Excerpts: Appraising residential properties in rural areas can be both challenging and rewarding. Unlike the standardized expectations of urban and suburban properties, rural properties often present unique characteristics that require a nuanced approach to valuation. Whether you’re a seasoned appraiser or new to the field, having a better understanding of rural properties is essential for providing credible appraisals. In this guide, we’ll explore what defines a rural property, the challenges appraisers face, reasons for conducting rural appraisals, strategies for finding comparables, and tips for writing a compliant appraisal report.
My comments: Worth reading, if only to find out about rural appraising. Well written. There are relatively few residential lender appraisals available now. This is an excellent diversification opportunity, with little competition from other appraisers or the GSEs use of other ways to get a value without human appraisers.
What if there are few rural areas near you?
You can expand your area to include rural appraisals to get more business.
When I worked for a northern California assessor’s office with rural areas I learned a lot about almond growing (the main crop) and other ag topics. It is not hard to learn the valuation factors. I had niece who had several horses for many years where she lived. There are equestrian facilities within 5 miles from my house in Oakland hills and in farther out Bay Area cities with larger lots. You may have some similar rural experience now!
The American Society of Farm Managers and Rural Appraisers www.asfmra.org has a specialty in Rural Appraising, but it requires a Certified General. There may be seminars available. Another reason for upgrading!
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NOTE: Please scroll down to read the other topics in this long blog post on USPAP and Personal Inspection, GSE Appraisal Modernization, Transaction costs and values including real estate commissions, unusual homes, mortgage origination stats, etc.
Excerpts: We do love our sun, but a handful of homeowners covet it more than others. Some are even willing to pay millions of dollars to enjoy as much light as possible, via houses made predominantly of glass. We’ve found five glorious examples of glass houses on the market right now.
These pricey, see-through properties are found all over the country. And while these naturally illuminated palaces might not fit into everyone’s budget, they are so lovely to behold. So indulge in a gander at this quintet of gorgeous, glass homes.
Click the listing links in the description for each home to read more and see lots more.
To read more and see the photos, Click Here
My comment: I included some of these homes in previous email newsletters, but thought this article fit well with daylight savings time so I am including it in my blog. I hate this time change. I always get jet lag from traveling east, even just one time zone (daylight savings time). Traveling west (to Hawaii) does not affect me at all. I am still messed up from the time change last Sunday.
By Dallas T. Kiedrowski
The most recent statistics show Value Acceptance accounts for up to 40% of all mortgage approvals. It is presented as part of the GSEs “Appraisal Modernization” initiative, which aims to streamline the mortgage appraisal process. However, a closer examination reveals potential drawbacks, raising questions about its efficacy and impact on the housing market. Despite its roots in a methodology designed to support appraisers, Value Acceptance appears to divorce itself from appraiser standards and oversight, leading to legitimate concerns regarding its reliability and accuracy.
In contrast to Value Acceptance, most homeowners are familiar with Mass Appraisal, the approach commonly employed by County Assessors for property tax purposes. Mass Appraisal is defined in the Homeowner’s Guide to Mass Appraisal as “the systematic appraisal of groups of properties as of a given date using standardized procedures and statistical testing.”
It involves analyzing data collected in mass quantities, developing statistics from the data, and applying the results to value properties. For Mass Appraisers, knowledge regarding cost, sales comparison, and income valuation models is essential, along with adhering to stringent standards for model calibration and specification. Noted in the International Association of Assessing Officers (IAAO) Standard on Mass Appraisal, “appraisal staff should have at least a general understanding of how the models work and the various rates and adjustments made by the models.”
The proliferation of terms under the banner of “Appraisal Modernization” such as Automated Valuation Models, Property Data Collection, Value Acceptance, and Automated Collateral Evaluation may seem like a new phenomenon, but in essence, they represent concepts that appraisers have long referred to as Mass Appraisal.
These modern labels are often heralded as a cure-all for the perceived inefficiencies and biases of traditional mortgage appraisal processes. However, their resemblance to established Mass Appraisal techniques without the benchmarks, oversight or transparency, raises concerns about potentially regressive standardization and market distortions.
My comments: The author has an MNAA, is a Certified Residential Appraiser, an Accredited Mass Appraiser, and on the Executive Board for the West Puget Sound Chapter of IAAO (International Association of Assessing Officers).
The article is long, but worth reading the comparison of Mass Appraising (transparent) and GSE methods (not transparent). I had never read or heard about this analysis before.
When I worked for an assessor’s office in the late 1970s (before computerization) my job was to equalize the values of all the properties in an assigned area. This is still the goal of tax assessment. In contrast, my fee appraisal business seldom used my equalization experience, unless I had an assignment with multiple properties (20+) for an estate.
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Why today’s slowdown is very different from previous downturns – CovidThe crazy ups and downs in lending in a short period of time had never happened before. There was no GSE data during the 1918 pandemic (the only “comp”), so we don’t know what the lending market was like then.
1980-1985, the largest downturn I experienced, was caused by significant increases in rates by the Fed to curb the very high inflation rates in the late 1970s. I worked for an assessor’s office then. We were making 2% per month time adjustments. Everyone was buying now. We thought that prices would go up tomorrow. Mortgage rates were 18%+. Most appraisers were staff appraisers and were laid off. A few fee appraisers made it though, probably on non-lender appraisals.
I started my business in 1986, when rates went down and got all the work I wanted. I remember going by a local Bank of America office to pick up as many appraisal files as I wanted.
My forecast: Today’s downturn will not last 5 years. The Fed will lower interest rates.
What are your plans for the future when today’s downturn will never happen again to you? My recommendation: Do not be 100% lender dependent!
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By George Dell, SRA, MAI, ASA, CRE
Excerpts: Transaction costs are added to every property transaction. Is this add-on a fair addition to the fundamental, intrinsic value a buyer gets? Is it part of the value of the home? Or is it something else? Is this a public policy issue? Is it an appraisal issue? And, is it yet one more question about the validity of the accepted (quasi-governmental) official ‘definition of value,’ where buyer’s price equals loan value?
Transaction costs (fees) may include loan application, escrow, credit report, title insurance, pest inspection, loan points, PMI, Appraisal, Appraisal management, Appraisal ‘technology’ fee, recording fee, transfer tax, underwriting and, of course, the broker/agent commission.
Transaction costs are added to every property transaction. Is this add-on a fair addition to the fundamental, intrinsic value a buyer gets? Is it part of the value of the home? Or is it something else? Is this a public policy issue? Is it an appraisal issue? And, is it yet one more question about the validity of the accepted (quasi-governmental) official ‘definition of value,’ where buyer’s price equals loan value?
Transaction costs (fees) may include loan application, escrow, credit report, title insurance, pest inspection, loan points, PMI, Appraisal, Appraisal management, Appraisal ‘technology’ fee, recording fee, transfer tax, underwriting and, of course, the broker/agent commission.
My comments: When I first saw the title of this blog post I assumed it was about AMCs and GSEs. When I read it I found out what it was really about – value and transaction fees.
Personally, regarding agent commissions, I have always thought percentages were not a fair way to pay for real estate agent services. I assumed that someday there would be a big issue with this, which started with recent NAR lawsuits. 4% of $1,000,000 median price is a lot more than 4% of $250,000 median price. I doubt if it takes a lot more time for a higher priced home. It should be a fee for service.
Issue Date: March 6, 2024
2024-04: Personal Inspection – Use of this term
Question: Am I required to use the term “personal inspection” in my appraisal report?
Answer: No. USPAP does not require use of the specific term “personal inspection”. The term “personal inspection” is only used in USPAP in the certification requirements.
2024-05 Personal Inspection – Inspection from a prior assignment
2024-06: Personal Inspection – Need for additional disclosure
My comments: All 3 Q&As in one place. Well written and not too long. Worth reading.
Excerpts: 3bedrooms, 3.5 baths, 2,350 sq.ft. 6,534 sq.ft. lot, built in 2016
They (owners) weren’t just getting questions at the grocery store—strangers would peer in the front windows, knock on the door, and ask to look inside. Somebody jumped his fence to check out the backyard. Four people drove up from Pittsburgh, nearly five hours away, to see the house.
Schnepp and his wife listed the house for $550,000 this month. They say they plan to build a second shipping container house in the area, ideally on property with more privacy.
In the past 17 months, he’s replaced the home’s vinyl siding with wood, built a two-story wooden privacy screen, replaced the staircase and railings, added a dark wood accent wall in the kitchen, and repainted throughout.
The result is a stunning industrial-style house that’s unlike anything on the market in this wealthy Detroit suburb.
It’s easier to see its maritime transportation origins inside: The living room walls still bear the blue-and-yellow logo of Hong Kong–based Florens, the world’s second-largest container leasing company.
The house was built by Michigan-based C3 UP, which specializes in shipping container homes and businesses. The company makes tiny container homes that start at $31,500, and full-size shipping container houses like Schnepp’s starting at $125,000.
My comment: The owner of a commercial parcel in my city, very close to the main bridge entry into town, tried to get a shipping container construction approved. Of course the city turned him down – too weird and did not look “good for the city” to have it there. Later a conventional commercial building was constructed.
HOW TO USE THE NUMBERS BELOW. Appraisals are ordered after the loan application. These numbers tell you the future for the next few weeks. For more information on how they are compiled, Click Here.
Note: I publish a graph of this data every month in my paid monthly newsletter, Appraisal Today. For more information or get a FREE sample go to www.appraisaltoday.com/order Or call 510-865-8041, MTW, 7 AM to noon, Pacific time.
My comments: Rates are going up and down. Many appraisers are not busy. Some are busy, usually with non-lender appraisals.
Mortgage applications increased 7.1 percent from one week earlier
WASHINGTON, D.C. (March 13, 2024) — Mortgage applications increased 7.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 8, 2024.
The Market Composite Index, a measure of mortgage loan application volume, increased 7.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 8 percent compared with the previous week. The Refinance Index increased 12 percent from the previous week and was 5 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 5 percent from one week earlier. The unadjusted Purchase Index increased 6 percent compared with the previous week and was 11 percent lower than the same week one year ago.
“Mortgage rates dropped below 7 percent last week for most loan types because of incoming economic data showing a weaker service sector and a less robust job market, with an increase in the unemployment rate and downward revisions to job growth in prior months,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Purchase application volume increased for the week but remains about 11 percent below last year’s level. By contrast, refinance volume picked up by 12 percent, with a larger, 24 percent increase in the government refinance index. While these percentage increases are large, the level of refinance activity remains quite low, and we expect that most of this activity reflects borrowers who took out a loan at or near the peak of rates in the past two years.”
The refinance share of mortgage activity increased to 31.6 percent of total applications from 30.2 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 7.7 percent of total applications.
The FHA share of total applications decreased to 12.0 percent from 12.7 percent the week prior. The VA share of total applications increased to 12.2 percent from 11.4 percent the week prior. The USDA share of total applications remained unchanged at 0.5 percent.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.84 percent from 7.02 percent, with points decreasing to 0.65 from 0.67 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate decreased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $766,550) decreased to 7.04 percent from 7.21 percent, with points increasing to 0.38 from 0.36 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 6.77 percent from 6.86 percent, with points increasing to 0.95 from 0.90 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 6.37 percent from 6.66 percent, with points increasing to 0.77 from 0.67 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The average contract interest rate for 5/1 ARMs was unchanged at 6.38 percent, with points decreasing to 0.52 from 0.67 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks, and thrifts. Base period and value for all indexes is March 16, 1990=100.Ann O’Rourke, MAI, SRA, MBA
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