WalshStreet Blog

Did you know that a good appraiser will review 2-4 different sources of data pertaining to a recent sale or listing before he uses it as a comparable?

Did you know that an appraiser will analyze a neighborhood or market area using 3-8 different analysis before making a conclusion about the characteristics and trends of that neighborhood?

Did you know that an appraiser will analyze the sales history of the subject property and comparables going back as far as three years?

Did you know that an appraiser will match and compare 5-25 different properties to determine an appropriate adjustment, sometimes going as far back as five years? 

Did you know that it is not uncommon for an appraiser to have 15-100 pages of information in a work file that was reviewed but you never see? 

Did you know that it is a requirement that an appraiser review the purchase agreement for the sale of a property being appraised. Did you know that this gives him insight as to what types of offers are being made and how they're being constructed? Not just from one broker but from all broker offices throughout his geographical area.

"No one else in the real estate profession spends this much time on market sales activity! No one else has this much knowledge about local market sales trends"!

SO THE NEXT TIME YOU'RE AT A SOCIAL GATHERING AND EVERYONE HAS A MOUTHFULL TO SAY ABOUT REAL ESTATE, KNOW WHO E.F. HUTTON IS!!!

The recent introduction of the "Valuation Code of Conduct" (HVCC) and its pending approval from some of the remaining powers that be, has been accepted by most appraisers as a welcomed change for the better. This new "code of conduct" requires lenders to order all appraisals through an "Appraisal Management Company" (AMC). The most welcomed aspect of this code specifically deals with appraisers not having to communicate directly with lenders, therefore reducing the possibility of any undue pressure. The AMC's especially like to boast about this feature because it helps to offset some of the negative aspects of ordering appraisals through an AMC.

With the recent disclosure of all the shady lending practices that have gone on over recent years and the current activity to rectify the situation and put polices in place to make sure that these things don't happen again, immediate attention needs to be given to some of the flaws of this new HVCC.

So while we're at it, let's change the practice of allowing AMC's to take as much as 50% of the fees they collect for an appraisal assignment that would ordinarily go to the appraiser. "Electronically" assigning and reviewing appraisals is not worth that much money!

While we're at it, let's require the lenders to have some respect for the time, effort and labor involved in accurately appraising real estate instead of creating bid wars amongst the AMC's using lowest price and quickest turn time as an across the board criteria. Every appraisal assignment is different, we don't live in a fixed world. Lenders/AMC's are not performing the appraisals, they shouldn't be allowed to dictate how much or how long an appraisal should take. Let's make lenders include the appraisers experience as part of that criteria so this current practice will not be allowed to continue with the inexperienced appraisers who don't know any better. If not, we will continue to get unsubstantiated values.

While we're at it, let's not allow lenders to own or partially own AMC's and require their customers to use their AMC. This practice invites collusive activity. 

While we're at it, since AMC's have so much control of appraisal management, lets require them to follow appraisers standards (USPAP).

Although the practice of ordering appraisals through a third party seems to be the best alternative in theory, AMC's have already lost law suits for pressuring appraisers to make certain values and there are similar law suits currently pending. If the AMC's main motivation wasn't profit, maybe we'd be rid of all the bugs in the new system!

After working in real estate for twenty two years I have seen many turns in the market, including the downturn in the early 1990's. Providing services in valuation and sales has allowed me to see and experience what creates value.

Market values have dropped, financing has been overhauled and there's a new set of rules. This is like being in on the startup of a new business venture that is going to make lots of money. After all - its American real estate.

Please consider Walsh & Associates for your real estate valuation, sales and investment needs. "We can create value for you too".  

With tighter lending restrictions and declining market values I hear the constant cry of frustration, "real estate is dead in the water". "I can't do anything to resolve my real estate issues". My friends, I'm here to tell you, all is not lost. We only have to go back a few pages in our history books to a time when current loan requirements were the norm, there was no accelerated appreciation in the market, and real estate professionals spent some time  putting deals together for clients.

Proven real estate purchase and selling procedures such as lease options, seller financing, wraparound loans, sandwich options and quick sales are just a few options to traditional lender financing that can make your deal happen. The key is to find a trustworthy and experienced real estate professional that can make it happen. Real estate investors are typically more knowledgeable than the average real estate agent for this reason, you should be open to considering investors.

Exercise your due diligence! Check licenses with issuing offices. Check references by interview, don't just review the information. Get everything in writing. Do all and anything you can to have enough information on the person you choose  to help you , so you can hold him accountable to his part of the agreement. If an investor does not have any credentials, check with any organizations or real estate clubs he may be a member of.  

To help with the uncertainty of a declining market, hire a certified, experienced (8 yrs. or more) appraiser  to provide you with an REO (REO= Real Estate Owned) appraisal. This appraisal report should analyze, support and exhibit any declining market trends and all influences. There should be a strong, understandable, reconciliation that explains how the final value was reached.This is the same type of report most lenders are requiring to help them eliminate speculation as to what the actual value is in a declining market.

Lawrence A. Walsh

Appraiser / Realtor / Investor

www.WalshStreet.net

I am constantly asked by individuals, "what I think of some of the valuation websites that exists on the internet today (Zill**, HouseVal*** etc...)". If you're trying to determine a value for a residential property in an older, fully developed city (L.A., San Diego, Santa Monica), the property values you get from these sites can be completely inaccurate. 

The foundation of these web valuation sites is based on gathering recent sales in the neighborhood with similar livable sq.ft. and bedroom/bathroom count. With all other amenities being equal. Some sites allow for "any" individual to go in and add additional amenities or improvements. Aside from the tax accessors records, their are no checks and balances on the validity of this information. Most importantly, there is no process that exists by a trained, experienced individual to interpret how the local market reacts to such improvements, repairs or alterations ( how much a positive or negative element is in terms of dollars).  

 Many of the homes built pre 1935 were not built with the tract home mentality. Therefore you have many custom homes that have "value added" amenities that change from house to house. For homes built post 1935, they may have been built with the tract home mentality, but there has been substantial customization and/or alterations done to the homes throughout the years.  

A person leaves one of these websites with an inaccurate or extremely broad valuation range. For whatever reason the individual is curious about the house value (purchase, sale, refinance, home improvement etc...), having an inaccurate value can be very costly when you're dealing with an asset that is worth several hundreds to millions of dollars. Any lender is going to require you to have an exact, verifiable number anyway.

Bottom line, one can get just enough information from one of these home valuation websites to be dangerous!