HAPPY BIRTHDAY SUNBELT APPRAISALS!!
ITS BEEN 6 GREAT YEARS!!
By:Kirk Haverkamp | January 18, 2012
Regulations intended to promote accurate real estate appraisals sometimes result in poorly qualified appraisers being assigned to determine property values for mortgage lenders, the nation’s largest professional organization for real estate appraisers has acknowledged.
Happy New Year!
We will open the book. Its pages are blank. We are going to put words on them ourselves. The book is called "Opportunity" and its first chapter is New Year's Day.
By Lew Sichelman, United Feature Syndicate
December 16, 2011
To hear real estate professionals tell it, appraisals are still the wild card in today's market. If low valuations aren't the No. 1 reason sales are falling through, they say, they are a close second, behind only the inability of would-be buyers to qualify for financing.
Obviously, accurate appraisals are important to lenders. They are putting hundreds of thousands of dollars on the line, so they want to be certain the subject property is actually worth what the sales contract indicates it is.
But accurate valuations are important to buyers and sellers too. If an appraisal comes in too low, sellers are simply not going to get what they think their homes are really worth. They're going to have to lower their expectations, or their buyers are going to have to reach deeper into their own pocketbooks to make the deal work.
Buyers, on the other hand, often look to an appraisal to be sure they are not paying more for a property than they should be. Because financing depends on the appraised value of the property, the appraisal serves as a fail-safe mechanism that allows buyers to vacate what has turned out to be a lopsided contract.
http://www.sunbeltappraisal.org/Orlando-Real-Estate-Appraiser
That's the natural ebb and flow of the marketplace. And it all depends on accuracy. But real estate agents, appraisers and even lenders complain that precision these days is a moving target clouded by inexperience, unfamiliarity and the need — or desire — to get the job done as quickly and as cheaply as possible.
"There is a tendency today to award assignments based on the lowest fee and the minimum time," says Frank Gregoire, a St. Petersburg, Fla., appraiser and a past chair of the National Association of Realtors' appraisal committee. "Quality doesn't enter into the equation."
It would take too much space to explain the reasons for all this consternation. What's more important is how a seller can make sure the appraisal on his property is, indeed, on target. That process starts even before you have a signed contract, according to Anna Ruotolo of RPM Mortgage in Walnut Creek, Calif.
If your agent hasn't done so, says Ruotolo, you should prepare a sheet of any features such as location, view or upgrades that make your home different — and potentially more valuable — than other houses like it.
Ruotolo also suggests creating two more sheets — one that documents any discrepancies with information contained in your tax assessment file, and another that lists recent sales of houses similar to yours.
Data used to value properties for tax purposes are often inaccurate or incomplete. Perhaps your local tax collector says your house has 2,500 square feet when it really has 3,500, or maybe the official doesn't know that you've finished off your basement or attic and the place now has four bedrooms instead of three.
Owners tend to "overlook" issues such as these because their property taxes would otherwise be higher. But when it comes time to sell, such discrepancies can come back to haunt you, because appraisers use the assessor's data to glean information for their reports.
Comparable sales
The sheet of comparable sales is important because "comps" are the foundation on which appraisers make their valuations. Consequently, you want to make sure the appraiser hasn't missed any, or used comps that aren't as comparable as they could be.
You'll want to list properties that are most similar to yours — ideally, four to six houses that have sold within the previous 90 days and are no more than 15 percent larger or smaller than yours and no farther than a mile away. Also list three or four places similar to yours that are currently on the market.
When the appraiser arrives, you and your agent should meet with him and accompany him as he checks out the house. Before he starts, you should pepper him with questions —not in an adversarial way, but in polite conversation — to make sure he is competent.
There's nothing in the rules that prevents agents and their clients from speaking with an appraiser. By law, you can't pressure — or try to bribe — an appraiser to arrive at a certain value. But you can talk to appraisers and share information with them.
"Don't you dare let him go out without talking to him," Ruotolo advised a group of real estate agents recently. "You can talk to him about anything you want."
For starters, make sure the appraiser has access to the local multiple listing service. If not, he won't be able to compare the details of your transaction with those of other deals — the all-important comps. And if not, says Gregoire, the Florida appraiser who also is a former regulator in his home state, he "should be turned in" to the office in your state that licenses appraisers.
Geographic experience
Determining whether your appraiser has geographic competency in your particular area is a bit tricky. Even if his office is 150 miles away, he may still know your market inside and out. But to make sure, Ruotolo suggests asking how familiar he is with the area, how frequently he performs valuations there, and when he last actually did one.
While many realty agents and veteran appraisers often blame low valuations on the appraiser's inexperience, you can't deny the appraiser access to your property on that basis alone. But if he lacks the geographic experience, you can and should refuse to allow him inside.
"It's your right and your obligation to deny access," Ruotolo told the agents.
If, on the other hand, the appraiser is qualified, now is the time to share your lists with him.
Point out your special features, make sure he knows about the discrepancies with the tax data, and review with him the comps you and your agent used to develop the listing price.
He doesn't have to use those comps in making his valuation, but at least you've made them available.
Once the appraiser sends his report to the lender, says Ruotolo, the bank becomes the client. But since you paid for the appraisal, you have the right to receive a copy. And if the valuation comes in too low for your liking, you should review the report for errors and omissions.
If you think the appraisal is faulty — say, it misstates the number of bathrooms or it uses comps with just two bathrooms and your house has four — you can protest it with your lender, who can assign a second appraiser (at an extra cost to the borrower) or deny your request and tell you to like it or leave it.
Orlando Florida residential appraisal, orlando home appraisals, orlando appraisals
by KATIE EUBANKS Sun Staff Writer
A fluctuating housing market does not necessarily mean big changes in property taxes.“Smaller houses less than 1,600 square feet have remained fairly stable [in appraised value],” said Madison County Tax Assessor Gerald Barber.“When houses were highest in 2007 we did not raise the [appraised] values to the highest level since we forecast it as temporary and predicted the bubble would burst,” Barber said.He said larger houses’ appraised values have decreased as much as 15 percent in the recession.Though appraised values are determined a bit differently for taxes than for real estate purposes, the values should be close to the same, he said. “The major difference is that we are using mass appraisal techniques that utilize large databases and compare with a larger group of comparable properties. Then we [account] for different construction materials and local economic index factors.”Market value is still the goal, he said, but mass appraisals can range from 80 to 110 percent of market value.Both Barber and Hinds County Tax Assessor Charles Stokes said it was too early to tell how county budgets would be affected by the current four-year cycle of reappraisals, which will wrap up in 2012. Counties appraise 25 percent of all properties each year.However, Stokes said, “the value pretty well stands on its own, regardless of the recession and all that. “But see, you also have a lot of foreclosures and things where people are getting good deals on houses when they buy them on the market.”SO IF YOU WANT to sell your home and are excited that your appraised value is still looking good, don’t get too excited just yet. You still might have to sell for less than you want.“The number of prospective buyers in a poor economy is less. But sometimes the number of sellers remains the same and you end up with over-supply. You end up with a buyer’s market,” said Kenny Adcock, a certified real estate appraiser with Appraisal Resources and a licensed real estate broker with B. Companies Inc.Adcock said that in his line of work, homes up to 2,000 square feet have kept a greater percentage of their appraised values, though “it pertains more to overall price than the size of the home.” He agreed with Barber that the values of more affluent homes have decreased more since the recession started.“More affordable homes market to a larger group of people, and as people come of age and get to the point where they’re ready to buy their first home, you’re going to have a certain amount of those buyers every year,” he said. “That’s not necessarily the same as the houses where you’re moving from a smaller one to a larger one.”Market value appraisals are based on several factors, including definitions from the nationwide Appraisal Foundation. What it should amount to is “the most reasonable price that an educated buyer would pay,” he said. “If somebody moves here from California, they might have a tendency to overpay because they’re not educated about our market and they think they’re getting a good deal on everything.” He said he thinks the housing market in the Jackson metro area is still trying to recover, though it has done well compared to some other parts of the country.“I think a lot of that is going to be left up to the elections of 2012,” he said.“The more stringent lending guidelines have stifled loans. The government tends to overreact and overcompensate. I’ve had realtors say, ‘Kenny I could’ve sold this house three times last year, and all these people would’ve qualified, but now they don’t.’“The government is going to have to relax those guidelines, and consumers will get more confident, and all of that takes time.”
http://www.sunbeltappraisal.org/AssessmentAppealServicesRead more: northsidesun - County appraisals don’t follow housing market trends
By Joan Probala
Seattle area energy-efficient homes sell faster and for more money compared with other homes here, according to a GreenWorks Realty report.
The trees have lost their leaves, it is getting dark earlier and temperatures are below freezing. Now is the time to talk about the advantages of adding GREEN to your home. Not the Christmas holly, but using GREEN products to increase the energy efficiency of your home.
A pressing question has always been, “How does spending the extra money on energy-efficient products help the value of my home”? It is nice to lower heating bills, but how long does it take to recoup the extra expense of some of these products that would aid in investing in them.
There is finally a way to capture these improvements and assign them a value in an appraisal. Real estate appraisers finally have a new form that helps standardize the way that energy efficient features are included in their reports. Until now, Fannie Mae, Freddie Mac and the Federal Housing Administration used a form that centered on maintaining sound lending practices but did not have a way to capture what energy-efficiency improvements contributed to the value of a home. Including a narrative of any GREEN features in a description box was not always viewed by the lending institution.
In 2009, Fannie Mae prohibited mortgage brokers or loan officers from selecting an appraiser or having direct contact with them. However, Realtors®, buyers or sellers can meet with and can provide extra information directly to the appraiser. Lenders should request the new appraisal form and sellers should fill out the form with all pertinent information. Realtors® should include it in their listing data on the MLS for easy access by appraisers or for other agents who have buyers that are looking for the most energy efficient home. Agents can also meet the appraiser at the home to provide relevant comparable sales information.
GreenWorks Realty prepared a report using NWMLS data of new homes sold from Sept 2007 through February 2010 comparing homes that sold with an environmental certification and those without a certification. According to the collected data, environmentally certified homes in Seattle sold for 9.2 percent more per square foot in 24 percent less time and make up 34 percent of the market.
A nationwide survey by the Shelton Group released in 2006 found that “78 percent of U.S. consumers say they would choose one home over another based on energy efficiency.”
Most new home builders are adding GREEN features because they know that is what consumers are looking for. They can advertise extensively any energy saving features that they build-in to their homes For the re-sale market to compete, home owners should look at adding some of these features when they are doing any type of remodeling. Now, especially since appraisers have the opportunity to add value to each upgrade in a consistent manner, return on investment has improved.
Beside the high cost additions of heating systems, appliances and windows, there are many low cost upgrades that will help to add value to a home and can now be highlighted in an appraisal:
· Adding insulation to attics, exterior walls and floors
· Installing a whole house fan
· Sealing ducts and air leaks
· Improving water efficiency with low-flow toilets, shower heads and faucets
· Installing a more efficient water heater
· Installing landscaping that requires little or no irrigation
Joan Probala is the managing broker for Issaquah Windermere (Windermere Real Estate/East Inc.). She has 30 years of experience in real estate, construction and sales. She is president-elect (2012) of the Seattle King County Association of Realtors.
Brendon Desimone
An inch is an inch is an inch. Or, so you’d think. But when it comes to measuring the square footage of a property, it’s not quite that simple.
I doubt there exists a buyer in the entire world of real estate who hasn’t asked, at one time or another, what is the square footage of a particular property. The fact is, however, measuring the size of a home isn’t an exact science.
You can hire three different appraisers to measure the same house and they may come up with three different measurements. Because there are multiple ways to measure and different mechanisms used, the physical act of measuring can be done differently. Some appraisers will measure square footage with a good old measuring tape, albeit a large one. Others come equipped with those new state-of-the-art laser devices. I have been present when an appraiser will just eyeball a difficult-to-measure space or even do the wide-arm measurement. The point is, there aren’t any universally applied standards.
Read more: http://articles.businessinsider.com/2011-12-09/news/30497207_1_square-footage-appraisers-sellers-and-buyers#ixzz1g9HgNT2x
Darci Marchese, wtop.com
WASHINGTON - If inexperience can lead to a lower appraisal, how can you protect yourself?
It's all about preparation.
Don Boucher, an area appraiser for nearly 40 years and president of Boucher and Boucher, Inc., says once the appraiser has done his or her work, getting a change "can be a hard battle to fight."
"Once an appraiser has gone out with their number and their report, they really don't want to change it," he says.
So sellers and real estate agents need to do what they can prior to the final report.
Boucher advises sellers to have their real estate agent tell the appraiser every specific detail about the house. For example, if there was a recent addition, give details on the cost, the type of products used and if they were high-end.
You as a seller also can offer the appraiser some specific comparables of your own. If you know the house down the street that sold had an outdated kitchen, tell the appraiser.
But also make sure you're not pushing inaccurate comps.
"As soon as you give an appraiser comparables that they know are the wrong comparables, then it just discredits anything that you're telling them," Boucher says.
Boucher says real estate agents also can take some control. He knows of agents who have refused to let certain inexperienced appraisers into properties.
"If they tell the seller not to let somebody into the property, that's their recommendation to the seller," he says.
WTOP has talked to area real estate agents who say they will turn down appraisers they know are not from the area.
Orlando Appraisers, Orlando Appraisals, Orlando Florida Appraisers
by Fenella Pearson (email) 11/28/11
Former Norwalk City Council member and real estate appraiser Nora King had a busy fall thanks to late October storm and municipal election a week later.
"We are the first that are called after a storm," says King, owner of the appraisal firm Nora King & Co., adding that the appraiser's job is a heavy responsibility. Banks and insurance companies want to know the extent of damage and the cost of repair, especially if a property is for sale.
Estimating storm damage is just part of the job description of a licensed real estate appraiser. His or her main task is establishing a value for a property by comparing it to similar properties that have sold in an area. This information helps real estate agents set a sale price and helps banks and other lenders determine loans and mortgages.
"An appraiser's job is to remain independent and develop an opinion based solely on factual market date," King says. An appraisal can help sellers steer clear of low-ball offers on their home, especially in tough markets, she says. Appraisers are trained to look beyond a home's furnishings and neatness, although tidying up will make their job easier.
King has insights into what adds value to a home. “When we appraise a house we look at the general condition and whether it has been kept up-to-date,” she says. "Renovated kitchens are a worthwhile investment." But she has a warning for those considering adding a wine cellar, a pool or a fancy barbeque. “We place very little value on these upgrades,” she said.
CHARLESTON, W.Va. -- A former Charleston real estate appraiser who pleaded guilty to a multi-million dollar mortgage fraud scheme in Putnam County could face up to 20 years in federal prison.
Mark E. Greenlee, 50, admitted Thursday to aiding and abetting wire fraud before U.S. District Judge Thomas Johnston.
Greenlee, a former president of the Kanawha Valley Board of Realtors, admitted he prepared a fraudulent appraisal in 2006 to advance a mortgage fraud scheme with Deborah Joyce and others at the Stonegate subdivision in Hurricane, according to a statement from U.S. Attorney Booth Goodwin's office.
"Although Greenlee knew that the requested amount was significantly over the listing price, he prepared an inaccurate appraisal," according to federal court documents.
He appraised the 3,475-square-foot property at $645,000, adding more than $300,000 to the original asking price of $360,000.
The former real estate appraiser sent a copy of his appraisal via email to a mortgage broker in Utah, who provided the appraisal to a lender who funded a loan for the property.
Greenlee said he concealed information about some of the property's details on purpose to justify the inflated figure.
One of the items the appraiser concealed was that another home in the subdivision had been bought by an associate of Joyce's for $375,000 and sold the same day to an investor in Utah for $660,000.
Greenlee said he then altered his appraisal of the Stonegate property in light of an investigation conducted by the West Virginia Real Estate Appraiser and Licensing Certification Board into the appraisals he provided for Joyce and others involved in the scheme.
The transaction with the Utah investor closed in December of 2006 on the basis of the appraisal and the investor then tried to "re-flip" the property.
Once the investor discovered the true value of the home it was put back on the market for the original asking price of $360,000. The house received little interest and was sold in August 2008 for $282,500.
Greenlee is the second real estate appraiser prosecuted in the scheme, according to the release. James R. Thornton admitted in June that he also aided and abetted the scheme. Thornton falsified the appraisal for a property at 45 Spruce Ridge Dr. and sent it via email to a Utah mortgage broker.
Joyce was sentenced in April to 46 months in federal prison for her role in the scheme, which ultimately resulted in $2 million in losses to lenders on six properties. Her husband, Todd Joyce, was sentenced to 18 months.
Thornton's sentencing is scheduled for Sept. 29. Greenlee faces up to 20 years in prison and a fine of $250,000 when he is sentenced Dec. 8.
Detectives with the FBI and IRS are still investigating. Assistant U.S. Attorney Thomas Ryan is handling the prosecution.
@tagline:Contact writer Ashley B. Craig at ashley.cr...@dailymail.com or 304-348-4850.
Here's a quote from the press release"November 7, 2011 - NAHB (National Association of Home Builders) has developed a set of guidelines to help builders communicate with appraisers and lenders to ensure that they receive an accurate valuation of the new homes they are selling.""The two-page document advises builders to meet with the appraiser on the site of where the home has been or will be built and provide direct support for the price with whatever relevant information they can.""For example, builders should provide the appraiser with all appropriate comps, market and absorption data, specifications of the property, materials in the property and why they were chosen, buyers' reactions to products selected, and sales information.""Hiding data is one of the biggest mistakes builders make, according to the NAHB appraiser guideline, which urges builders to provide appraisers with all the relevant data.""In return, builders should demand that lenders use qualified, designated appraisers who are experienced in their local area, and who understand new construction and green building values.""The use of inexperienced or under-qualified appraisers by lenders is a major problem that negatively affects property values and remains an obstacle to the recovery of the housing market.""Banks have been relying upon appraisal management companies (AMCs) to select the appraiser. Too often this can be a matter of finding the appraiser who charges the lowest fee but doesn't provide the best quality.""And an inadequate amount of time may be provided to complete the evaluation, making it difficult to adequately conduct proper research."My comment: this is just guidelines. Maybe some builders will do something.Direct link to the 2 pages of guidelineshttp://www.fhba.com/docs/BuilderGuidelinestoaStrongerandMoreProductiveRelationshipwithAppraisers.pdf Link to full press releasehttp://www.nahb.org/news_details.aspx?sectionID=241&newsID=13929&print=true
www.appraisaltoday.com
Alyssa Abkowitz via Smart Money
Jason Gonsalves worked hard to turn his 6,500-square-foot stucco-and-stone home in the suburbs of Sacramento into the ultimate grown-up party pad. Inside are the game room, home theater and custom wine cellar. Outside, there’s the recently added piece de resistance — a wood-burning pizza oven, kegerator and searing station, all flanking an infinity-edge pool that overlooks the lapping waters of Folsom Lake. A spread like that doesn’t come cheap, of course, so when interest rates fell recently, Gonsalves, who runs a lobbying firm, looked into refinancing his $750,000 mortgage. That’s when he got some startling news — even as he was putting the finishing touches on his home, it had dropped more than $200,000 in value over a seven-month stretch.
Or at least, that’s what one popular real estate website told him. Another valued Gonsalves’s pad at a jaw-droppingly low $640,500. And these online estimates left him all the more confused when a real-life appraiser, assessing the house for the refi loan, pinned its value at $1.5 million. "I have no idea how those numbers could be so different," Gonsalves says.
Right or wrong, they’re the numbers millions of consumers are clamoring for. In a housing market that’s been mostly a cause for gloom, so-called home-valuation technology has become one of the few sources of excitement. After years of real estate pros holding all the informational cards in the home-sale game, Web-driven companies like Zillow, Homes.com and Realtor.com are offering to reshuffle the deck. They’ve rolled out at-your-fingertips technology via laptop and smartphone to give shoppers and owners an estimate of what almost any home is worth. And people have flocked to the data in startling numbers: Together, four of the biggest websites that offer home-value estimates get 100 million visits a month, and one, Homes.com, saw traffic jump 25 percent in the three months after it launched a value estimator in May. "Consumers used to use us for home buying and move on," says Jason Doyle, vice president of Homes.com. "Now we can stay engaged with them."
Real estate voyeurism aside, the stakes are high for many of the sites’ visitors. Homebuyers use the estimates to get a feel for what’s on the market and, later on, to figure out whether their bid will entice a seller to play ball. Vigilant homeowners like Gonsalves check their values to help decide whether it’s worth the hassle of refinancing, while others who are ready to sell use them to gauge if they’re priced right for the market. Real estate agents, meanwhile, say they’re increasingly resigned to spending more time answering questions — or arguing — about the estimates. "It’s an evolution for consumers," says Gary Painter, director of research at the Lusk Center for Real Estate at the University of Southern California. Banks and other lenders are piggybacking on the trend as well, with some even showcasing the upstarts’ estimates on their own websites. While lenders say they don’t use the estimates to make final decisions about loans, they say Zillow in particular has become a go-to tool for their preliminary research on homes. "I use it every day," says Zach Rohelier, a mortgage banker at LendingTree.
But for figures that carry such weight, critics say, the estimates can be far rougher than most consumers realize. Indeed, if the websites were dart throwers, they’d seldom hit the bull’s-eye, and they’d sometimes miss the board entirely: Valuations that are 20, 30 or even 50 percent higher or lower than a property’s eventual sale price are not uncommon. The estimates frequently change, too, for reasons that aren’t always easy for homeowners to discern. According to the companies themselves, some quotes have swung by hundreds of thousands of dollars in as little as a month as new data gets plugged into the algorithms the sites rely on. (Those algorithms also change, as happened this summer when Zillow made adjustments that affected all of the 100 million homes in its database.) And while the sites say it’s probably rare that individual homeowners (or real estate agents, for that matter) game the system, they do acknowledge that people can enter information that might push estimates higher. Put it all together, say pros, and you’ve got numbers that have become head-scratching legends in one community after another: a Hollywood Hills aerie losing 47 percent of its value in one month (with no earthquakes or mud slides to explain the drop); a century-old home in Louisville, Ky., that, according to local lore, served as the inspiration for Daisy’s home in The Great Gatsby, quadrupling in value over 30 days; and one townhouse in Brooklyn, N.Y., listed now for $5 million, valued at a whopping $31 million in the midst of the real estate crash — at least according to Zillow.
Zillow says the Brooklyn valuation was an error that it subsequently corrected. And make no mistake, all of the competitors go out of their way to make it clear their numbers are guesstimates, not gospel. "A Trulia estimate is just that — an estimate," says a disclaimer on that site’s new home-value tool. Zillow deploys similar language and goes a step further, publishing precise numbers about how imprecise its estimates can be. And every major site urges home-price hunters to "always consult with a real estate agent or house appraisal specialist," in the words of Homes.com. Indeed, these sites say they have strong relationships with the real estate business in general; they get a significant share of their revenue from the industry, in the form of advertising and subscriptions.
But when the real estate version of Pandora’s box is opened, homeowners don’t necessarily pay attention to disclaimers. Consumers and pros alike say many Web surfers put enough faith in the estimates to sway the way they shop and sell. "I’m constantly explaining to clients that those numbers don’t come from a person," says Mindy Chanaud, a real estate agent in Greenwich, Conn., who launched into what she calls her Zillow spiel when shown a Zestimate of one of her listings. Frank and Sue Parks, former owners of the Gatsby house in Louisville, watched as the site put a $331,000 value on the dwelling in May; by July it had climbed to $1.5 million. (Zillow says the lower estimate reflected errors in its statistical model.) The couple got some potential buyer referrals from the site, but they had to fend off a stream of lowball offers before they sold their place this fall. They’re convinced that the estimate roller coaster accounted for some of that. Says Sue, "It really affected our ability to move the place."
For most of real estate history, of course, determining a home’s value has been an appraiser’s job. Appraisal involves gathering data on recently sold homes in the area and comparing them with the "subject property" on matters like size, condition and characteristics, before coming up with an estimate of the home’s worth. If the property has, say, a swimming pool, but most recently sold homes don’t, the appraiser might add a premium to the sale value. Still, the exercise involves as much art as science, as appraisers acknowledge. The more unique or luxurious a property, the harder it is to accurately value. "Imported marble and a view of the ocean are going to be more or less valuable depending on market conditions," says Susan Allen, a vice president at CoreLogic, a data and analysis provider in California. And critics have accused a few appraisers of inflating the value of properties or rubber-stamping other people’s estimates to ensure that deals went through.
The response, beginning in the late 1980s, was the rise of the machines. Economists started developing automated valuation models, or AVMs; instead of having a person visit the property and crunch calculations, these computer models sync the math with data about comparable sales, square footage, number of bedrooms and the like, all in a matter of seconds. Rob Walker, a managing director at AVM purveyor Lender Processing Services, says the models sped up the approval process for second mortgages and home-equity loans; indeed, for years, the tools were mostly reserved for in-house nerds at lending banks. It wasn’t until 2006 that Zillow took them to the masses, with its Zestimate. The company runs data on more than 100 million homes through its own algorithms that recognize relationships between property characteristics, tax assessments and recent transactions. "Humans don’t make these decisions," says Stan Humphries, chief economist at Zillow.
Scores like these have helped build successful business models for some companies — Seattle-based Zillow, for one, just raised $69 million in an initial public offering. And they’ve become weapons in the arsenal of consumers like Terence Avella, an attorney in Eastchester, N.Y. After he and his wife became enamored of a four-bedroom Victorian with an asking price of $650,000, Avella consulted Zillow, finding a much lower valuation: $510,000. He says the Zestimate reinforced his belief that the house would need extensive renovations — and he put up a lowball bid. By the time the process was over, Avella had settled on an offer of just $580,000 (though the negotiations later fell through). Indeed, in a market where listing prices often reflect hope more than reality, some agents and consumers say that online tools are a useful reality check. Simms Jenkins, an Atlanta marketing executive, says he’s recently relied on sites like these to both buy and sell homes. "I can’t imagine 25 years ago, when people would just go out and spend their entire Saturday looking at homes," Jenkins says. "You don’t have to do that now."
But what’s a godsend to Jenkins is an ongoing mystery to Mike Battaglia. Battaglia lives in a Frank Lloyd Wright inspired mansion in Louisville, on a historic street, across from a lush park. But his neighborhood is decidedly eclectic — homes like his sit near much smaller starter homes — making it a challenge, local appraisers and agents say, to figure out how much each home is worth. Among the online estimates, that difficulty plays out in real time. Homes.com valued the manor at $761,700, but that figure dropped $85,000 in a month. Zillow pinned its worth at $1.1 million in December 2010, then posted no Zestimates at all for several months — only to peg its value at $327,000 in May, a 70 percent haircut. By fall, it was back up to $1 million.
Battaglia, a business consultant, says he knows the numbers are only estimates, but he still thinks that notion doesn’t register with people: "It’s the perception of value that affects people’s psychology." Zillow says its wide range of estimates was a result of volatility in the local market. Homes.com’s Doyle declined to comment specifically on Battaglia’s house, but says that a home in a neighborhood like his could definitely be vulnerable to inaccuracies. "If there’s a transaction next door and someone just gave away a house, it will throw off the model," Doyle says.
Indeed, appraisers and real estate consultants say that those models veer off target with alarming frequency. Typically, data for valuation models come from two sources: records from tax assessors and listing data for recent sales. Middleman companies — the dominant ones are CoreLogic and Lender Processing Services — gather this data from more than 3,000 U.S. counties and license them out to the Web sites and other model-builders. Collection is itself a challenge, because not every county tracks properties the same way. In North Carolina’s high-tech Research Triangle, anyone can get data directly from the Wake County website, while in rural Wright County, Mo., tax rolls are available only on paper. The size of a home could be reported by square footage or by the size of each bedroom and bathroom, so data companies must "scrub" the data to make it uniform. Even then, the data isn’t always useful in the field, say real estate pros. County assessors often use AVMs in newer subdivisions where floor plans don’t vary much. But with custom homes or neighborhoods going through gentrification, the models can go haywire. "You cannot use a computer model in certain areas and expect the value to come out right," says John May, the former assessor of Jefferson County, Ky.
Some properties’ data can be too tough a nut for any computer model to crack. On a quiet street in one of Brooklyn’s grander old neighborhoods stands the brownstone that, according to Zillow, was worth $31 million in 2007. "I don’t even know if there’s ever been a home in Brooklyn worth that much," says a spokeswoman for The Corcoran Group, the agency that now lists the property on the market, for $5 million. Zillow declined to discuss why its earlier estimate was so high, but a look at the house’s records suggests one potential reason for the enormous spread: Although the address is a two-family townhouse, the current owners use the entire house, giving them square footage that’s off-the-charts big by New York City standards.
Public records are hardly the only problem. Automated models aren’t designed to account for the unique details that often make or break a deal — something their designers readily acknowledge. AVMs usually can’t capture data that determines the condition of a property, such as whether there’s been a ton of wear and tear. Is a home right next to the railroad tracks or a golf course or a landfill? AVMs can’t always answer those questions, say industry pros, though GPS technology is improving things on that score. Models also can’t decipher the motivations of a buyer or seller, says Leslie Sellers, a past president of The Appraisal Institute. A couple who’s going through a nasty divorce, for example, may have taken the first offer that came along just to unload the property. For all these reasons, says Lee Kennedy, managing director of AVMetrics, a firm that audits and tests industrial-grade AVMs, the models that banks use often add a "confidence score" to their value estimates, with a low score signaling that it’s best to send in a human appraiser.
Consumers, however, don’t get to see a confidence score; instead, they get disclaimers, some of which are eye-opening. Zillow surfers who read the "About Zestimates" page find out that the site’s overall median error rate — the amount the estimates vary from the actual fair value — is 8.5 percent, and that about one-fourth of the estimates wind up being at least 20 percent off the properties’ eventual sale price. In some places, the numbers are far more dramatic: Gibson County, home of the West Tennessee Strawberry Festival, has a 57 percent error rate; in Hamilton County, Ohio, where the Cincinnati Bengals play, it’s 82 percent. Site users are always one click away from this data, but agents say few homebuyers read it (on Zillow’s homepage, the font for the "About Zestimates" link is slightly smaller than the main home-data type — and quite a bit fainter).
The sites argue that, over time, edits and corrections will help them perfect their numbers — and many of the corrections will come from their customers. On Homes.com, for example, anyone who knows certain specifics, like a homeowner’s surname and the year the home was last purchased, can edit the details to reflect, say, a sprawling two-bedroom addition. Zillow also allows site visitors to modify its property details, and in four years, it has accepted revisions on 25 million homes — perhaps the strongest testament to how seriously consumers take the estimates. Today, Zestimates are helpful enough, says the site, to give consumers an accurate sense of any home’s value. In the meantime, says Humphries, the company’s economist, "We’re always tweaking the algorithm or building a new one."
But in the eyes of some skeptics, that tweaking only increases the potential for off-base estimates. Steve Levine, a real estate agent in Shrewsbury, Mass., says he recently changed his home description on one site, adding the fact that he has a finished basement. Over the next six months, his home rose from $516,000 to $558,000 — a healthy 8 percent — while a neighbor’s nearly identical home sank in value. Levine says he has no way to tell how big an impact his update made, "but being able to change the facts is one more tool for manipulating the system." The sites say they believe intentionally wrong changes are rare, but acknowledge they can only go so far policing those tweaks. "It’s not 100 percent bulletproof," says Homes.com’s Doyle.
In the end, some critics say, the sites’ business models may pose a bigger problem for consumers than their algorithms. Even their flaws help to sustain the buzz around the estimates, drawing curious visitors. The online firms earn significant revenues from advertising, and the more traffic they get, the greater that ad revenue is. Zillow says 57 percent of its revenue comes from display ads from the likes of home-supply store Lowe’s, realty franchisor Century 21 and builder KB Home. Realtor.com’s parent company, Move Inc., generates 42 percent of its sales from listings by local agents, while Homes.com says advertising is its fastest growing revenue area. Trulia expects its traffic to grow now that it has launched a beta version of an online estimator, says head of communications Ken Shuman; after all, he adds, "consumers asked for it." As long as they keep asking, say industry insiders, stumbles in reliability aren’t especially important. "It’s not about being accurate or precise; it’s about being sticky," says Kennedy, of AVMetrics. For their part, the sites say stickiness matters to their business plans, but that they take the estimates very seriously; otherwise, as a Zillow spokesperson put it, "we wouldn’t have a team of Ph.D.s trying to make them better all the time." They depict the estimates as an ongoing experiment that is likely to achieve a very high degree of accuracy — someday. (At least for now, one site is deferring to agents in the home-value game: Realtor.com says it removes its estimates from homes once they actually go on the market.)
In the future, of course, homeowners may look at today’s estimates the way they look at those enormous console televisions from the 1940s — as an awkward early phase for what became a ubiquitous, reliable technology. But in the meantime, many are content to use them, flaws and all, whether in earnest or as entertainment. In an exurb outside Phoenix, Mike Lang, a commercial-property manager, has seen his home jump almost 20 percent in value on Zillow in the past few months — he’s not sure why. Though he’s not moving any time soon, he’s enjoying his time at the top of the real estate heap. "I’ve got the most expensive house in the neighborhood," Lang says.
Here's a quote:
FORT LAUDERDALE, Fla. - Low appraisals continue to block people from selling homes or refinancing mortgages, leaving many sellers and real estate agents unhappy.
"We really feel we're at the mercy of appraisers," said Randy Lane, a Broward County, Fla., homeowner whose sale fell through recently when two value estimates came in well below the negotiated price.
"This requirement is costing everybody, including the consumer, because we're not getting quality appraisals," said Tim Singer of Coldwell Banker in Fort Lauderdale.
Appraisers bristle at the criticism. While some concede that concerns about the law are valid, they also say real estate agents and sellers have vested interests that blind them to the reality of falling home values.
"Don't shoot the messenger," said Ken Chitester, spokesman for the Appraisal Institute, a Chicago-based association with 24,000 members nationwide. "It's very easy to point fingers, especially in a depressed market."
http://www.joplinglobe.com/dailybusiness/x1953747266/Buyers-sellers-chafe-at-low-home-appraisals-that-hurt-sales
Ann O'Rourke
Editor's Note: Every now and then I read some unusual "Underwriter Requests" in appraiser forums. Yesterday I read this post from Bob McGivern, SRA on the WinTOTAL Users Group:
So every morning, I power up the computer and think “what’s the new stupid for today”? And then the e-mail spins out notices and guidelines. Some result in a nod of approval, and most a chuckle. Today, I just decided the “thinkers” all went into the same basement and shared some illegal contraband. I have no other idea how to explain it.
It’s bad enough, they concluded appraisers should write the reports in “morse code”, but now this:
2. The appraiser must include the addresses for at least 5 comparable sales that were considered but not included in the grid. Please provide a brief explanation in the addendum section as to why you did not include those properties in the Sales Comparison Analysis grid
The real question is this – “Would any down to earth, knowledgeable appraiser take this “requirement” seriously”? Maybe it’s time to join the “thinkers” in the basement….
http://appraisalscoop.com/
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Check out the UAD resources link below! Good stuff!
For appraisals with an effective date (date of inspection) on or after September 1, 2011, the appraisal report must be completed in compliance with the UAD for conventional mortgage loans sold to Fannie Mae or Freddie Mac.
Fannie Mae has some great tools to assist appraiser in learning these changes.
https://www.efanniemae.com/sf/lqi/umdp/uad/index.jsp
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There are skinny houses. And then there is Jakub Szczesny's Keret House, which could make Calista Flockhart look like a fatty. At its most generous, the proposed place, in Warsaw, Poland, will clock in at 4 feet wide. At its narrowest, it'll be just 28 inches wide -- thinner than the average doorway. And we complain about our sardine can in New York...
The house (officially an "art installation," because it doesn't meet Polish building code) is slated to fill a crack between a pair of buildings in Warsaw's Wola district. When construction's finished in December, it'll be the thinnest house in Warsaw and possibly the whole world. We did a quick Google search and couldn't find anything leaner.
Szczesny designed the house to be a work space and home for Israeli writer Etgar Keret. It'll also be a "studio for invited guests -- young creators and intellectualists from all over the world." If, that is, they're willing to drop half their body weight to fit inside.
Kidding, kidding. In all seriousness, though, the house is a pretty remarkable feat of architecture. If everything goes according to plan, Szczesny will manage to squeeze in designated rooms for sleeping, eating, and working. The place will have off-grid plumbing inspired by boat sewage technology and electricity lifted from a neighbor. To save space, the entry stairs will fold up at the press of a button and become part of the first floor.
Aesthetically, the Keret House isn't gonna win any beauty contests. It's been compared to everything from a pregnancy test to a sanitary napkin. (Our vote is for "pregnancy test.") Our biggest concern, though, is that it's hardly got any windows. How's it going to "produce creative work conditions," as ArchDaily reports, and "become a significant platform for world intellectual exchange," if it feels like a sensory deprivation chamber? Won't Keret go insane? But maybe that's the point. It's not like he'd be the first artist to benefit from going crazy.
Nation’s Largest Organization of Real Estate Appraisers Says Consumers Could Suffer
CHICAGO (May 12, 2011) – The Appraisal Institute today cautioned real estate appraisers about signing agreements imposed by some appraisal management companies that seek to hold residential appraisers responsible for AMCs’ actions. Its president warned that consumers could be the ultimate losers.
“Appraisers should be very careful about signing any agreement, especially one that makes them responsible for another party’s actions,” said Appraisal Institute President Joseph C. Magdziarz, MAI, SRA. “While there are some fine AMCs doing business today, many AMCs shift liability onto appraisers. For many professional appraisers, it’s simply not worth the risk.”
Magdziarz, as president of the nation’s largest professional organization of real estate appraisers, noted that the most qualified, most competent appraisers often refuse to sign such indemnification agreements. “That means that consumers ultimately suffer, because the valuation of their property isn’t likely to be conducted by an appraiser with the most training, education and experience,” he said. “And without a reliable, credible opinion of value, everyone involved in a home sale suffers.”
While lenders can manage appraisal operations with internal staff, some choose to outsource these functions to third-party management companies called AMCs. These firms act as “middlemen” between lenders and appraisers.
“To get an idea of how potentially dangerous this situation is for appraisers, one need only look to the FDIC’s recent action,” Magdziarz said in reference to the Federal Deposit Insurance Corp. complaint filed May 9 against Lender Processing Services and CoreLogic that seeks to recover roughly $283 million in losses allegedly tied to appraisals. “Regardless of the merit of the FDIC’s charges, it’s clear that appraisers who sign indemnification agreements expose themselves to unnecessary liability that can ruin their careers and destroy their businesses.”
Magdziarz also noted the potential effect on consumers, who often have to rely on valuation services from some of the least qualified and least competent appraisers hired by some AMCs. He warned that such agreements drive professional appraisers further from consumer mortgage lending valuation services.
“The Appraisal Institute’s best advice for consumers is to ensure their lender hires a qualified, competent appraiser, such as a Designated member of the Appraisal Institute,” Magdziarz said. “For appraisers, the Appraisal Institute advises that they know and understand any agreement they sign and that they not sign any agreement they feel is unreasonable or not in their best interests. For most AMCs, providing a certificate of insurance may be a good alternative to signing an indemnification agreement.”
Consumers can locate a real estate appraiser in their area by clicking on the “Find an Appraiser” link at http://www.appraisalinstitute.org.
Subscribe to the Appraisal Institute News Releases RSS feed and stay connected with the latest news from the Appraisal Institute: http://www.appraisalinstitute.org/RSS/NewsRelease/Default.aspx
The Appraisal Institute is a global membership association of professional real estate appraisers, with more than 24,000 members in about 60 counties throughout the world. Its mission is to advance professionalism and ethics, global standards, methodologies, and practices through the professional development of property economics worldwide. Organized in 1932, the Appraisal Institute advocates equal opportunity and nondiscrimination in the appraisal profession and conducts its activities in accordance with applicable federal, state and local laws. Members of the Appraisal Institute benefit from an array of professional education and advocacy programs, and may hold the prestigious MAI, SRPA and SRA designations. Learn more at www.appraisalinstitute.org.
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Here's a quote:"The industry continues to wait for the flood for foreclosure sales as the amount of delinquent properties continues to grow at a staggering rate. In fact, the number of serious delinquent properties and foreclosures now out-number foreclosure sales by a 50:1 ratio." "The latest data from Lender Processing Services' Mortgage Monitor report shows that the number of mortgages that are 90 or more days delinquent, combined with the foreclosure inventory at the end of May, totaled 4,084,557. The number of foreclosure sales stood at 78,676 at month end. In fact, LPS stated that there are still significantly fewer foreclosure sales than there were before the foreclosure moratoria were put into place, and the numbers are actually declining."
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