Appraisal Myths, Facts & Methodology

By: Donald A. Rousseau, President

1. Myth: Appraisers must use comparable's within 1 mile of the subject property.
   
   Reality/Fact: FNMA guidelines state, "Whenever possible, the appraiser should use comparable sales in the same neighborhood as the subject property."
   
   Methodology: In some areas of the country, sales within 3-5 miles are excellent comparable data and are “within” the same marketing area as the subject. In some areas of the country, sales outside of a 1/4 mile could be “outside” the subject neighborhood and deemed not comparable. Bottom line- appraisers need to be familiar with their market area and explain to their reader and to the underwriter why comparables were chosen and utilized.
   
   
2. Myth: If an appraiser does an appraisal for Client “A”, he can reassign (or transfer) the appraisal to Client “B” with the release and consent of the prior client.
   
   Reality/Fact: No- that’s “Old School.” USPAP Guidelines state that simply changing the name on the report cannot change or replace the original appraiser-client relationship.
   
   Methodology: To do this properly, Client “B” should request a new assignment or a re-appraisal on the same property. The appraiser does not need to contact Client “A” for a release and does not need to notify them of the request by Client “B”. However, any confidential information supplied by Client “A” may not be revealed to Client “B”.
   
   
3. Myth: Appraisers can accept orders from lenders who make appraisal requests with statements like: “If this property will not appraise for at least ___, stop and call us immediately or please call and notify if it is NOT possible to support a value at or above ___ before you proceed.”
   
   Reality/Fact: According to USPAP, if these requests are conditions for accepting the assignment, the appraiser cannot accept the assignment because it violates professional ethics.
   
   Methodology: The correct way to approach these requests as suggested in USPAP AO-19, is for the appraiser to state:
   
   

   Your request is acknowledged, but it is important for you to be aware that I must develop an appraisal before I can tell you whether the property will support the value indicated. It is also important for you to be aware that your statement of that amount with this request for service does not, in my view, establish a ‘condition’ for my performing the appraisal. If you intend it to be a condition for performing the assignment, I cannot accept the assignment because it violated the professional ethics.

If you have any questions please contact us at marketing@metrowestappr.com

High Home Values Boost Net Worth Of Households Across the Country

By Rafael Gerena-Morales and James R. Hagerty
From The Wall Street Journal Online

The rising value of U.S. homes boosted the net worth of American households to a record in the fourth quarter, but higher interest rates could slow home-price appreciation in the months ahead.

Meanwhile, new claims for unemployment insurance rose slightly in the week ended March 4.

More Info Here

Housing price boom fizzling? Not According to the FED

By Kenneth R. Harney
From The Realty Times

Home sales may be slowing in major markets around the country, but the latest federal survey of price appreciation suggests that the real estate boom was alive and well -- at least as of the final quarter of 2005.

More Info Here

The State of Real Estate

By The Research Staff, TAMU

Soaring energy prices, devastation from Hurricane Katrina and the financial burden of the Iraq war dealt powerful blows to the U.S. economy in 2005. But thanks to consumers and historically low long-term interest rates, the economy continued to grow steadily during the year. And the real estate market, particularly the residential market, surprised economists.

More Info Here

Watch Your Step

As an eager appraiser who recently got his license, I was ready to inspect all the properties I could handle. On one of my first inspections I went to this very nice neighborhood. The lady who answered was elderly, but I proceeded with respect and politeness. I was somewhat overly focused, since I knew I would not have a lot of input from the homeowner. She mentioned to me that there were dogs in the home, but they were locked away and I was completely safe. I thought to myself, "ah ha," there may be some droppings in the back yard and I'll just be really careful when I take the rear photo. I was proud of myself for remembering that caveat and continued as usual.

This home was a tri-level and a little tricky. Again, my focus was to "get it right" and that's all that counted. By the time I got to the rear photo, I had to jump a fence and, you guessed it, landed squarely in the middle of a huge pile! Ugh!! Both shoes were coated and my focus changed immediately. Needless to say, my eagerness and newfound expertise was a reminder that appraising is humbling too and it may be wise to bring an extra pair of shoes.

“…It was a sunny Saturday morning on the course and I was beginning my pre-shot routine, visualizing my upcoming shot, when a voice came over the clubhouse loudspeaker. “Would the gentleman on the woman’s tee back up to the men’s tee please!” I was still deep in my routine, seemingly impervious to the interruption. Again the announcement, “Would the MAN on the WOMAN’S tee kindly back up to the men’s tee.” I simply ignored the guy and kept concentrating. Once more the man yelled, “Would the man on the woman’s tee back up to the men’s tee, PLEASE!” I finally stopped, turned, looked through the clubhouse window directly at the person with the mike and shouted back, “Would the person in the clubhouse kindly shut up and let me play my second shot!”

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Q: "I was wondering if you could explain to me what the differences between a Modular and Manufactured Home."

A: Absolutely! Below is a break down of the differences. If you need or would like more information please let us know at info@metrowestappr.com or info@worldappraisal.com. We will send you a packet of detailed information regarding Modular and Manufactured homes.

We will send you a packet of detailed information regarding Modular and Manufactured homes.

Modular Homes

>> Modular homes are built in modules at a factory.

>> Modular are built to conform to all state, local regional building codes at their destinations.

>> Modules are transported to the home site on truck beds, then joined together by local contractors.

>> Local building inspectors check to make sure the structure meets requirements and that finish work is done properly.

>> Modular homes are sometimes less expensive per square footage than site built homes.

>> Appraisal reports for Modular homes will not have the Manufactured Home box checked. The appraiser will explain in the addendum that the quality of construction of a Modular home is similar to that of a “stick-built” home. (Metro-West Appraisal Co., LLC policy)

>> A well-built modular home should have the same longevity as its site-built counterpart, increasing in value overtime.

Manufactured Homes

>> Formerly referred to as mobile homes or trailers.

>> Manufactured homes are built in a factory.

>> Conform to a Federal building code, called the HUD code, rather than to building codes at their destinations.

>> Homes are built on a non-removable steel chassis.

>> Sections are transported to the home site on their own wheels.

>> Multi-part units are joined at their destination.

>> Segments are not always placed on a permanent foundation (more difficult to re-finance).

>> Building inspectors check the work done locally (electric hook up, etc.) but are not required to approve the structure.

>> Manufactured housing is generally less expensive than site built and modular homes.

>> Manufactured homes often decrease in value over time.

Thank you for your questions and please feel free to email us anytime with any questions or concerns you may have.

Please email us at marketing@metrowestappr.com

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