353) Community Apartment
Dear Henry,
I recently did an appraisal in which the subject's County Use is listed as "Own-Your-Own-Apt". The original Title report stated the subject as a Condominium. Now 1 week later I have received a new report from the Title company stating the subject is a "Community Apartment Project." What form would I use since the description still states it is an undivided interest?
Wendy Kramer wendy@kramernet.com
Dear Wendy,
In many ways a "Community Apartment Project" is similar to a condominium or a PUD, but they are not the same. I can find nothing in the Fannie Mae regulations about them. They seem to be quite popular in California. I think it is up to the client to decide -- as part of your scope of work discussion with them -- which form you should use. My first choice would be the URAR.
H2
I recently did an appraisal in which the subject's County Use is listed as "Own-Your-Own-Apt". The original Title report stated the subject as a Condominium. Now 1 week later I have received a new report from the Title company stating the subject is a "Community Apartment Project." What form would I use since the description still states it is an undivided interest?
Wendy Kramer wendy@kramernet.com
Dear Wendy,
In many ways a "Community Apartment Project" is similar to a condominium or a PUD, but they are not the same. I can find nothing in the Fannie Mae regulations about them. They seem to be quite popular in California. I think it is up to the client to decide -- as part of your scope of work discussion with them -- which form you should use. My first choice would be the URAR.
H2
352) AMC Test
Dear Henry,
I recently filled out an application with an AMC that included an appraisal test/quiz at the end. The Q & A was very shoddy. Here's a sample question:
"Across the board adjustments:
A) should never be made when possible.
B) can be acceptable in some cases such as REO properties when no similar condition homes exist.
C) should be evident to the client when they were needed. That is why they are in the report.
D) Both a & b
Do these multiple choice answers make any sense to you? The other 10 questions are equally faulty. I know a company can choose their own criteria for determining whether they will provide assignments to an appraiser, but this quiz was far from appropriate in my opinion. Does an AMC have any business quizzing licensed appraisers this way and for this purpose?
Name withheld by request
Dear Friend,
Using the answer "both a & b" or "all of the above" in a multiple choice question is no longer considered to be good test question construction. The State of Florida Real Estate Commission will not approve any question with such answers. Frankly, I think it is very unprofessional for an AMC to have a test like this as part of their approval process.
H2
I recently filled out an application with an AMC that included an appraisal test/quiz at the end. The Q & A was very shoddy. Here's a sample question:
"Across the board adjustments:
A) should never be made when possible.
B) can be acceptable in some cases such as REO properties when no similar condition homes exist.
C) should be evident to the client when they were needed. That is why they are in the report.
D) Both a & b
Do these multiple choice answers make any sense to you? The other 10 questions are equally faulty. I know a company can choose their own criteria for determining whether they will provide assignments to an appraiser, but this quiz was far from appropriate in my opinion. Does an AMC have any business quizzing licensed appraisers this way and for this purpose?
Name withheld by request
Dear Friend,
Using the answer "both a & b" or "all of the above" in a multiple choice question is no longer considered to be good test question construction. The State of Florida Real Estate Commission will not approve any question with such answers. Frankly, I think it is very unprofessional for an AMC to have a test like this as part of their approval process.
H2
351) Appraisal Sharing
06/20/08 Keyword: impartiality
Dear Henry,
I was recently asked by an AMC reviewer to remove a brief disclosure that I had made in an appraisal indicating that the property owner had shown me another recently completed appraisal and that I had noted the effective date and the value opinion. Perhaps this might be technically considered confidential information, even though in this context neither previous client nor the appraiser was identified, and thus information better excluded from my report. But the reviewer also informed me that as an appraiser he had generally declined any invitation by a property owner to look at a prior appraisal out of a concern in finding possible error or wrong-doing that he would then be obliged to report. But that one troubled me. I found that particular policy to be unusually limiting for a professional fact finder and opinion maker. As an appraiser, I seek to learn as much as possible about how people might react to a particular property in terms of current market value, and appraisers are people too! Again, the information was presented during my inspection -- I certainly did not solicit it in any way. I have in the past even made a quick note as to comparable properties and their locations, but again only if the complexity of the assignment suggested it might prove reasonably worthwhile in the interest of preparing a better report. I would never automatically use any of the comparable sales or listings cited in the prior report, but of course I might use one or more, or all of them, if subsequent research dictated. What are your thoughts Henry? Am I walking some kind of slippery slope here?
Name Withheld by Request
Dear Friend,
I don't think it is a good idea for an appraiser to look at the work of another appraiser done on the same property that you are appraising. It is not purely an academic problem at that point: you have an assignment, and their previous appraisal work parallels much of what you will be required to do for your client. I suggest that you refrain in future to keep both the appearance and the reality of impartiality.
H2
I was recently asked by an AMC reviewer to remove a brief disclosure that I had made in an appraisal indicating that the property owner had shown me another recently completed appraisal and that I had noted the effective date and the value opinion. Perhaps this might be technically considered confidential information, even though in this context neither previous client nor the appraiser was identified, and thus information better excluded from my report. But the reviewer also informed me that as an appraiser he had generally declined any invitation by a property owner to look at a prior appraisal out of a concern in finding possible error or wrong-doing that he would then be obliged to report. But that one troubled me. I found that particular policy to be unusually limiting for a professional fact finder and opinion maker. As an appraiser, I seek to learn as much as possible about how people might react to a particular property in terms of current market value, and appraisers are people too! Again, the information was presented during my inspection -- I certainly did not solicit it in any way. I have in the past even made a quick note as to comparable properties and their locations, but again only if the complexity of the assignment suggested it might prove reasonably worthwhile in the interest of preparing a better report. I would never automatically use any of the comparable sales or listings cited in the prior report, but of course I might use one or more, or all of them, if subsequent research dictated. What are your thoughts Henry? Am I walking some kind of slippery slope here?
Name Withheld by Request
Dear Friend,
I don't think it is a good idea for an appraiser to look at the work of another appraiser done on the same property that you are appraising. It is not purely an academic problem at that point: you have an assignment, and their previous appraisal work parallels much of what you will be required to do for your client. I suggest that you refrain in future to keep both the appearance and the reality of impartiality.
H2
350) Unpermitted Addition
06/19/08 Keyword: hypotheticals
Dear Henry,
I have a comment regarding the question about the value of square footage added to a house that was not "permitted" by the local governmental authority.
In my area (Fort Collins, CO), there are many additions and finished basements that are completed without a building permit and without inspection. I have come to the conclusion that this violates "Highest and Best Use", meaning that the basement finish or additional square footage is not "Legally Permitted." This is so far above most lenders' heads that they just won't understand what it is I am talking about.
However, in this new age of underwriting, I make the appraisal "subject to obtaining a permit" for the un-permitted basement finish or additional sq.ft. Most of the time this still causes brokers and lenders a great deal of resistance and as you know, a large number of phone conversations defending this position. It even irritates the borrower in a refinance situation as the borrower is the one who has to get the additional permit. If the borrower is the one who did not get the permit in the first place, he/she knows they have been caught, but if they purchased the property and the previous appraiser or broker did not bring this to their attention, they are more than upset.
What do you think?
Sidney W. Clark, SRA thesidster@aol.com
Dear Sidney,
Thank you for your interesting comments on my answer about Highest & Best use. I agree that the value you estimate must be based on a Legally Permitted Use. The question is, do you make the appraisal "subject to" or do you use a hypothetical condition that a permit could be obtained? Since Fannie Mae does not permit the addition of any hypothetical conditions you have no choice if the appraisal is on the URAR or other Fannie Mae form but to make the value estimate based on the legal use of the property. The question is really how much less is that value than market value would be if you were permitted to make a hypothetical condition?
This is the kind of thing that needs to be considered as part of the scope of work discussion that is required by the USPAP.
H2
I have a comment regarding the question about the value of square footage added to a house that was not "permitted" by the local governmental authority.
In my area (Fort Collins, CO), there are many additions and finished basements that are completed without a building permit and without inspection. I have come to the conclusion that this violates "Highest and Best Use", meaning that the basement finish or additional square footage is not "Legally Permitted." This is so far above most lenders' heads that they just won't understand what it is I am talking about.
However, in this new age of underwriting, I make the appraisal "subject to obtaining a permit" for the un-permitted basement finish or additional sq.ft. Most of the time this still causes brokers and lenders a great deal of resistance and as you know, a large number of phone conversations defending this position. It even irritates the borrower in a refinance situation as the borrower is the one who has to get the additional permit. If the borrower is the one who did not get the permit in the first place, he/she knows they have been caught, but if they purchased the property and the previous appraiser or broker did not bring this to their attention, they are more than upset.
What do you think?
Sidney W. Clark, SRA thesidster@aol.com
Dear Sidney,
Thank you for your interesting comments on my answer about Highest & Best use. I agree that the value you estimate must be based on a Legally Permitted Use. The question is, do you make the appraisal "subject to" or do you use a hypothetical condition that a permit could be obtained? Since Fannie Mae does not permit the addition of any hypothetical conditions you have no choice if the appraisal is on the URAR or other Fannie Mae form but to make the value estimate based on the legal use of the property. The question is really how much less is that value than market value would be if you were permitted to make a hypothetical condition?
This is the kind of thing that needs to be considered as part of the scope of work discussion that is required by the USPAP.
H2
349) Down Market
06/18/08 Keyword: external
obsolescence
Dear H2,
In the cost approach, when you have a forclosure sale or a "short sale" and the sale price is lower than the cost to rebuild (reproduction cost), is it proper to use the External Obsolescence to balance out the final value? The forclosure market -- which is an external pressure -- appears to have caused this low sale value.
Using the Cost approach you start by: 1st, establishing site value, use a building cost with a cost service, put in physical depreciation, and then use the abstraction method for External Obsolescence which is the difference caused by the low sale price. Is this a correct method?
GM jcvsor@yahoo.com
Dear GM,
Anything that happens off the site that causes a property to lose value in the cost approach is classified as External Obsolescence. Market conditions would fall into that category. If your site sales are not current, they should also be adjusted to reflect the down market.
H2
In the cost approach, when you have a forclosure sale or a "short sale" and the sale price is lower than the cost to rebuild (reproduction cost), is it proper to use the External Obsolescence to balance out the final value? The forclosure market -- which is an external pressure -- appears to have caused this low sale value.
Using the Cost approach you start by: 1st, establishing site value, use a building cost with a cost service, put in physical depreciation, and then use the abstraction method for External Obsolescence which is the difference caused by the low sale price. Is this a correct method?
GM jcvsor@yahoo.com
Dear GM,
Anything that happens off the site that causes a property to lose value in the cost approach is classified as External Obsolescence. Market conditions would fall into that category. If your site sales are not current, they should also be adjusted to reflect the down market.
H2
348) Leasehold Valuation
06/17/08 Keyword: leasehold
valuation
Dear Henry --
I am looking for information on leasehold valuation. My subject property has a 20 year lease, with 12 years remaining on the lease and an option to extend for an additional 9 years. The site has been improved with a retail building by the tenant. Any information I found discusses how to value the lease but does not discuss how to value the tenant improvements. Any help you can provide would be much appreciated.
Thanks,
Dan
Dear Dan,
My book Advanced Appraisal Methods covers this subject in depth. It is available from our distributor Forms and Worms, 1-800 243-4545 or online at www.formsandworms.com
H2
I am looking for information on leasehold valuation. My subject property has a 20 year lease, with 12 years remaining on the lease and an option to extend for an additional 9 years. The site has been improved with a retail building by the tenant. Any information I found discusses how to value the lease but does not discuss how to value the tenant improvements. Any help you can provide would be much appreciated.
Thanks,
Dan
Dear Dan,
My book Advanced Appraisal Methods covers this subject in depth. It is available from our distributor Forms and Worms, 1-800 243-4545 or online at www.formsandworms.com
H2
347) Detached vs Attached
Good Morning Henry:
Could you please clarify what the definition is for a property type classified as DETACHED versus a property type classified as ATTACHED? For an appraisal assignment of a 2 unit duplex on two levels, what would be the accurate property type on the appraisal?
Sue Erzinger serzinger@baylake.com
Dear Sue,
Attached means that the units have at least one common wall or floor/ceiling. Detached means they have no common walls or floors. Since the floor of the upper unit is the ceiling of the lower unit, they are considered ATTACHED.
H2
Could you please clarify what the definition is for a property type classified as DETACHED versus a property type classified as ATTACHED? For an appraisal assignment of a 2 unit duplex on two levels, what would be the accurate property type on the appraisal?
Sue Erzinger serzinger@baylake.com
Dear Sue,
Attached means that the units have at least one common wall or floor/ceiling. Detached means they have no common walls or floors. Since the floor of the upper unit is the ceiling of the lower unit, they are considered ATTACHED.
H2
346) Illegal Use
06/15/08 Keyword: scope of
work |
USPAP
Violation
Dear H2,
I am apprasing a property in a rural area of San Martin. Preliminary review shows a single family residence. When it was purchased two years ago, the MLS listed it as a SFR with 3 cottages with rental income. A previous appraisal was done on a Small Residential Income Property form showing it as a 4-unit improvement. Now it is being sold again by the owner, and the purchase contract is for a residential income property with 3 "legal non-conforming ancillary units". I contacted the planning department and they said those 3 rental units were illegal and various violations had been sent out to the owner to remove or obtain permits for them. However, the Realtor gave me a letter dated in 02/04 from the County of Santa Clara Environmental Resources saying no permits were on file, and that the buildings were built prior to 1947 and not required to have a permit. Do I disclose these as violations, or are these legal non conforming units? I was planning to use a standarad URAR 1004 form with assessory units and appraise the property as a SFR -- not as a fourplex -- as there are very few comparables even in a 6-10 mile radius. What would you do?
George Cuilla gmonny@sbcglobal.net
Dear George,
What form you use should be agreed upon between you and the client as part of the scope of work discussion you have with them. You need to determine what the highest and best use of the property is and then the appraised value is based on its highest and best use. Keep in mind, however, that the highest and best use must be a legal use.
You must report what you find in your investigations. The USPAP states that you cannot make an appraisal if you think it will be used to mislead anyone, or for any fraudulent purposes. You need to satisfy yourself that your appraisal is for a legitimate purpose. You really have to ask yourself if you want to get involved in a job like this or if you would be better off turning down the assignment.
H2
I am apprasing a property in a rural area of San Martin. Preliminary review shows a single family residence. When it was purchased two years ago, the MLS listed it as a SFR with 3 cottages with rental income. A previous appraisal was done on a Small Residential Income Property form showing it as a 4-unit improvement. Now it is being sold again by the owner, and the purchase contract is for a residential income property with 3 "legal non-conforming ancillary units". I contacted the planning department and they said those 3 rental units were illegal and various violations had been sent out to the owner to remove or obtain permits for them. However, the Realtor gave me a letter dated in 02/04 from the County of Santa Clara Environmental Resources saying no permits were on file, and that the buildings were built prior to 1947 and not required to have a permit. Do I disclose these as violations, or are these legal non conforming units? I was planning to use a standarad URAR 1004 form with assessory units and appraise the property as a SFR -- not as a fourplex -- as there are very few comparables even in a 6-10 mile radius. What would you do?
George Cuilla gmonny@sbcglobal.net
Dear George,
What form you use should be agreed upon between you and the client as part of the scope of work discussion you have with them. You need to determine what the highest and best use of the property is and then the appraised value is based on its highest and best use. Keep in mind, however, that the highest and best use must be a legal use.
You must report what you find in your investigations. The USPAP states that you cannot make an appraisal if you think it will be used to mislead anyone, or for any fraudulent purposes. You need to satisfy yourself that your appraisal is for a legitimate purpose. You really have to ask yourself if you want to get involved in a job like this or if you would be better off turning down the assignment.
H2
345) Handrails
06/14/08 Keyword: guidelines
Dear Henry,
Is there anything in USPAP or Fannie Mae that says safety issues have to be resoved and marked as "subject to" these repairs for a conventional loan? Handrails and safety rails lacking on decks/porches high enough to cause injury if someone falls off is a recurring issue. Thanks.
Bob Edwards bob717@bellsouh.net
Dear Bob,
While I am not aware of any specific USPAP or Fannie Mae guidelines that directly address the situation you describe, I believe that it is an appraiser's obligation to report any life endangering or injury producing safety hazard they observe.
H2
Is there anything in USPAP or Fannie Mae that says safety issues have to be resoved and marked as "subject to" these repairs for a conventional loan? Handrails and safety rails lacking on decks/porches high enough to cause injury if someone falls off is a recurring issue. Thanks.
Bob Edwards bob717@bellsouh.net
Dear Bob,
While I am not aware of any specific USPAP or Fannie Mae guidelines that directly address the situation you describe, I believe that it is an appraiser's obligation to report any life endangering or injury producing safety hazard they observe.
H2
344) Overimprovement
06/13/08 Keyword: improvements
Dear Henry,
I did an inspection on a very unique two family property yesterday. The house is a 5,000 sq ft two family. Any multis in the town are under 3,000 sq ft. It is also a certified five star energy efficient house, with a geothermal heating system. The town values it in the high 400s. It's completely renovated and in mint condition (basically new construction). Everything has been inspected and approved by the town. There are no similar comps in surrounding towns either. I also think I want to put more weight on the cost approach. And I need to write an addendum about the highest and best use, being condos. (The owner is eventually going to split it into two condo units.) But it is currently a legal two family (duplex style). I know the lenders are not going to accept an appraisal with adjustments over $100,000 based on the GLA difference, and the inferior comps. I also don't believe the property is built up too much for the market area. There are new condo units located just behind it. There are also other new construction projects in the area. There are just no similar comps, especially of two family units. Also I am familiar with the geothermal heating system, but I am not sure of the adjustment, and market reaction yet, and the systems are still new and just gaining in popularity. I was just wondering if you have any advice for me on how to approach this. I was thinking of using multiple condo units, single family comps, 4 unit comps. But I really believe that the cost approach is probably the best approach to value. But the appraisal is for a conventional refi, and I doubt the client will accept it. I am also not sure how to estimate the cost per sq ft in the cost approach, considering the unique energy efficient items. Thank you very much for any help you may have.
Jeremy Jerome info@connecticutappraisalllc.com
Dear Jeremy,
This is a tough one. You are correct in trying to determine the highest and best use and then estimating the value based on that use. I would think twice about relying primarily on the cost approach. Also, I wouldn't worry about what the lender will do. That is not your problem. The unique heating system certainly adds to the complications. If you are estimating market value, what you believe that the house will sell for is what counts most and not its cost. Good luck!
H2
I did an inspection on a very unique two family property yesterday. The house is a 5,000 sq ft two family. Any multis in the town are under 3,000 sq ft. It is also a certified five star energy efficient house, with a geothermal heating system. The town values it in the high 400s. It's completely renovated and in mint condition (basically new construction). Everything has been inspected and approved by the town. There are no similar comps in surrounding towns either. I also think I want to put more weight on the cost approach. And I need to write an addendum about the highest and best use, being condos. (The owner is eventually going to split it into two condo units.) But it is currently a legal two family (duplex style). I know the lenders are not going to accept an appraisal with adjustments over $100,000 based on the GLA difference, and the inferior comps. I also don't believe the property is built up too much for the market area. There are new condo units located just behind it. There are also other new construction projects in the area. There are just no similar comps, especially of two family units. Also I am familiar with the geothermal heating system, but I am not sure of the adjustment, and market reaction yet, and the systems are still new and just gaining in popularity. I was just wondering if you have any advice for me on how to approach this. I was thinking of using multiple condo units, single family comps, 4 unit comps. But I really believe that the cost approach is probably the best approach to value. But the appraisal is for a conventional refi, and I doubt the client will accept it. I am also not sure how to estimate the cost per sq ft in the cost approach, considering the unique energy efficient items. Thank you very much for any help you may have.
Jeremy Jerome info@connecticutappraisalllc.com
Dear Jeremy,
This is a tough one. You are correct in trying to determine the highest and best use and then estimating the value based on that use. I would think twice about relying primarily on the cost approach. Also, I wouldn't worry about what the lender will do. That is not your problem. The unique heating system certainly adds to the complications. If you are estimating market value, what you believe that the house will sell for is what counts most and not its cost. Good luck!
H2
343) Room Count
06/12/08 Keyword: GLA
Dear Henry,
Is a laundry room to be considered as a room in the room count if it has surrounding walls and a door? What about a 'breakfast room' or 'casual dining area' adjoining a kitchen area? Thank you.
Anne Carlisle carlisle.a@att.net
Dear Ann,
Neither of these rooms are counted in the room count in most areas and in most markets. However, if they are usually included in your area or market, there is nothing to prevent you from doing so. However, to avoid confusion, you should prominently explain what you are doing and the reason that you are doing so.
H2
Is a laundry room to be considered as a room in the room count if it has surrounding walls and a door? What about a 'breakfast room' or 'casual dining area' adjoining a kitchen area? Thank you.
Anne Carlisle carlisle.a@att.net
Dear Ann,
Neither of these rooms are counted in the room count in most areas and in most markets. However, if they are usually included in your area or market, there is nothing to prevent you from doing so. However, to avoid confusion, you should prominently explain what you are doing and the reason that you are doing so.
H2
342) Buyer's Lender
06/11/08 Keyword: lender
Dear Henry,
I am doing a large commercial appraisal and the owner is requesting the appraisal for the the buyer's lender. Is this proper?
Thank you,
Darwin darholland@mchsi.com
Dear Darwin,
There is nothing in the USPAP that regulates who can order an appraisal. When the loan is going to be sold to Fannie Mae or Freddie Mac they require that the lender order the appraisal. To protect yourself, you should point out to the owner that it is possible that the Buyer's lender will not accept an appraisal they do not order. You might also point out that if the client changes you cannot just change the name on the appraisal, as the USPAP requires that you make a new appraisal.
H2
I am doing a large commercial appraisal and the owner is requesting the appraisal for the the buyer's lender. Is this proper?
Thank you,
Darwin darholland@mchsi.com
Dear Darwin,
There is nothing in the USPAP that regulates who can order an appraisal. When the loan is going to be sold to Fannie Mae or Freddie Mac they require that the lender order the appraisal. To protect yourself, you should point out to the owner that it is possible that the Buyer's lender will not accept an appraisal they do not order. You might also point out that if the client changes you cannot just change the name on the appraisal, as the USPAP requires that you make a new appraisal.
H2
341) License Number
06/10/08 Keyword: license
Dear Henry,
When signing an appraisal I notice that there is a place for a "State Certification#" or "State License#" or "Other____State#". Because appraisers are licensed at all levels, what exactly is the State Certification# referring to?
John Hartman jhartman@freeway.net
Dear John,
You should put in the number of your highest level of license or certification.
H2
When signing an appraisal I notice that there is a place for a "State Certification#" or "State License#" or "Other____State#". Because appraisers are licensed at all levels, what exactly is the State Certification# referring to?
John Hartman jhartman@freeway.net
Dear John,
You should put in the number of your highest level of license or certification.
H2
340) Mold Redux
06/09/08 Keyword: environmental
hazards |
mold
Dear Henry,
I attended your seminar on Environmental Hazards at the Columbia Society of Appraiser's meeting this month, and have a question to ask you. Have you ever heard of white mold? What is it, how do you know it is present (since it is white), and how does it affect value?
maureen coyle maureenann120@hotmail.com
Dear Maureen,
Mold comes in every color of the rainbow. Even "black mold" is often not obviously black. Your obligation is to report any mold that you see. Keep in mind that it has to be "apparent." Whenever you see mold -- or any other detrimental environmental condition, for that matter -- you should recommend an inspection by a professional environmental inspector. Your appraisal should also contain a statement that the value you have estimated is based on the assumption that the mold will have no effect on the value and that if, based on the results of the inspection, it does impact the value, then your value estimate is not going to be valid. Note that if the mold needs to be removed, the effect on the value is the cost to remove it plus something extra for having to deal with the problem.
H2
I attended your seminar on Environmental Hazards at the Columbia Society of Appraiser's meeting this month, and have a question to ask you. Have you ever heard of white mold? What is it, how do you know it is present (since it is white), and how does it affect value?
maureen coyle maureenann120@hotmail.com
Dear Maureen,
Mold comes in every color of the rainbow. Even "black mold" is often not obviously black. Your obligation is to report any mold that you see. Keep in mind that it has to be "apparent." Whenever you see mold -- or any other detrimental environmental condition, for that matter -- you should recommend an inspection by a professional environmental inspector. Your appraisal should also contain a statement that the value you have estimated is based on the assumption that the mold will have no effect on the value and that if, based on the results of the inspection, it does impact the value, then your value estimate is not going to be valid. Note that if the mold needs to be removed, the effect on the value is the cost to remove it plus something extra for having to deal with the problem.
H2
339) No People
06/08/08 Keyword: scope of
work |
comp
photos
Dear Henry,
On 5/13/08 you answered a questions about including and/or deleting a person or personal photo from an appraisal, and intimated that there is no regulation requiring same. Yet most of my clients have two strict rules: "No people in subject or comp photos" and "No identifiable people in pictures on walls in interior photos." This has been extended by some to mean personal items of an ethnic or racial origin such as tribal masks, native american art-work, etc. Their contention is that the appraisal cannot have anything that would lead the reader to know the race, etc., of the borrower. It seems pretty silly to me, when often their name gives away the game, but those are the rules promulgated by many of my clients. Do you think it is illegal?
Robert Godwin rcgodwin2@appraise.gccoxmail.com
Dear Robert,
As part of the scope of work negotiation with the client, which is required by the USPAP, it is not unreasonable that the client request pictures without people in them. I think it is a little extreme to apply this to personal property too, but I doubt it is illegal.
H2
On 5/13/08 you answered a questions about including and/or deleting a person or personal photo from an appraisal, and intimated that there is no regulation requiring same. Yet most of my clients have two strict rules: "No people in subject or comp photos" and "No identifiable people in pictures on walls in interior photos." This has been extended by some to mean personal items of an ethnic or racial origin such as tribal masks, native american art-work, etc. Their contention is that the appraisal cannot have anything that would lead the reader to know the race, etc., of the borrower. It seems pretty silly to me, when often their name gives away the game, but those are the rules promulgated by many of my clients. Do you think it is illegal?
Robert Godwin rcgodwin2@appraise.gccoxmail.com
Dear Robert,
As part of the scope of work negotiation with the client, which is required by the USPAP, it is not unreasonable that the client request pictures without people in them. I think it is a little extreme to apply this to personal property too, but I doubt it is illegal.
H2
338) Making Sense
06/07/08 Keyword: intuition
Hi Henry,
The search for a way to make mortgage brokers financially liable for their loans is a great idea. But it makes me think that making appraisers financially liable would also help. Thirty-plus years ago I was taught by an MAI who told me after finishing an appraisal to sit back and simply ask myself, "Would I purchase the subject for the amount I am reporting as market value?" Maybe a few appraisers should be forced to eat what they cook. That would inject a lot of reality into appraisals from then on! What do you think about that?
Craig Farr arizonavaluation@onebox.com
Dear Craig,
That is a very old bit of advice which I believe is still valid. This is especially true when the value is based primarily on math, where it is easy to make a mistake. Also I live in fear of computer generated appraisals where sometimes the value estimate makes no sense at all. At the end of the valuation process, I feel that you should always ask yourself if your answer "makes sense."
H2
The search for a way to make mortgage brokers financially liable for their loans is a great idea. But it makes me think that making appraisers financially liable would also help. Thirty-plus years ago I was taught by an MAI who told me after finishing an appraisal to sit back and simply ask myself, "Would I purchase the subject for the amount I am reporting as market value?" Maybe a few appraisers should be forced to eat what they cook. That would inject a lot of reality into appraisals from then on! What do you think about that?
Craig Farr arizonavaluation@onebox.com
Dear Craig,
That is a very old bit of advice which I believe is still valid. This is especially true when the value is based primarily on math, where it is easy to make a mistake. Also I live in fear of computer generated appraisals where sometimes the value estimate makes no sense at all. At the end of the valuation process, I feel that you should always ask yourself if your answer "makes sense."
H2
337) Reproduction vs Replacement Cost
06/06/08 Keyword: replacement
cost estimate
Dear Mr. Harrison:
Why do so many reviewers and lenders ask for the replacement cost rather tha reproduction cost? It is my understanding that if a structure can be reproduced in the same fashion as originally constructed at reasonable cost with readily available materials, the reproduction cost should be applied. When the cost of materials is extreme and the availabilty of such materials would result in an over-improvement, is it not my correct understanding that the replacement cost is then warranted? Yet reviewers constantly ask me to change from reproduction to replacement cost.
Thomas Padden peconicappr@gmail.com
Dear Thomas,
The time for a lender/client to ask for replacement cost vs reproduction cost in the cost approach is during the required scope of work determination before the appraisal begins -- not during the review process. The best way to do the cost approach, in my opinion, is to use reproduction cost and then deduct and explain all forms of depreciation. However, many cost services use replacement cost as their starting point which also works. Most likely the reason the lender/client wants replacement cost is that they are using your appraisal for insurance purposes.
H2
Why do so many reviewers and lenders ask for the replacement cost rather tha reproduction cost? It is my understanding that if a structure can be reproduced in the same fashion as originally constructed at reasonable cost with readily available materials, the reproduction cost should be applied. When the cost of materials is extreme and the availabilty of such materials would result in an over-improvement, is it not my correct understanding that the replacement cost is then warranted? Yet reviewers constantly ask me to change from reproduction to replacement cost.
Thomas Padden peconicappr@gmail.com
Dear Thomas,
The time for a lender/client to ask for replacement cost vs reproduction cost in the cost approach is during the required scope of work determination before the appraisal begins -- not during the review process. The best way to do the cost approach, in my opinion, is to use reproduction cost and then deduct and explain all forms of depreciation. However, many cost services use replacement cost as their starting point which also works. Most likely the reason the lender/client wants replacement cost is that they are using your appraisal for insurance purposes.
H2
336) Trainee Workfiles
06/05/08 Keyword: trainee
Dear Henry,
As an appraiser trainee, do I need to keep duplicate files of completed reports that I assisted on?
NWBR
Dear Friend,
The USAP has requirements for keeping the work file for each appraisal report. Your state may also have requirements for trainees.
If it is not a big problem, the safest thing for you to do is keep a complete copy of each report your assist on.
H2
As an appraiser trainee, do I need to keep duplicate files of completed reports that I assisted on?
NWBR
Dear Friend,
The USAP has requirements for keeping the work file for each appraisal report. Your state may also have requirements for trainees.
If it is not a big problem, the safest thing for you to do is keep a complete copy of each report your assist on.
H2
335) Reporting Lender Pressure
06/04/08 Keyword: lender
pressure
Hello Henry,
Thank you for providing your guidence through this forum and your online magazine. [http://www.revmag.com]
Today, I am asking you to tell us to what agency, to whom, and at what address/email, can appraisers report lender pressure, unethical behavior, or general incompetence. In my case — as with many of us residential appraisers, I am sure — I am fed up with lenders that don't know the rules and ask me to do stuff that I know is unethical or unprofessional. When I respond as to why I won't do something and why they shouldn't be asking me to do thus and such, the answer is usually "all of our other appraisers do this with no problem".
Of course I don't believe them or fall into their trap, but until recently, I never got a written response which absolutely indicated that the lender was in serious violation, that their request was unethical, that the action in question was standard company practice. With my "NO I WON"T AND YOU SHOULDEN"T BE ASKING ME TO DO THIS" response, a client recently threatened me (in writing) that I would be put on their "banned forever" list. So I am asking in earnest. I want to know, what agency(s), who at that agency(s), and how do I contact them to report such lender infractions? I am truly angry! I feel it is only by policing ourselves and our industry that we can be the "stand up" professionals that most of us strive to be.
Susan Wolfson azaleaappraisalassociates@msn.com
Dear Susan,
One of the few good things in the proposed Fannie/Freddie/Andrew Cuomo Agreement is that it recognizes lender pressure and tries to offer a solution. Unfortunately, the agreement is so flawed that there is little chance it will go into effect unless (and until) it is substantially modified. At the present time, there is little you can do about lender pressure unless you have good evidence that there is fraud or other criminal activity involved. If there is, and you have convincing evidence to back up your position, you can go to your State Banking Commission, State's Attorney General or FBI and ask them to review the situation. Your can also write to your representatives in Congress who are now trying to write legislation to reduce lender fraud.
H2
Thank you for providing your guidence through this forum and your online magazine. [http://www.revmag.com]
Today, I am asking you to tell us to what agency, to whom, and at what address/email, can appraisers report lender pressure, unethical behavior, or general incompetence. In my case — as with many of us residential appraisers, I am sure — I am fed up with lenders that don't know the rules and ask me to do stuff that I know is unethical or unprofessional. When I respond as to why I won't do something and why they shouldn't be asking me to do thus and such, the answer is usually "all of our other appraisers do this with no problem".
Of course I don't believe them or fall into their trap, but until recently, I never got a written response which absolutely indicated that the lender was in serious violation, that their request was unethical, that the action in question was standard company practice. With my "NO I WON"T AND YOU SHOULDEN"T BE ASKING ME TO DO THIS" response, a client recently threatened me (in writing) that I would be put on their "banned forever" list. So I am asking in earnest. I want to know, what agency(s), who at that agency(s), and how do I contact them to report such lender infractions? I am truly angry! I feel it is only by policing ourselves and our industry that we can be the "stand up" professionals that most of us strive to be.
Susan Wolfson azaleaappraisalassociates@msn.com
Dear Susan,
One of the few good things in the proposed Fannie/Freddie/Andrew Cuomo Agreement is that it recognizes lender pressure and tries to offer a solution. Unfortunately, the agreement is so flawed that there is little chance it will go into effect unless (and until) it is substantially modified. At the present time, there is little you can do about lender pressure unless you have good evidence that there is fraud or other criminal activity involved. If there is, and you have convincing evidence to back up your position, you can go to your State Banking Commission, State's Attorney General or FBI and ask them to review the situation. Your can also write to your representatives in Congress who are now trying to write legislation to reduce lender fraud.
H2
334) Room Count
06/03/08 Keyword: scope of
work |
USPAP
Violation
Dear Henry:
I am appraising an REO. I have always counted the bedrooms (4), baths (2), kitchen, living room, and dining area in this case and then listed the rooms as 6-4-2. The lender wants me to count the 4 bedrooms, 2 baths, foyer, laundry, and dining area for a total of 9-4-2. Am I correct and what should I tell the lender? Please note that the dining area is a small space which is adjacent to the kitchen.
Thanks,
M. J. Mouton moutonap@bellsouth.net
Dear M.J.,
There is nothing specific in the USPAP or Fannie Mae regulations that dictate how to count rooms. If, as part of you scope of work discussion, this is what the lender wants, I think you can comply — as long as you make it clear what you are doing in the report. However, keep in mind that the USPAP prohibits you from making any appraisal you believe is fraudulent or will be used to deceive anyone.
H2
I am appraising an REO. I have always counted the bedrooms (4), baths (2), kitchen, living room, and dining area in this case and then listed the rooms as 6-4-2. The lender wants me to count the 4 bedrooms, 2 baths, foyer, laundry, and dining area for a total of 9-4-2. Am I correct and what should I tell the lender? Please note that the dining area is a small space which is adjacent to the kitchen.
Thanks,
M. J. Mouton moutonap@bellsouth.net
Dear M.J.,
There is nothing specific in the USPAP or Fannie Mae regulations that dictate how to count rooms. If, as part of you scope of work discussion, this is what the lender wants, I think you can comply — as long as you make it clear what you are doing in the report. However, keep in mind that the USPAP prohibits you from making any appraisal you believe is fraudulent or will be used to deceive anyone.
H2
333) In House Appraiser
06/02/08 Keyword: career
Dear Henry,
I am a staff appraiser for Bank of America. With the new Code of Conduct coming out, do you think that I should be looking for a new job?
Doug
Dear Doug,
I think it is too early to panic over the new Code of Conduct. There are going to be a lot of changes — if and when it ever goes into effect.
H2
I am a staff appraiser for Bank of America. With the new Code of Conduct coming out, do you think that I should be looking for a new job?
Doug
Dear Doug,
I think it is too early to panic over the new Code of Conduct. There are going to be a lot of changes — if and when it ever goes into effect.
H2
332) Enclosed Porches & GLA
06/01/08 Keyword: GLA
Dear Henry:
Can an enclosed porch be counted in the GLA if it is completely finished, but does not have a heat vent, radiator, or heat baseboard physically in the enclosed porch, but it can be heated easily by opening the door to the adjoining family room?
Robert O'brien obrienconsultants@hotmail.com
Dear Robert,
The general rule with is that a porch can be counted in the GLA only when it is enclosed, finished and heated like the rest of the house. That does not sound like what you are describing. However, an appraiser can always make an exception to the rule if it will make a more credible appraisal. If you decide to include the porch in the GLA, you must make it clear what you are doing so as not to confuse anyone who might have calculated a different GLA based on the conventional method of measuring.
H2
Can an enclosed porch be counted in the GLA if it is completely finished, but does not have a heat vent, radiator, or heat baseboard physically in the enclosed porch, but it can be heated easily by opening the door to the adjoining family room?
Robert O'brien obrienconsultants@hotmail.com
Dear Robert,
The general rule with is that a porch can be counted in the GLA only when it is enclosed, finished and heated like the rest of the house. That does not sound like what you are describing. However, an appraiser can always make an exception to the rule if it will make a more credible appraisal. If you decide to include the porch in the GLA, you must make it clear what you are doing so as not to confuse anyone who might have calculated a different GLA based on the conventional method of measuring.
H2
331) Duplex Exterior Only Appraisal
Dear Henry,
Can I do an exterior duplex appraisal? If so, which form should I use?
Sondi Eden sondieden@hotmail.com
Dear Sondi,
What form you use is decided by you and your client as part of the scope of work discussion. I assume from your question that the appraisal is not going to be used for a mortgage to be sold to Fannie Mae or Freddie Mac as I doubt they would accept an exterior-only appraisal. If you would normally use a Small Income Property Appraisal Report then I see no reason not to use it if it is acceptable to the client. You could also used a short form narrative or the new AI Residential Summary Appraisal Report form. Keep in mind that no matter what form you use, in order to make a "credible appraisal" which is required by the USPAP, you are going to need information about the interior of the property or base your appraisal on assumptions you make about the interior of the property which is very tricky. (Note: The USPAP does not require an interior inspection) Also remember that it is against the USPAP to make an appraisal that you think might be used to defraud someone.
H2
Can I do an exterior duplex appraisal? If so, which form should I use?
Sondi Eden sondieden@hotmail.com
Dear Sondi,
What form you use is decided by you and your client as part of the scope of work discussion. I assume from your question that the appraisal is not going to be used for a mortgage to be sold to Fannie Mae or Freddie Mac as I doubt they would accept an exterior-only appraisal. If you would normally use a Small Income Property Appraisal Report then I see no reason not to use it if it is acceptable to the client. You could also used a short form narrative or the new AI Residential Summary Appraisal Report form. Keep in mind that no matter what form you use, in order to make a "credible appraisal" which is required by the USPAP, you are going to need information about the interior of the property or base your appraisal on assumptions you make about the interior of the property which is very tricky. (Note: The USPAP does not require an interior inspection) Also remember that it is against the USPAP to make an appraisal that you think might be used to defraud someone.
H2
330) Exit Value
05/30/08 Keyword: definitions
Dear Henry,
What is an EXIT VALUE? I had a Lender Assistant tell me he wanted an exit value. I am an appraiser for the past 30-years, and have never heard of the phrase.
Please help!
Thelma McQuade tjappraise@suddenlink.net
Dear Thelma,
I too have never heard such a term. When you use the URAR, the appraisal must be of Market Value unless you clearly state that it is of some other value which you and the lender/client have agreed upon as part of the scope of work discussion. If you use another value, the appraisal must contain a definition of that value.
H2
What is an EXIT VALUE? I had a Lender Assistant tell me he wanted an exit value. I am an appraiser for the past 30-years, and have never heard of the phrase.
Please help!
Thelma McQuade tjappraise@suddenlink.net
Dear Thelma,
I too have never heard such a term. When you use the URAR, the appraisal must be of Market Value unless you clearly state that it is of some other value which you and the lender/client have agreed upon as part of the scope of work discussion. If you use another value, the appraisal must contain a definition of that value.
H2
329) Fannie/Freddie/Andrew Cuomo Agreement
05/29/08 Keyword: Fannie Mae
| Freddie
Mac
Hello Mr. Harrison,
What is your opinion regarding the Fannie/Freddie/Andrew Cuomo activity?
Anna Richardson richardson313808@bellsouth.net
Dear Anna,
The editorial in the current Spring 2008 issue of Real Estate Valuation Magazine - online at www.revmag.com - expresses in detail how I feel.
H2
What is your opinion regarding the Fannie/Freddie/Andrew Cuomo activity?
Anna Richardson richardson313808@bellsouth.net
Dear Anna,
The editorial in the current Spring 2008 issue of Real Estate Valuation Magazine - online at www.revmag.com - expresses in detail how I feel.
H2
328) Appraising for Family Members
05/28/08 Keyword: conflict of
interest
Dear Henry --
Is there anything in USPAP that states you cannot appraise a family member's property? I have looked through Standard 2 (Ethics) and FAQ about conflict of interest, but would like to get it clarified. I know I must disclose my relationship in the report and state that I do not have an interest in the property. Your help would be greatly appreciated. Thank you!
Kara Hall kara_hall@embarqmail.com
Dear Kara,
I don't think there is anything in the USPAP that specifically prohibits you from appraising a property owned by a family member. However, keep in mind there is a heavy burden on you to demonstrate that there is no present or potential future conflict of interest. I personally think it is a bad idea to do appraisals for family members.
H2
Is there anything in USPAP that states you cannot appraise a family member's property? I have looked through Standard 2 (Ethics) and FAQ about conflict of interest, but would like to get it clarified. I know I must disclose my relationship in the report and state that I do not have an interest in the property. Your help would be greatly appreciated. Thank you!
Kara Hall kara_hall@embarqmail.com
Dear Kara,
I don't think there is anything in the USPAP that specifically prohibits you from appraising a property owned by a family member. However, keep in mind there is a heavy burden on you to demonstrate that there is no present or potential future conflict of interest. I personally think it is a bad idea to do appraisals for family members.
H2
327) Architect as Appraiser
05/27/08 Keyword: career
Dear Henry:
I'm a recently retired licensed Architect in 5 states including New Jersey were I reside. I would like to explore the possibility and process of obtaining a New Jersey Real Estate Appraisal license. Where and how can I get specific requirements and course availability data? Can I expect credit for my current Architectural and Planner licenses? Your response is appreciated.
N.J. Cifaretto, AIA PP njcarchitects@optonline.net
Dear N.J.,
You will not be the first architect to become an appraiser. The specific requirements can be found on the Appraisal Foundation web site, at www.appraisalfoundation.org
However, there are also state requirements which can be obtained from the New Jersey Real Estate Appraisal Commission. You might also contact one of my New Jersey appraisal friends who provides various courses for appraisers using my books:
Mr. George Yager
Business Learning Center, Inc
P.O. Box 1219
Laurence Harbor, NJ 08879
Ph: 732-583-9110, Fax: 732-583-1956
Yours,
H2
I'm a recently retired licensed Architect in 5 states including New Jersey were I reside. I would like to explore the possibility and process of obtaining a New Jersey Real Estate Appraisal license. Where and how can I get specific requirements and course availability data? Can I expect credit for my current Architectural and Planner licenses? Your response is appreciated.
N.J. Cifaretto, AIA PP njcarchitects@optonline.net
Dear N.J.,
You will not be the first architect to become an appraiser. The specific requirements can be found on the Appraisal Foundation web site, at www.appraisalfoundation.org
However, there are also state requirements which can be obtained from the New Jersey Real Estate Appraisal Commission. You might also contact one of my New Jersey appraisal friends who provides various courses for appraisers using my books:
Mr. George Yager
Business Learning Center, Inc
P.O. Box 1219
Laurence Harbor, NJ 08879
Ph: 732-583-9110, Fax: 732-583-1956
Yours,
H2
326) Commercial Appraising
Dear Henry,
Now that I have taken my course in appraisal and am a registered appraiser, how do I begin? I really want to pursue the commercial appraising arena. I have a full time job right now but I want to start learning more in the commercial field. A lot of appraisers don't want to take on a mentee because it is alot of work. So how can I better position myself and break down the iron walls -- not to mention the "glass ceiling" since I am a woman. What things can I be doing to connect with the appraisal community and persuade someone in the commercial realm to take me on as a mentee, when I don't have any experience?
Val valerie@visionaryconcept.net
Dear Val,
The reality of the appraisal business is that the residential side goes up and down, but the commercial business is much more steady. One good way to start is by joining the Appraisal Institute in your state, going to all their chapter meeting and events, and doing whatever you can to become active and known in the chapter. Most likely you will make contacts both among appraisers and potential sources of work who will help you. You should continue to take as many advanced courses as you can. Again, you will make important contacts. Also, more good education is becoming available online, which you should consider. Finally, if you work for the MAI designation, you will find that you get higher level business that only goes to MAIs.
H2
P.S. My wife likes to point out that when she entered appraising in 1974, women represented 8% of surgeons in the US, but only 5% of appraisers! Now the numbers have shifted dramatically, and many classes are nearly half women. I think this is a good time to be pursuing your career.
keywords: career, commercial appraising, mentors
Now that I have taken my course in appraisal and am a registered appraiser, how do I begin? I really want to pursue the commercial appraising arena. I have a full time job right now but I want to start learning more in the commercial field. A lot of appraisers don't want to take on a mentee because it is alot of work. So how can I better position myself and break down the iron walls -- not to mention the "glass ceiling" since I am a woman. What things can I be doing to connect with the appraisal community and persuade someone in the commercial realm to take me on as a mentee, when I don't have any experience?
Val valerie@visionaryconcept.net
Dear Val,
The reality of the appraisal business is that the residential side goes up and down, but the commercial business is much more steady. One good way to start is by joining the Appraisal Institute in your state, going to all their chapter meeting and events, and doing whatever you can to become active and known in the chapter. Most likely you will make contacts both among appraisers and potential sources of work who will help you. You should continue to take as many advanced courses as you can. Again, you will make important contacts. Also, more good education is becoming available online, which you should consider. Finally, if you work for the MAI designation, you will find that you get higher level business that only goes to MAIs.
H2
P.S. My wife likes to point out that when she entered appraising in 1974, women represented 8% of surgeons in the US, but only 5% of appraisers! Now the numbers have shifted dramatically, and many classes are nearly half women. I think this is a good time to be pursuing your career.
keywords: career, commercial appraising, mentors
325) Illegal Uses
Good morning Henry,
I am being assigned an appraisal for a multi-family for Private Mortgage Insurance (PMI ). The lender requests an "as is " appraisal. In my initial research, the subject is listed on public records as a 2 family dwelling.
In contacting the owner to set up my appointment, I am told it is a 3 family dwelling. Checking the prior MLS listing when subject was purchased
it is noted as a 2 family style with "finished apartment on third floor." This is typical for the area, but not legal. I will check with the building department when I go to do the inspection to see if there is a permit that changed its use to a 3 family. If not, do I appraise the subject as a 2 family with an accesory apartment and note that the 3rd unit is not a legal use, or do I appraise as a 3 family unit, as it is being used, but note legality issue of third unit.
Thank you
Joe Violetta joseph_a_violetta@sbcglobal.net
Dear Joe,
This is a very tricky problem. These residences with ancillary third floor dwelling units are very common, especially in cities near universities, such as New Haven where I live. Step one is to ask the client what they want you to do. If they say to appraise it as a three family, then I would describe it as such. However, you must report in the appraisal the investigation you made just as in your question. Keep in mind that your highest and best use analysis (which is required) must be for a legal use. However, for your value estimate, you can consider the present use, but you will need to include an opinion as to how long you think that use will be permitted and how the market reacts to houses like this. The best comparable sales are other 2 family houses with an illegal third family dwelling unit as well.
H2
I am being assigned an appraisal for a multi-family for Private Mortgage Insurance (PMI ). The lender requests an "as is " appraisal. In my initial research, the subject is listed on public records as a 2 family dwelling.
In contacting the owner to set up my appointment, I am told it is a 3 family dwelling. Checking the prior MLS listing when subject was purchased
it is noted as a 2 family style with "finished apartment on third floor." This is typical for the area, but not legal. I will check with the building department when I go to do the inspection to see if there is a permit that changed its use to a 3 family. If not, do I appraise the subject as a 2 family with an accesory apartment and note that the 3rd unit is not a legal use, or do I appraise as a 3 family unit, as it is being used, but note legality issue of third unit.
Thank you
Joe Violetta joseph_a_violetta@sbcglobal.net
Dear Joe,
This is a very tricky problem. These residences with ancillary third floor dwelling units are very common, especially in cities near universities, such as New Haven where I live. Step one is to ask the client what they want you to do. If they say to appraise it as a three family, then I would describe it as such. However, you must report in the appraisal the investigation you made just as in your question. Keep in mind that your highest and best use analysis (which is required) must be for a legal use. However, for your value estimate, you can consider the present use, but you will need to include an opinion as to how long you think that use will be permitted and how the market reacts to houses like this. The best comparable sales are other 2 family houses with an illegal third family dwelling unit as well.
H2
324) Declining Markets
05/22/08 Keyword: declining
market
Dear H2,
I have recently (last several weeks) received about 6 phone calls from real estate brokers who were concerned that a lender (or several) indicated that Fannie Mae recently placed our MSA on a "declining market" status. I have searched the Fannie websites to no avail. Do you know if there is a location (URL) that indicates what areas have been classified as declining markets?
Thank you
Otis
Dear Otis,
As far as I know Fannie Mae has not made their MSA list available to the public. I know of no other single site that provides this information. If you discover one, please let me know as others are asking the same question. Since the market in most of the country is declining I think you should start with the assumption that your market area is also declining unless you have evidence that it is not.
H2
I have recently (last several weeks) received about 6 phone calls from real estate brokers who were concerned that a lender (or several) indicated that Fannie Mae recently placed our MSA on a "declining market" status. I have searched the Fannie websites to no avail. Do you know if there is a location (URL) that indicates what areas have been classified as declining markets?
Thank you
Otis
Dear Otis,
As far as I know Fannie Mae has not made their MSA list available to the public. I know of no other single site that provides this information. If you discover one, please let me know as others are asking the same question. Since the market in most of the country is declining I think you should start with the assumption that your market area is also declining unless you have evidence that it is not.
H2
323) FHA Manual & URAR Guide
Dear H2,
I'm in the process of becoming approved to complete FHA appraisals. What are the best basic manuals or guidebooks that I should have?
Jane Ritzenthaler jane@azappraisalmanagement.com
Dear Jane,
We recommend three.
1. First off, you need to download (or purchase) a copy of the main HUD Manual, 4150.2. It gives chapter and verse on what FHA wants you to consider when you make an appraisal for them. Click here: http://www.hud.gov/groups/appraisers.cfm Then, on the right under the green RESOURCES tab, click on "HUD Handbook 4150.2" [NOTE: Save this link. It is the main HUD resource page for FHA Appraisers, including training, events, news, and various updates.]
2. Secondly, we suggest purchasing Ann O'Rourke's new FHA Handbook. Ann is very knowledgeable and her information is current and very useful. Click here: http://www.appraisaltoday.com/products.htm Ann's Special Report on FHA Appraising is the first item for sale.
3. Finally, we think every appraiser doing appraisal reports on the URAR should have a copy of my book, Harrison's Illustrated Guide: How to Make a Single Family Appraisal on the Fannie Mae/Freddie Mac URAR Form. This line-by-line guide to filling out a URAR form ihas been a bestseller for over 20 years, through 4 major updates. The book listed here is current, including the 2008-2009 USPAP requirements.
Click here: http://www.formsandworms.com/cgi-bin/select.pl?ImageName=300285
H2
I'm in the process of becoming approved to complete FHA appraisals. What are the best basic manuals or guidebooks that I should have?
Jane Ritzenthaler jane@azappraisalmanagement.com
Dear Jane,
We recommend three.
1. First off, you need to download (or purchase) a copy of the main HUD Manual, 4150.2. It gives chapter and verse on what FHA wants you to consider when you make an appraisal for them. Click here: http://www.hud.gov/groups/appraisers.cfm Then, on the right under the green RESOURCES tab, click on "HUD Handbook 4150.2" [NOTE: Save this link. It is the main HUD resource page for FHA Appraisers, including training, events, news, and various updates.]
2. Secondly, we suggest purchasing Ann O'Rourke's new FHA Handbook. Ann is very knowledgeable and her information is current and very useful. Click here: http://www.appraisaltoday.com/products.htm Ann's Special Report on FHA Appraising is the first item for sale.
3. Finally, we think every appraiser doing appraisal reports on the URAR should have a copy of my book, Harrison's Illustrated Guide: How to Make a Single Family Appraisal on the Fannie Mae/Freddie Mac URAR Form. This line-by-line guide to filling out a URAR form ihas been a bestseller for over 20 years, through 4 major updates. The book listed here is current, including the 2008-2009 USPAP requirements.
Click here: http://www.formsandworms.com/cgi-bin/select.pl?ImageName=300285
H2
322) Title Search
05/20/08 Keyword: title
search
Dear H2,
I'm an appraiser in Texas. I use the tax assessor's office to check on the Owner of Public Record. For new construction, the buider's name is often not on the tax assessor records yet. As the appraiser, I note this fact and state "to say that the builder is the owner prior to being the owner of record would be misleading and not credible". However, my client replies that the builder "wouldn't sell a property he doesn't own -- and it is on the contract -- and they say it's on the title -- and that is all YOU need to know to say so on the report."
Your comments please?
Melanie Sellers mbsellers@earthlink.net
Dear Melanie,
It most areas it is not expected that the appraiser do a title search. What the appraiser customarily does to check who the owner is depends upon where you are. Normally, the Lender/Client tells the appraiser who the owner is. Also it is customary that the appraiser be supplied with a signed copy of the sales contract, which also indicates who the owner is. It appears from your question that it is also customary in your area for the appraiser to check the assessor's records. In some areas it is also customary for the appraiser to check the deed.
You need to do whatever is customary in your area. If there appears to be a problem, you should note it in the appraisal and recommend that a title search be made to determine who the real owner is.
H2
I'm an appraiser in Texas. I use the tax assessor's office to check on the Owner of Public Record. For new construction, the buider's name is often not on the tax assessor records yet. As the appraiser, I note this fact and state "to say that the builder is the owner prior to being the owner of record would be misleading and not credible". However, my client replies that the builder "wouldn't sell a property he doesn't own -- and it is on the contract -- and they say it's on the title -- and that is all YOU need to know to say so on the report."
Your comments please?
Melanie Sellers mbsellers@earthlink.net
Dear Melanie,
It most areas it is not expected that the appraiser do a title search. What the appraiser customarily does to check who the owner is depends upon where you are. Normally, the Lender/Client tells the appraiser who the owner is. Also it is customary that the appraiser be supplied with a signed copy of the sales contract, which also indicates who the owner is. It appears from your question that it is also customary in your area for the appraiser to check the assessor's records. In some areas it is also customary for the appraiser to check the deed.
You need to do whatever is customary in your area. If there appears to be a problem, you should note it in the appraisal and recommend that a title search be made to determine who the real owner is.
H2
321) Personal Interest
Dear H2,
Can a Residential Licensed Appraiser in Georgia do his own appraisal and if so up to what value? Also how can a Residential Licensed Appraiser get FHA certified?
Ken kenjbrady2004@hotmail.com
Dear Ken,
The 2008-9 USPAP Ethics Rule-Conduct states: "An appraiser must perform assignments with impartiality, objectivity, and independence, and without accommodation of personal interests."
I think this prohibits making appraisals for yourself.
The FHA does not certify anyone. However, they do add appraisers to the Roster based upon an application process. The new FHA application requirements are fully explained in the Spring 2008 issue of REVMAG. Click here: www.revmag.com
H2
Can a Residential Licensed Appraiser in Georgia do his own appraisal and if so up to what value? Also how can a Residential Licensed Appraiser get FHA certified?
Ken kenjbrady2004@hotmail.com
Dear Ken,
The 2008-9 USPAP Ethics Rule-Conduct states: "An appraiser must perform assignments with impartiality, objectivity, and independence, and without accommodation of personal interests."
I think this prohibits making appraisals for yourself.
The FHA does not certify anyone. However, they do add appraisers to the Roster based upon an application process. The new FHA application requirements are fully explained in the Spring 2008 issue of REVMAG. Click here: www.revmag.com
H2
320) Highest and Best Use
05/16/08 Keyword: highest and
best use
Hi Henry,
My family has inherited some industrial property and are now having to pay the taxes on it. My question is, is the appraisal based on the income of the property, and does the stepped up basis law apply here? The property is in a trust.
When my grandmother died the property was industrial, the area is booming and the city council has approved to annex the property into multi-purpose. i think the appraiser used the numbers from a neighboring development that has been deemed multi-use already, because the appraisal seems way too high for industrial with nothing more than bare land and just one useless building. I ask these questions because the trustee does not want to tell the beneficiaries anything and I can't figure out why. It is making me very suspicious which is why I have been to the building dept. and getting some info. I am trying to get them to give us a copy of the appraisal to see what they have based it on. What is your opinion?
Chris Cunningham chris@palmspringsdisposal.com
Dear Chris,
This is a difficult question for me to answer without seeing the appraisal. First of all, the qualifications of appraisers are not equal. It is best to find one the is recommended for this type of complex assignment. The highest appraisal designation an appraiser can obtain is the MAI. It is not a guarantee, but it is a good indication of the appraiser having met more stringent requirements.
All appraisals are based on what is called the highest and best use of the property, which is its future use. It considers the probability of this use and the time and cost to achieve it.
I am sorry but I don't know what the "stepped up basis law" is.
I am not an attorney. However, if you are a beneficiary of the trust, you should be entitled to see it and get a copy. Given the circumstances you've outlined, I think that you may need an attorney to represent you.
H2
My family has inherited some industrial property and are now having to pay the taxes on it. My question is, is the appraisal based on the income of the property, and does the stepped up basis law apply here? The property is in a trust.
When my grandmother died the property was industrial, the area is booming and the city council has approved to annex the property into multi-purpose. i think the appraiser used the numbers from a neighboring development that has been deemed multi-use already, because the appraisal seems way too high for industrial with nothing more than bare land and just one useless building. I ask these questions because the trustee does not want to tell the beneficiaries anything and I can't figure out why. It is making me very suspicious which is why I have been to the building dept. and getting some info. I am trying to get them to give us a copy of the appraisal to see what they have based it on. What is your opinion?
Chris Cunningham chris@palmspringsdisposal.com
Dear Chris,
This is a difficult question for me to answer without seeing the appraisal. First of all, the qualifications of appraisers are not equal. It is best to find one the is recommended for this type of complex assignment. The highest appraisal designation an appraiser can obtain is the MAI. It is not a guarantee, but it is a good indication of the appraiser having met more stringent requirements.
All appraisals are based on what is called the highest and best use of the property, which is its future use. It considers the probability of this use and the time and cost to achieve it.
I am sorry but I don't know what the "stepped up basis law" is.
I am not an attorney. However, if you are a beneficiary of the trust, you should be entitled to see it and get a copy. Given the circumstances you've outlined, I think that you may need an attorney to represent you.
H2
319) Neighborhood Definition
05/15/08 Keyword: definitions
Dear Henry,
In my quest to continue to improve my skills, I am focusing on the Present Land Use section of Neighborhood on the 1004 URAR.
My questions are (1.) How narrow of an area do you consider for this section to be the town or neighborhood? and (2.) What are some good sources or areas to look for such data? I have not been really satisfied with the ones that I use and it has been tough finding alternatives.
Ted cscappraisals@comcast.net
Dear Ted,
There are no hard and fast rules about what is a neighborhood. It can be as small as a city block in some large cities, to a whole community is some rural areas. Sometimes neighborhoods have natural or manmade boundaries such as rivers or highways, but often they do not. Sometimes they appear on maps. The best place to start is by asking the owners or occupants of the subject property what neighborhood they are in and what its boundaries are.
I have said before (somewhat tongue in cheek) that you should define the neighborhood as large as you can to avoid having to make neighborhood adjustments.
H2
In my quest to continue to improve my skills, I am focusing on the Present Land Use section of Neighborhood on the 1004 URAR.
My questions are (1.) How narrow of an area do you consider for this section to be the town or neighborhood? and (2.) What are some good sources or areas to look for such data? I have not been really satisfied with the ones that I use and it has been tough finding alternatives.
Ted cscappraisals@comcast.net
Dear Ted,
There are no hard and fast rules about what is a neighborhood. It can be as small as a city block in some large cities, to a whole community is some rural areas. Sometimes neighborhoods have natural or manmade boundaries such as rivers or highways, but often they do not. Sometimes they appear on maps. The best place to start is by asking the owners or occupants of the subject property what neighborhood they are in and what its boundaries are.
I have said before (somewhat tongue in cheek) that you should define the neighborhood as large as you can to avoid having to make neighborhood adjustments.
H2
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 your 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 your 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: