bathroom mirrors. Also, landscape needs to be re-established and properly maintained.
I used 6 comps in the report. 4 of 6 comps were REOs and this area is REO driven. All recent listings and pendings in this market are either REO or "short sales". The condition of 3 of the comps was similar to subject property, per their MLS descriptions, and I gave them a similar "fair" rating. They sold between $360,000-380,000 while the homes in "average" condition were selling between $400,000-450,000.
Today the broker comes back and wants me to change my report to indicate that the subject is in "average" condition and include in a cost to cure. I told them that I cannot indicate that the subject is average, because it wasn't. They have been pressuring me all day to change this rating because I am killing their deal, as the broker said to me. Why would the underwriter deny a loan based on a property being in fair condition? This is a bank owned sale transaction and it is selling for less than even the listings in the area, mainly due to its condition. Am I just the scapegoat for the lender? I am sticking to my guns and not changing my condition rating, because I reported the actual condition of the subject and not what anyone else is telling me to do, so they can fund a loan. What else can I do?
-Mike
Dear Mike,
The client has two choices. They can order an "as is" appraisal which is what you have given them, disclosing the current condition of the property. They can also ask you to include a list of what has to be done to put it into better condition. Alternatively, they can order a "subject to" appraisal. A "subject to" appraisal provides an estimate of value as of the effective date of the appraisal with the assumption — which you must document as such— that the needed work will be done in the future. With this appraisal, you would supply a list of what has to be done and an estimate of the cost to do the work.
Your client seems to want to have it both ways, which is not permitted by the USPAP.
H2
300) Declining Market Adjustments
04/16/08 Keyword: adjustments
| declining
market
Greetings Henry!
Some of the real estate companies are promoting new techniques to get properties priced correctly so they sell quickly. That is, not using the CMA approach of last sale and adjusting to the subject property; rather, just using the last sale and pegging the sale price under the last sale.
I am curious to know what the appraisers are doing with these markets, and if there is a formula in use for this, e.g., a 5% "haircut" from last sale? I am in the North Jersey area, not in Florida or Nevada where I think things are even worse.
Thanks,
Carolyn Galant carolyngalant@att.net
Dear Carolyn,
In a declining market, there is a lot to be said for using comparable sales with selling dates as near as possible to the effective date of the appraisal.
I have problems with what you are reporting. First, it is the use of just one sale. This is always a dangerous practice. The other error is to make a time adjustment beyond what is indicated by the data in the market, based on an unsupported assumption that a trend will continue. To directly answer your question, there is no acceptable formula to do this that I am aware of.
H2
Some of the real estate companies are promoting new techniques to get properties priced correctly so they sell quickly. That is, not using the CMA approach of last sale and adjusting to the subject property; rather, just using the last sale and pegging the sale price under the last sale.
I am curious to know what the appraisers are doing with these markets, and if there is a formula in use for this, e.g., a 5% "haircut" from last sale? I am in the North Jersey area, not in Florida or Nevada where I think things are even worse.
Thanks,
Carolyn Galant carolyngalant@att.net
Dear Carolyn,
In a declining market, there is a lot to be said for using comparable sales with selling dates as near as possible to the effective date of the appraisal.
I have problems with what you are reporting. First, it is the use of just one sale. This is always a dangerous practice. The other error is to make a time adjustment beyond what is indicated by the data in the market, based on an unsupported assumption that a trend will continue. To directly answer your question, there is no acceptable formula to do this that I am aware of.
H2
299) Complex Assignment
Dear Henry,
A man with a private airstrip is interested in making it a public airport. He envisions installing approximately 100 hangars and developing 30 residential sites on the airport. Do you have any suggestions where to get information for appraising this type of property? Thank you for you kind attention.
Keith Erlewine paerlewine@sbcglobal.net
Dear Keith,
This sounds like a very complex assignment. I think you need expert help. One way to find someone is to contact the Lum Library (LUM Appraisal Library, Appraisal Institute, 550 Van Buren Street, Suite 1000, Chicago, Il 60607, Ph: 312-335-4100.) See if anyone has written an article on airport development. Then contact the author and see if they will help you or have a suggestion as to where you can get help.
H2
A man with a private airstrip is interested in making it a public airport. He envisions installing approximately 100 hangars and developing 30 residential sites on the airport. Do you have any suggestions where to get information for appraising this type of property? Thank you for you kind attention.
Keith Erlewine paerlewine@sbcglobal.net
Dear Keith,
This sounds like a very complex assignment. I think you need expert help. One way to find someone is to contact the Lum Library (LUM Appraisal Library, Appraisal Institute, 550 Van Buren Street, Suite 1000, Chicago, Il 60607, Ph: 312-335-4100.) See if anyone has written an article on airport development. Then contact the author and see if they will help you or have a suggestion as to where you can get help.
H2
298) Water Problem
Dear Henry,
I did an inspection on a very rainy day. At the time of inspection, there was water seepage in the basement of the house, in the right front corner. The water was also around the furnace. I don't have any idea where the water was coming from. How should I write up this finding in my appraisal report?
Kasia kjpiekut@snet.net
Dear Kasia,
I suggest that you write "On the day of the inspection there was water in the basement and around the furnace. I was unable to determine its source."
H2
keyword: reporting problems, water problem, water in basement
I did an inspection on a very rainy day. At the time of inspection, there was water seepage in the basement of the house, in the right front corner. The water was also around the furnace. I don't have any idea where the water was coming from. How should I write up this finding in my appraisal report?
Kasia kjpiekut@snet.net
Dear Kasia,
I suggest that you write "On the day of the inspection there was water in the basement and around the furnace. I was unable to determine its source."
H2
keyword: reporting problems, water problem, water in basement
297) Changing the Date
04/10/08 Keyword: date of
appraisal | scope of
work
Dear Henry,
I have one Appraisal Management Client that sends me steady work. Lately, I have been refusing orders with conditions that I think are contradictory to USPAP. The client requests a Desk Review Short Form, but asks the appraiser to complete the review with an effective date as of the current inspection date, not the effective date of the report under review. I have explained that this encompasses two separate scopes of work and that I cannot change the effective date of the report under review.
My understanding is that the client is seeking additional sales and listing information not available as of the effective date of the report under review. I have no objection to providing additional comparables, even those that have settled or listed after the effective date. In some cases, this can provide additional support for the appraiser's opinion of value, or demonstrate declining or increasing property values in the property's neighborhood. However, changing the effective date of the report is not acceptable as it is my understanding that this is in violation of USPAP.
Am I correct in interpreting USPAP, or am I just standing on principle? My account representative at the AMC says that they have many appraisers who willingly do these assignments for them and they have not had any problems nor have any of their long-term appraisers refused these assignements. What's your take?
Name Withheld By Request.
Dear Friend,
You are correct. The USPAP is very clear that when you change the effective date a new appraisal is required.
H2
I have one Appraisal Management Client that sends me steady work. Lately, I have been refusing orders with conditions that I think are contradictory to USPAP. The client requests a Desk Review Short Form, but asks the appraiser to complete the review with an effective date as of the current inspection date, not the effective date of the report under review. I have explained that this encompasses two separate scopes of work and that I cannot change the effective date of the report under review.
My understanding is that the client is seeking additional sales and listing information not available as of the effective date of the report under review. I have no objection to providing additional comparables, even those that have settled or listed after the effective date. In some cases, this can provide additional support for the appraiser's opinion of value, or demonstrate declining or increasing property values in the property's neighborhood. However, changing the effective date of the report is not acceptable as it is my understanding that this is in violation of USPAP.
Am I correct in interpreting USPAP, or am I just standing on principle? My account representative at the AMC says that they have many appraisers who willingly do these assignments for them and they have not had any problems nor have any of their long-term appraisers refused these assignements. What's your take?
Name Withheld By Request.
Dear Friend,
You are correct. The USPAP is very clear that when you change the effective date a new appraisal is required.
H2
296) Contingent Fees
04/09/08 Keyword: contingent
fees |
fees
Dear Henry,
In eminent domain practice I often see very large appraisal fees for work on a parcel yet it is billed based on an hourly rate. However, if the parcel is settled for considerably less than the amount in the appraisal, the fee is oftened reduced accordingly. This seems to me to be a violation of USPAP as the fee appears to be contingent upon a future circumstance. The appraiser does not do any less work, yet accepts a lower fee. What is your opinion?
Name and Address withheld by request
Dear Friend,
Sounds like a violation to me.
H2
In eminent domain practice I often see very large appraisal fees for work on a parcel yet it is billed based on an hourly rate. However, if the parcel is settled for considerably less than the amount in the appraisal, the fee is oftened reduced accordingly. This seems to me to be a violation of USPAP as the fee appears to be contingent upon a future circumstance. The appraiser does not do any less work, yet accepts a lower fee. What is your opinion?
Name and Address withheld by request
Dear Friend,
Sounds like a violation to me.
H2
295) FHA Requirements
04/08/08 Keyword: FHA
Dear H2,
I am trying to get approved with FHA. I found the application on the REV Magazine Website ( www.revmag.com/winter2008/10.html ) but could not find anything about what courses I need to get approved. I live in California -- I am not sure this matters.
Scott McCrory mccroryjs@adelphia.net
Dear Scott,
The FHA does not require any special courses. However, you must be a licensed or certified appraiser to apply.
H2
I am trying to get approved with FHA. I found the application on the REV Magazine Website ( www.revmag.com/winter2008/10.html ) but could not find anything about what courses I need to get approved. I live in California -- I am not sure this matters.
Scott McCrory mccroryjs@adelphia.net
Dear Scott,
The FHA does not require any special courses. However, you must be a licensed or certified appraiser to apply.
H2
294) Comparable Sales & Listings
04/07/08 Keyword: comps
Dear Henry,
Whenever I had a tough question, you have always come up with an appropriate answer! OK, here's another one...
In today's changing market place, I have a large client that now requires us to use comps under 90 days old and within 1 mile. If not, they want a comment on why. I feel this is just good practice. If these "rules" are not met, they also request the use of a "pending" or "active" listing to validate the current value estimate in this changing market place. The issue comes when they also require these "pending" and/or "active" listings be used in the value estimate of the subject. My contention is that the prices in these listings are not the sold price, which may vary from the listing price and is usually unknown. Until the deal is closed, it is not a "sold" price. What is your take on this?
Thanks,
Larry Kowitt AppraisalOne@aol.com
Dear Larry,
It is well established that as part of the scope of work, the lender or client can request that you gather and consider any data you both agree upon. The USPAP says it is up to you to select the data you use to make a credible appraisal and how much weight you put on each comparable. It is a fine line but not unreasonable. The client may not tell you what comparable not to consider, use or report.
H2
Whenever I had a tough question, you have always come up with an appropriate answer! OK, here's another one...
In today's changing market place, I have a large client that now requires us to use comps under 90 days old and within 1 mile. If not, they want a comment on why. I feel this is just good practice. If these "rules" are not met, they also request the use of a "pending" or "active" listing to validate the current value estimate in this changing market place. The issue comes when they also require these "pending" and/or "active" listings be used in the value estimate of the subject. My contention is that the prices in these listings are not the sold price, which may vary from the listing price and is usually unknown. Until the deal is closed, it is not a "sold" price. What is your take on this?
Thanks,
Larry Kowitt AppraisalOne@aol.com
Dear Larry,
It is well established that as part of the scope of work, the lender or client can request that you gather and consider any data you both agree upon. The USPAP says it is up to you to select the data you use to make a credible appraisal and how much weight you put on each comparable. It is a fine line but not unreasonable. The client may not tell you what comparable not to consider, use or report.
H2
293) Update vs. New Appraisal
04/06/08 Keyword: update
appraisal | new
appraisal
Dear Henry,
I've been asked by a client to complete an appraisal update on an oceanfront lot that I appraised for the same lender last year. The report was completed on a FNMA land form. The subject property is located in a declining market, and as such, the value of the lot has declined since the effective date of the original report.
I would like to update the original report through the use of the new FNMA 1004D form. However, in reviewing this form, I noticed the "Scope of Work" states the apraiser must at a minimum concur with the original appraisal. Also, the "Appraiser's Certification" states that "I concur with the analysis and conclusions in the original appraisal. "
Can this form be used to update an appraisal in a declining market, or does this constitute a new assignment? Please help.
Sincerely,
JD jim@daylor.net
Dear JD,
As soon as you change the date of the appraisal, the USPSP requires that you make a new appraisal.
H2
I've been asked by a client to complete an appraisal update on an oceanfront lot that I appraised for the same lender last year. The report was completed on a FNMA land form. The subject property is located in a declining market, and as such, the value of the lot has declined since the effective date of the original report.
I would like to update the original report through the use of the new FNMA 1004D form. However, in reviewing this form, I noticed the "Scope of Work" states the apraiser must at a minimum concur with the original appraisal. Also, the "Appraiser's Certification" states that "I concur with the analysis and conclusions in the original appraisal. "
Can this form be used to update an appraisal in a declining market, or does this constitute a new assignment? Please help.
Sincerely,
JD jim@daylor.net
Dear JD,
As soon as you change the date of the appraisal, the USPSP requires that you make a new appraisal.
H2
292) Agricultural Property
Dear Henry,
Regarding the question on agricultural properties, I believe the regulations are in regard to use and not zoning. In our market, many properties have some additional acreage, are in an AG zone, are not farms and are accepted by Fannie and Freddie.
Regards,
James T Scholl jamestscholl@yahoo.com
Dear James,
It is not really the appraiser's problem to determine if a mortgage is eligible for purchase by Fannie Mae or Freddie Mac. However, when a lot is large and the zoning is agricultural, it is helpful to your client to make it very clear how the property is being used and what the highest and best use is.
H2
Regarding the question on agricultural properties, I believe the regulations are in regard to use and not zoning. In our market, many properties have some additional acreage, are in an AG zone, are not farms and are accepted by Fannie and Freddie.
Regards,
James T Scholl jamestscholl@yahoo.com
Dear James,
It is not really the appraiser's problem to determine if a mortgage is eligible for purchase by Fannie Mae or Freddie Mac. However, when a lot is large and the zoning is agricultural, it is helpful to your client to make it very clear how the property is being used and what the highest and best use is.
H2
291) Highest & Best Use
04/04/08 Keyword: highest and
best use
Dear H2:
I am appraising a property that has an older, dated, brick cottage with panelled walls, 8' ceilings and laminate wood floors, original kitchen cabinets and lots of cosmetic updates.
The owner was going to tear it down, but fixed it up instead. It is a $200,000 house on a $500,000 lot very close to a high-end resort area. I think this improvement is not the "highest and best use" but there are some other homes like it that have sold. A very comparable sale for $750,000 just closed 10 days ago. Does the fact that other properties like the subject sell — even though they are small old cottages on sought-after lots — mean that this is the highest and best use? I don't think so, but the lot has some issues: across from a church, not in a sub-division, has a rundown place right next door — so I don't know if a new expensive home is the highest and best use either.
I read the applicable sections in your book and I know the four tests - it is just on the "most profitable" that I am stuck. Can you help me?
Thank you for all your wonderful advice all these years. I have most of your books and always read and enjoy the magazine. I hope you can respond to me quickly. (Please withhold my name and email. I live in a small town and prefer not to be identified. The questions arise from an appraisal assignment from a "big fish" and I am way down on the food chain.)
Name Withheld by Request
Dear Friend,
Your question seems to be presenting a situation where the house and the lot together are worth $700,000 vs $500,000 for a vacant lot. Why would anyone tear the house down? The question you need to answer is if they spent more money on the existing house, would it then increase in value greater than the additional cost?
H2
I am appraising a property that has an older, dated, brick cottage with panelled walls, 8' ceilings and laminate wood floors, original kitchen cabinets and lots of cosmetic updates.
The owner was going to tear it down, but fixed it up instead. It is a $200,000 house on a $500,000 lot very close to a high-end resort area. I think this improvement is not the "highest and best use" but there are some other homes like it that have sold. A very comparable sale for $750,000 just closed 10 days ago. Does the fact that other properties like the subject sell — even though they are small old cottages on sought-after lots — mean that this is the highest and best use? I don't think so, but the lot has some issues: across from a church, not in a sub-division, has a rundown place right next door — so I don't know if a new expensive home is the highest and best use either.
I read the applicable sections in your book and I know the four tests - it is just on the "most profitable" that I am stuck. Can you help me?
Thank you for all your wonderful advice all these years. I have most of your books and always read and enjoy the magazine. I hope you can respond to me quickly. (Please withhold my name and email. I live in a small town and prefer not to be identified. The questions arise from an appraisal assignment from a "big fish" and I am way down on the food chain.)
Name Withheld by Request
Dear Friend,
Your question seems to be presenting a situation where the house and the lot together are worth $700,000 vs $500,000 for a vacant lot. Why would anyone tear the house down? The question you need to answer is if they spent more money on the existing house, would it then increase in value greater than the additional cost?
H2
290) School System Adjustment
04/03/08 Keyword: adjustments
| schools
Dear Henry,
How and when do you adjust a comparable sale for a different school system when the subject home and comparable sale home are very similar in all respects, are within 1 mile of each other, and the school system boundaries are next to each other? This is important as this scenario is in a question on an appraisal.
Jean Y. Mueller jeanyorkmueller@aol.com
Dear Jean,
To make this kind of an adjustment, you will need to find a matched pair in the market, and try to develop the adjustment.
H2
How and when do you adjust a comparable sale for a different school system when the subject home and comparable sale home are very similar in all respects, are within 1 mile of each other, and the school system boundaries are next to each other? This is important as this scenario is in a question on an appraisal.
Jean Y. Mueller jeanyorkmueller@aol.com
Dear Jean,
To make this kind of an adjustment, you will need to find a matched pair in the market, and try to develop the adjustment.
H2
289) Reporting Detrimental Conditions
04/02/08 Keyword: detrimental
conditions
Dear Henry,
I was requested to appraise a property by a lender and at the inspection the homeowner mentioned that an insurance adjuster would be inspecting the roof the following day due to recent ice storm damage. This immediately put me on alert. Inside the subject property, I noticed a couple of water stains on the ceiling; however no further damage was apparent to me. On that note, I am not a roof specialist or home inspector. What would be the appropriate action to take?
Should I list the repairs apparent to me, adjust the comparables accordingly, and make an extraordinary assumption (appropriately disclosed) concerning the overall condition of the roof and then recommend a Home Inspector/Roof Specialist inspect the roof?
Name & Address Withheld by Request
Dear Jessica,
What you propose to do sounds O.K. to me. Whenever you learn about detrimental conditions on a property, you have an obligation to disclose them to your client in the appraisal report.
H2
I was requested to appraise a property by a lender and at the inspection the homeowner mentioned that an insurance adjuster would be inspecting the roof the following day due to recent ice storm damage. This immediately put me on alert. Inside the subject property, I noticed a couple of water stains on the ceiling; however no further damage was apparent to me. On that note, I am not a roof specialist or home inspector. What would be the appropriate action to take?
Should I list the repairs apparent to me, adjust the comparables accordingly, and make an extraordinary assumption (appropriately disclosed) concerning the overall condition of the roof and then recommend a Home Inspector/Roof Specialist inspect the roof?
Name & Address Withheld by Request
Dear Jessica,
What you propose to do sounds O.K. to me. Whenever you learn about detrimental conditions on a property, you have an obligation to disclose them to your client in the appraisal report.
H2
288) Hypothetical Conditions
04/01/08 Keyword: hypotheticals
Henry -- many thanks for your books
and webpage, their invaluable and appreciated!
Received a request to appraise a lakefront property while in the field from my co-worker. Went to the buyers' Realtors office to pick up a copy of the plat map, contract and listing printout and proceeded to vacant property. Due to a lockbox, I was unable to do a full inspection. I measured and shot pictures and wrote down the HUD serial numbers from outside, as this was a doublewide mobile home with a walk-out basement.
When I arrived back at the office I went over the order from the lender and the paperwork from the buyers' agent, which included building restrictions for the subdivision. Number 5 on the list of restrictions is No Mobile Homes, including doublewides. These are recorded restrictions at the courthouse.
I informed both the real estate agents representing the sellers and buyers and put a hold on the appraisal assignment. Can I complete the assignment based on the hypothetical assumption that the restrictions will be worked out and the property will be legal to sell?
Stephen R Staley rushappraisals@mchsi.com
Dear Stephen,
The USPAP Standard 1-2 (g) covers when a hypothetical condition can be used -- with emphasis on the need to follow the disclosure rules. I think that if in your opinion there is a reasonable possibility that the restriction could be changed, then you could base your opinion on the hypothetical condition you propose to make. The burden would be on you to demonstrate and report why you think this reasonable possibility exists. What you are doing must clearly be disclosed in the report.
H2
Received a request to appraise a lakefront property while in the field from my co-worker. Went to the buyers' Realtors office to pick up a copy of the plat map, contract and listing printout and proceeded to vacant property. Due to a lockbox, I was unable to do a full inspection. I measured and shot pictures and wrote down the HUD serial numbers from outside, as this was a doublewide mobile home with a walk-out basement.
When I arrived back at the office I went over the order from the lender and the paperwork from the buyers' agent, which included building restrictions for the subdivision. Number 5 on the list of restrictions is No Mobile Homes, including doublewides. These are recorded restrictions at the courthouse.
I informed both the real estate agents representing the sellers and buyers and put a hold on the appraisal assignment. Can I complete the assignment based on the hypothetical assumption that the restrictions will be worked out and the property will be legal to sell?
Stephen R Staley rushappraisals@mchsi.com
Dear Stephen,
The USPAP Standard 1-2 (g) covers when a hypothetical condition can be used -- with emphasis on the need to follow the disclosure rules. I think that if in your opinion there is a reasonable possibility that the restriction could be changed, then you could base your opinion on the hypothetical condition you propose to make. The burden would be on you to demonstrate and report why you think this reasonable possibility exists. What you are doing must clearly be disclosed in the report.
H2
287) Comp Photo from MLS
03/31/08 Keyword: comp
photos |
MLS
Dear H2,
I just read you comment about using MLS pictures when you can't get into a gated community to take photos of a comparable. In our area, they are copyrighting their photos in MLS -- so now what do you do?
I'm assuming these are registered copyright photos since you probably have to send them in with a fee like appraisals to register them.
Dave Hanson hansondb@charter.net
Dear Dave,
I am not an expert in copyright law. You need to get an opinion from a lawyer as to whether pictures in an MLS Book have a valid copyright.
H2
I just read you comment about using MLS pictures when you can't get into a gated community to take photos of a comparable. In our area, they are copyrighting their photos in MLS -- so now what do you do?
I'm assuming these are registered copyright photos since you probably have to send them in with a fee like appraisals to register them.
Dave Hanson hansondb@charter.net
Dear Dave,
I am not an expert in copyright law. You need to get an opinion from a lawyer as to whether pictures in an MLS Book have a valid copyright.
H2
286) Ethics Complaints
03/30/08 Keyword: Ethics
Dear H2,
A real estate firm was asked to do a BPO on one of our appraisals. We got a copy of it and the entire thing was fabricated. The comparables did not exist!! He is not a member of our local MLS. Is there anything we can do?
Diane E Woodworth sdwoodworth@chartermi.net
Dear Diane,
Make a formal complaint to your State Real Estate Commission.
H2
A real estate firm was asked to do a BPO on one of our appraisals. We got a copy of it and the entire thing was fabricated. The comparables did not exist!! He is not a member of our local MLS. Is there anything we can do?
Diane E Woodworth sdwoodworth@chartermi.net
Dear Diane,
Make a formal complaint to your State Real Estate Commission.
H2
285) GLA Adjustment
03/29/08 Keyword: GLA | adjustments
Hi Henry --
I love this site.
I have seen several questions to you about the GLA adjustment. Yes -- if we had the perfect comparables, the matched pairs technique would work. With a wide range in single family values within the same subdivision, I'm finding it difficult.
What other formula is there? I have looked through all of your books and still there is only a mention of matched pairs.
Julie Schilling jschillappr@msn.com
Dear Julie,
You could take a sample of sales in your market and see if there is a correlation between their size and the price per square foot. I have seen people plot this information on a graph and base their opinion on the results.
H2
I love this site.
I have seen several questions to you about the GLA adjustment. Yes -- if we had the perfect comparables, the matched pairs technique would work. With a wide range in single family values within the same subdivision, I'm finding it difficult.
What other formula is there? I have looked through all of your books and still there is only a mention of matched pairs.
Julie Schilling jschillappr@msn.com
Dear Julie,
You could take a sample of sales in your market and see if there is a correlation between their size and the price per square foot. I have seen people plot this information on a graph and base their opinion on the results.
H2
284) Declining Market
03/28/08 Keyword: declining
market
Hi Henry:
I recently completed an appraisal for a client and checked the "declining" box for property values. I did a CMA for the subject's neighborhood from Feb 06 to Feb 07 and then compared that data to Feb 07 to Feb 08. The data revealed that the average sales price and median sales price "declined" in the current year compared to the prior year. Price per square foot average also declined, and days on market increased compared to the prior year.
The lender called and ranted at me, because I checked the "declining" box -- saying this killed the deal. The lender says Fannie Mae has not dubbed this area as declining, yet my MLS statistics shows that it is. The lender stated that "she doesn't care about MLS statistics, only what Fannie Mae says." Got any advice?
Darren djhayden2@msn.com
P.S. Keep up the great work as always. I enjoy everything you put out!
Dear Darren,
Fannie Mae is making it very clear that since almost all real estate today (with the exception of a few markets) is declining, they expect appraisers to so indicate in their appraisals. If the market you are in is an exception, they expect you to substantiate your opinion. Tell your lender that reporting a property in a declining market does not kill sales to Fannie Mae. Something else may have done so.
Check out the article on page 25 of Real Estate Valuation Magazine Online regarding "Appraising in a Declining Market." You might also suggest that your lender-client read it.
H2
I recently completed an appraisal for a client and checked the "declining" box for property values. I did a CMA for the subject's neighborhood from Feb 06 to Feb 07 and then compared that data to Feb 07 to Feb 08. The data revealed that the average sales price and median sales price "declined" in the current year compared to the prior year. Price per square foot average also declined, and days on market increased compared to the prior year.
The lender called and ranted at me, because I checked the "declining" box -- saying this killed the deal. The lender says Fannie Mae has not dubbed this area as declining, yet my MLS statistics shows that it is. The lender stated that "she doesn't care about MLS statistics, only what Fannie Mae says." Got any advice?
Darren djhayden2@msn.com
P.S. Keep up the great work as always. I enjoy everything you put out!
Dear Darren,
Fannie Mae is making it very clear that since almost all real estate today (with the exception of a few markets) is declining, they expect appraisers to so indicate in their appraisals. If the market you are in is an exception, they expect you to substantiate your opinion. Tell your lender that reporting a property in a declining market does not kill sales to Fannie Mae. Something else may have done so.
Check out the article on page 25 of Real Estate Valuation Magazine Online regarding "Appraising in a Declining Market." You might also suggest that your lender-client read it.
H2
283) Geodesic Domes
03/27/08 Keyword: geodesic
domes
Dear H2,
I have an assignment to appraise a geodesic dome house. What is the proper measuring procedure and what types of comps should I be looking to use being that no other domes exists in this area.?
Thanks!
Jack Sheffrin jsheffrin@yahoo.com
Dear Jack,
There is no standard way to measure a geodesic dome. I would calculate the square foot of floor area by measuring the circumference and using the standard formula for calculating the area of a circle.* If the house was designed by the Reverend Buckminster Fuller it probably has historic value. To determine what kind of comps to use, ask yourself this question: If the house were up for sale and a potential buyer found out it had sold, what would they buy instead? This might give you a clue. Remember, however, that the USPAP says that your appraisal must be credible and that may be hard to comply with in this situation.
H2
* Note: Once you know the circumference of a circle, the area inside it can be found using the formula:
where:
C is the circumference of the circle and π is Pi, approximately 3.142
For an excellent explanation of all of the properties of a circle and how they relate, check out:
http://www.mathopenref.com/circlearea.html
I have an assignment to appraise a geodesic dome house. What is the proper measuring procedure and what types of comps should I be looking to use being that no other domes exists in this area.?
Thanks!
Jack Sheffrin jsheffrin@yahoo.com
Dear Jack,
There is no standard way to measure a geodesic dome. I would calculate the square foot of floor area by measuring the circumference and using the standard formula for calculating the area of a circle.* If the house was designed by the Reverend Buckminster Fuller it probably has historic value. To determine what kind of comps to use, ask yourself this question: If the house were up for sale and a potential buyer found out it had sold, what would they buy instead? This might give you a clue. Remember, however, that the USPAP says that your appraisal must be credible and that may be hard to comply with in this situation.
H2
* Note: Once you know the circumference of a circle, the area inside it can be found using the formula:
where:
C is the circumference of the circle and π is Pi, approximately 3.142
For an excellent explanation of all of the properties of a circle and how they relate, check out:
http://www.mathopenref.com/circlearea.html
282) Fannie & Freddie's NEW RULES
03/26/08 Keyword: Fannie Mae
| Freddie
Mac
Dear
Henry,
What is your opinion on the new agreement reached between OFHEO, Fannie Mae, Freddy Mac and Mr. Cuomo, the NY State Attorney General? Will this much needed agreement equal better fees and more work? Is this the end of AMCs? Will other states follow?
Richard Gomez RG67@bellsouth.net
- - -
Dear Henry,
It this new Code of Conduct just more of the same "pass the problem on to the Appraisers?" I see no penalities for the lenders (for coercion)....
Dave Hanson Hanson@boscgi0604.eigbox.net
- - -
Dear Henry,
I am confused. Is it true that Fannie Mae and Freddie Mac will have to obtain appraisals from independent fee aprpaisers, not in-house appraisers or appraisers working for AMC's? Is this new agreement going to apply nationwide? Please clarify.
Thanks,
Rick Daniel rickdan@erols.com
- - -
Hi Henry!
What is your opinion of the new developments with Fannie Mae & Freddie Mac regarding the ordering of appraisals in 2009? Many of my colleagues feel that this is the end of their profession because the new requirements will force us to seek out AMCs to belong to...in hopes of getting some appraisals now and then. Also, to go along with having to seek out AMC's or try and get on lenders lists, do you think we face having our fees slashed again? It costs a small fortune being an appraiser what with having to belong to an MLS board, upgrade software, CE, licensing...the list goes on and on. Please state your opinion of these new developments.
Sincerely,
Mary karmtra@gmail.com
- - -
Dear Henry,
Just finished going through the new Fannie/Freddie guidelines. Appraising residential real estate in the Houston market for the last 32 years, I know that the "devil is in the details". Not all is as seems. What are the repercussions of this policy change for appraisers?
Thomas Ponce, MRA thomas@theponcegroup.com
- - -
Dear Friends,
What is your opinion on the new agreement reached between OFHEO, Fannie Mae, Freddy Mac and Mr. Cuomo, the NY State Attorney General? Will this much needed agreement equal better fees and more work? Is this the end of AMCs? Will other states follow?
Richard Gomez RG67@bellsouth.net
- - -
Dear Henry,
It this new Code of Conduct just more of the same "pass the problem on to the Appraisers?" I see no penalities for the lenders (for coercion)....
Dave Hanson Hanson@boscgi0604.eigbox.net
- - -
Dear Henry,
I am confused. Is it true that Fannie Mae and Freddie Mac will have to obtain appraisals from independent fee aprpaisers, not in-house appraisers or appraisers working for AMC's? Is this new agreement going to apply nationwide? Please clarify.
Thanks,
Rick Daniel rickdan@erols.com
- - -
Hi Henry!
What is your opinion of the new developments with Fannie Mae & Freddie Mac regarding the ordering of appraisals in 2009? Many of my colleagues feel that this is the end of their profession because the new requirements will force us to seek out AMCs to belong to...in hopes of getting some appraisals now and then. Also, to go along with having to seek out AMC's or try and get on lenders lists, do you think we face having our fees slashed again? It costs a small fortune being an appraiser what with having to belong to an MLS board, upgrade software, CE, licensing...the list goes on and on. Please state your opinion of these new developments.
Sincerely,
Mary karmtra@gmail.com
- - -
Dear Henry,
Just finished going through the new Fannie/Freddie guidelines. Appraising residential real estate in the Houston market for the last 32 years, I know that the "devil is in the details". Not all is as seems. What are the repercussions of this policy change for appraisers?
Thomas Ponce, MRA thomas@theponcegroup.com
- - -
Dear Friends,