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APPRAISING IN TODAYS MARKET
General Issues
Comparables
Single Family Homes
Fee Simple Townhouses/PUDs
Condominiums
Appraiser Packet
Questions
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GENERAL ISSUES
Who is reading
the appraisal
today?
Buyers
Sellers
Selling Agents
Listing Agent
Buyers/Sellers
Attorneys
Loan Officer
Mortgage Underwriter
Review Appraiser
Mortgage Insurance
Underwriter
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GENERAL ISSUES
HVCC (Home
Valuation Code of
Conduct) NAR is heavily
petitioning to
sunset this code
Adopted May 1, 2009
Enacted by Fannie Mae/Freddie Mac
Recently adopted by FHA
AMCs (Appraisal Management
Companies)
Higher fees
Slower turn times
Appraisers from outside of area
Helps eliminate appraiser
pressure
Many lenders have hired appraisal
coordinators)
Cannot be involved in the loan
production
All about risk management
Lenders have their own
approved appraisers
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GENERAL ISSUES
Appraisal
Inspection
Treat the appraisal
inspection as the most
important showing to date!
Make sure the property
is clean.
Try to have any needed
repairs addressed prior
to the inspection.
Explain to the sellers whatto expect, and how
important the appraisal is.
SHOW UP!
Answer Questions
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GENERAL ISSUES
FHA appraisal inspection Appraisal is tied to property for 6 months
More in depth inspection
www.hud.gov - Homeownership ReferenceGuide
Utilities must be active
Necessary repairs may be conditioned
Concerned by the 3 Ss
Safety
Security
Soundness
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GENERAL ISSUES
Gross living area (GLA) The total area of finished, ABOVE GRADE, square
footage that is finished in similar manner as the rest
of the property. Fannie Mae/Freddie Mac guidelines
Condominium units, lower level is included in GLA
Only bedroom/bathroom above grade is included in
BR/BA count
Basement finishing, as well as BR/BA are a separate
adjustment
Single family homes measured from exterior,
condominiums measured from interior walls
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GENERAL ISSUES
Contracts
The stronger the
buyer the less
scrutinized theappraisal
5% down versus
20% down
Mortgage Insurance
underwriters moreparticular than typical
mortgage underwriter
Concessions Repair Credits
May raise a red flag
Include on attorneyreview, and not initialcontract
Personal property
Furniture, TVs, etc.
Not considered in
appraisal Closing Costs
3% limit, use to be6%
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COMPARABLES
Arms Length Transaction:
A transaction in which neither buyer
nor seller is acting under duress, theproperty is offered on the open market
for a reasonable length of time, and
both buyer and seller have a reasonable
knowledge of the property, its assets,and its defects. (Fundamentals of Real EstateAppraisal 8th Ed.)
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COMPARABLES
Old Requirements
(Pre-market
crash)
3 closed
comparables
within 12 months Typically within 1
mile
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COMPARABLES
New
requirements
(Typical)
1-2 closed sales
within 90 days
1-2 closed saleswithin 6 months
4-5 total closed
sales
1-2 pending listings
1-2 active listings
Within 1 mile
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COMPARABLES
Justification for citing dated
comparables:
Same project Same subdivision, and/or close
proximity
Same model Lack of recent data
Similar external obsolescence
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COMPARABLES
External
Obsolescence
A feature made undesirable
or unnecessary because of
conditions outside of the
property. (Fundamentals of
Real Estate Appraisal 8thEd.)
Must cite comparables with
similar obsolescence
Examples
View of the train
Proximity to airport
View of a busy street
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COMPARABLES
Short-Sales and REOs (Foreclosures) Not considered an arms length transaction
Typically omitted
If utilized typically require a conditionadjustment
Utilized if these transactions are the bulk ofmarket activity
May be utilized in order to meet certain lender
requirements/criteria Typically given less weight in the overall
reconciliation of values
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SINGLE FAMILY HOMES
Plat of survey:
Provides lot lines
Shows anyeasements/encroachments
Provides legal description
Typically required for all sales otherthan condominiums or co-ops
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SINGLE FAMILY HOMES
StandardAdjustments Date of sale
LOCATION Site view
Design
Quality ofconstruction
Age Overall condition
Bedroom/bathroomcount
Gross living area
Basement
Basement finishing
Functional utility
Heating/cooling
Parking Outdoor space
Energy efficiency
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SINGLE FAMILY HOMES
Discretionary
Adjustments
Kitchen/bathroomquality
Fireplace count
Professional
landscaping
Amenities
Smart-home
Wine cellar
Home-theater
Pool
Coach house
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PLANNED UNIT DEVELOPEMENT
Commonly referred to as PUDs
Typically townhouses or suburban
subdivisions
Still have an association
Governed by covenants, conditions, and
restrictions (CCRs)
Lower/minimal dues
Similar adjustments as single family houses
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PLANNED UNIT DEVELOPMENT
Condominium
Townhouse
Higher monthlyassessment
Governed by rules
& regulations
Covered by
common
insurance
No land ownership
PUD Townhouse
Lower monthlyassessment (may
be monthly orquarterly)
Governed byCCRs
No common
insurance Own land, roof,
exterior walls
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CONDOMINIUMS
Standard
Adjustments
Date of sale Location
Recreation
facilities
Floor location View
Design
Quality ofconstruction
Age
Overall condition
Bedroom &bathroom count
Gross living area
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CONDOMINIUMS
Standard Adjustments
(Cont)
Gross living area Functional utility
Heating/cooling
Outdoor space
Parking
Outdoor space
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CONDOMINIUMS
Discretionary
Adjustments
Kitchen/bathroomquality
Fireplace count
In-Unit Laundry
Amenities
Roof-Rights Audio/visual
wiring
Home-theater
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CONDOMINIUMS
Project information
# of stories
# of elevators Year built
Construction (brick, concrete, frame,etc)
Roof material # of parking spots
Type of parking
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CONDOMINIUMS
Project information (cont) # of units
# of units sold
# of units completed
# of units for sale
# of units sold
# of units rented (MI limit 33%)
# of units owner occupied (or secondhomes)
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CONDOMINIUMS
Project information (cont)
# of phases
Developer in control of HOA? Management company/contact
Any entity own more than 10% of project
Date of conversion
Status of completion
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CONDOMINIUMS
Project information (cont)
Status of completion (common areas)
Commercial space (limit 20-25%
) Current monthly assessment
Assessments include
Special assessment amount
Special assessment covers what?
Project subject to ground rent?
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APPRAISER PACKET
Be PROACTIVE
Do not wait until the appraisal is aproblem
You are the expert on the property
Assist in whatever manner possible
Create an appraiser packet
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APPRAISER PACKET
RELEVANTcomparables
Executedcontract Executed Date
Seller-owner of record
Concessions
Anything unusual
Plat of survey
List of upgrades
or improvements Zoning certificate
Floor plans
Project
information
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APPRAISER PACKET
Agent Metrics/MLS Reports
Show the rate of
appreciation/depreciation, orstabilization
Demonstrate an accurate sales-to-list
price ratio
Analyze median/average price for
market
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OMMITTED PROPERTY
2-4 unit properties
Vacant land Cooperative interest
(Co-Ops)
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QUESTIONS