Archive for the ‘Real Estate Appraisal’ Category
Appraisal Institute Releases FAQ on Dodd-Frank Financial Reform Law
The Appraisal Institute, the country’s largest professional organization of real estate appraisers, has released a FAQ regarding information found in the Dodd-Frank Wall Street Reform and Consumer Protection Act. This list of frequently asked questions addresses the enforcement of customary and reasonable fee provisions, and forthcoming procedures for creating new rules.
The FAQ clarifies that new real estate appraiser independence requirements can be enforced by state attorneys general under the Act. This increases the authority of the new Consumer Financial Protection Bureau, the lead enforcement agency of Dodd-Frank and other consumer protection laws.
“These FAQs are intended to clarify several misconceptions that we have seen within the lending and appraisal communities regarding the appraisal provisions found in Dodd-Frank,” said Richard Maloy, chair of the Appraisal Institute’s Government Relations Committee. “Most pressing are those provisions dealing with appraiser independence and payment of customary and reasonable fees, both of which are under an expedited rulemaking process. Lenders, their agents, and appraisers should have no doubt that these requirements will commence in October of this year.”
The Appraisal Institute will update the FAQ periodically. To access the latest version, click here.
By: Present Value
The Dodd-Frank Wall Street Reform and Consumer Protection Act
Property Values in the Age of Foreclosures
In the old days, the real estate industry, at its heart, was very simple. Houses were built, houses were bought, houses were sold. When there was a greater demand than supply, more houses were built and the cycle continued. It was one of the country’s economic cornerstones.
Today, with the economic recession still holding tight, the cycle is all but nonexistent. Homes are being foreclosed upon, sold at a fraction of their worth, and there isn’t enough capital to invest in new properties, let alone finding people in the economic situation to buy them. REOs and short sales are the norm.
As a side effect of the battered real estate economy, homes that are being appraised are being unfairly compared to the sale prices around them – sale prices that are way below market value. But it’s a vicious cycle that has no end in sight. One house is being appraised low and sold low, and the similar house next door is appraised low, and the house next door to that, and so on and so on.
Industry insiders were hoping that new home construction might help jump-start the buying-selling cycle, but with the glut of foreclosed homes on the market, why would anyone pay full price for a new construction?
What’s the solution? Right now, there isn’t one. Like the rest of the sectors of the economy, the real estate industry will just have to wait.
By: Present Value
Additional reading:
Four Methods to Determine a Property Value
Real estate appraisals are, of course, the best method of determining the value of a property. But did you know there are a few other methods that brokers and lenders will sometimes use to determine a value? Here are four of the most popular methods used:
- Broker Price Opinion (BPO). BPOs are used by lenders in certain situations – for example, pending foreclosure – where they don’t want to order a full appraisal, which costs more and takes more time. It’s important to note, though, that BPOs are not appraisals. They are merely used to get a property’s value.
- Comparative Market Analysis (CMA). When a realtor wants to calculate a property’s worth, he or she will use a computer-generated value known as a Comparative Market Analysis. Some agents use recently sold property with similar features or similarly listed properties to determine a number. CMAs are free from real estate agents, but because agents are looking for business, they will sometime skew the numbers to the buyer’s liking.
- Automated Valuation Model (AVM). Lenders use this automated computer program to analyze data regarding a property. At the end of the data analysis, the AVM creates a value range and places the property at a specific point within that range. AVMs tend to be of little practical use, however, because they don’t take into account renovations or other property alterations that could increase or decrease the value of a home.
- Real Estate Appraisal. Appraisals are done by licensed professionals to determine the market value of a home. Because they are performed by experts with real-world experience and years of training, they are the best choice for determining an accurate property value.
By: Present Value
Additional reading:
Hard Lessons Learned in Real Estate Appraisal
One of the recurring motifs of this blog has been the importance of using an experienced, licensed real estate appraiser with an established reputation and a good standing within the industry. The reasons are, for the most part, obvious. You’re more likely to get a fair and accurate appraisal of your home. You’ll have a more positive experience during the appraisal itself. And the appraisal report will stand up to scrutiny by the courts, the IRS, and other appraisers.
Still think it’s worth saving a little money and hiring a non-certified appraiser? Consider a case that went to court just this week in Yorktown, New York, in which a real estate appraiser was arrested for stealing an $8,500 diamond ring from a home she was appraising. Yes, she was caught, but imagine if she’d been in your home and stolen something of great monetary or sentimental value to you. Does the bargain real estate appraiser still seem like a bargain?
Make sure you go with trustworthy certified appraisers like Present Value for your real estate appraisal. We provide a higher level of professionalism that caters to our clients’ individual needs, and we are certified, licensed, and FHA approved.
And we don’t steal stuff.
By: Present Value
Additional reading:
Much Rejoicing as Financial Reform Bill Passes
The Dodd-Frank Wall Street Reform and Consumer Protection Act, a sweeping financial regulatory reform bill that includes the first modernization of real estate appraisal regulations in more than 20 years, has passed through the Senate, and now awaits President Obama’s signature to become law.
“This bill will mean good news for consumers because they should see more reliable home appraisals,” said president of the Appraisal Institute Leslie Sellers. “It will encourage the use of highly trained and competent real estate appraisers, and will provide much-needed resources for oversight and enforcement.”
The Dodd-Frank Act is the first overhaul of appraisal regulations since the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) of 1989. The House passed the bill on June 30, 2010, and President Obama is expected to sign it into law shortly.
The Dodd-Frank Act will require that “reasonable and customary” fees be paid to real estate appraisers. Appraisers have complained that with the growth of appraisal management companies (AMCs) since the passing of the Home Valuation Code of Conduct (HVCC) in May 2009, they have experienced sharply reduced fees from these appraisal management companies. “Reasonable and customary” fees will reflect what the appraiser would typically be paid for the assignment without an AMC. Under the new act, violations of this policy will result in severe penalties.
By: Present Value
Additional reading:
The Dodd-Frank Wall Street Reform and Consumer Protection Act
Mortgage Players Look to Soften Bill
Fannie Mae Plays Hardball
As we all know, real estate appraisers are the men and women in the field, going from property to property and making evaluations based on years of training and experience, and then reporting these numbers to mortgage lenders to establish property values.
But after receiving appraisals they feel are too high, some lenders have taken to performing desk reviews – appraisals done from a computer. While qualified real estate appraisers are able to perform accurate desk reviews if need be, lenders’ desk review values can be wildly inaccurate. Since there is no on-site inspection, they don’t reflect the condition of a house, they don’t add value for remodels, they’re often lacking information even on room additions, and so forth. Nevertheless, lenders are using desk reviews as justification to reduce appraised values, and sales continue to fall apart.
Fannie Mae has announced that effective September 1, 2010, lenders will no longer be allowed to reduce appraised valuations. Instead, they will be required to contact the appraiser to resolve discrepancies between the appraiser’s value and the desk review value. If the disagreement can’t be resolved on that level, the lender will be required to order a second appraisal.
By: Present Value
Additional reading:
The Dodd-Frank Wall Street Reform and Consumer Protection Act
In our recent blog post, “Mortgage Players Look to Soften Bill,” we wrote about a new real estate bill – the Dodd-Frank Wall Street Reform and Consumer Protection Act, known simply as HR 4173 – that Congress was working on, and how mortgage lenders were hoping that some of the provisions in the bill would be adjusted to improve the state of the real estate appraisal industry.
Well, the final version of the bill is ready for a vote, and the real estate appraisal community is applauding the new measures, which are the first modernization of U.S. real estate appraisal regulations since the Financial Institutions Reform Recover and Enforcement Act (FIRREA) was enacted in 1989.
“We applaud the conference committee’s efforts and urge Congress to pass HR 4173,” said Appraisal Institute President Leslie Sellers. “We are extremely pleased that this bill will protect consumers by encouraging the use of highly trained and competent real estate appraisers with much-needed resources for oversight and enforcement.”
If passed, the measure would:
- Establish a federal appraisal independence standard, sunsetting the HVCC
- Require AMCs to register with state agencies
- Enhance appraiser competency provisions, including clarification regarding consideration of professional appraisal designations
- Provide financial resources for oversight and enforcement
The vote is slated to take place sometime in July.
By: Present Value
Additional Reading:
Mortgage Players Look to Soften Bill
This week, as Congress moves to finalize new financial regulations, mortgage lenders will be attempting to soften a series of provisions that could potentially reshape how most Americans obtain home loans. At stake are regulations regarding loan repayments, the ability to sue a lender for fraud or poorly underwritten mortgages, and changes to appraisal rules.
A key issue on the table is changes to rules of real estate appraisals. Ever since the advent of HVCC, virtually every type of player in the real estate game wants changes in the current rules for ordering appraisals; these rules were established after the collapse of the mortgage market. Real estate professionals say the rules have gone too far, and often inexperienced appraisers are assigned appraisals when they do not understand or are unfamiliar with the local real estate market.
We will know soon enough if lenders were successful in their bid to make adjustments to the new regulations, and how much it will affect the currently volatile real estate market.
By: Present Value
Oil Spill and Property Values
The ongoing oil spill in the Gulf of Mexico has had a devastating effect on the environment, and will likely continue to wreak havoc on the surrounding ecosystem for months or even years to come.
But the spill is also affecting the real estate appraisal market, particularly in Florida. Two of Florida’s property appraisers have asked state lawmakers to allow them to reduce the value of coastal real estate to reflect damage from BP’s oil spill and force BP to make up for lost tax revenue.
Appraisers are elected in Florida, and it’s their job to provide the fairest property values possible to constituents. Chris Jones, one of the elected appraisers, said, “What do I tell the owner of a $1 million house is the value if he can no longer walk on the beach? We want to hold our own citizens harmless and don’t want to put the burden on other taxpayers.” Florida Governor Charlie Crist has been asked to call a special session of the Legislature to authorize governments affected by the spill to revalue property for the current tax year, something that has been done after hurricanes and tornadoes in the past.
The appraisers are seeking permission to reflect damage to property values from the spill in tax bills property owners will receive in November. Under state law, they can’t alter the value assigned to property on January 1 in the middle of the year.
By: Present Value
Be Sure to Use a Reputable Appraiser
An article in the May 19 edition of The Champion tells an important cautionary tale about a Georgia-based real estate appraiser who was sentenced to almost three years in federal prison for his part in a real estate appraisal scam.
According to the article, Edward Farley, the so-called ringleader in the scam, caused $23 million in losses to lenders by having Walter Herman, a real estate appraiser, inflate the value of each property he appraised by $50,000 to $100,000, and then found inexperienced investors to purchase the properties from one of his real estate companies. Farley received a 25-year sentence, and Herman received the nearly three-year sentence for complicity.
This incident underscores the importance of a point we’ve made many times across many blogs – be sure you use a licensed, established, reputable real estate appraiser. Thoroughly check their credentials. Find out if they belong to appraisal organizations, like NEBBI and NAPA. And if something seems wrong, be sure you speak up.
By: Present Value
Additional Reading:
Recent Posts
Categories
- Appraisal Terms
- Asset Inspection
- barcoding
- business appraisals
- business broker
- Business Valuation
- Buying a Business
- C Corp to S Corp Conversion
- Case Study
- Certified Machinery and Equipment Appraisers
- Custom Appraisal
- economic stimulus package
- equipment appraisal
- Equipment Auctions
- estate planning
- Fannie Mae
- FHA Loans
- Freddie Mac
- Goodwill
- HVCC
- Intellectual Property
- Inventory appraisal
- Inventory Control
- inventory management systems
- investors
- lenders
- loans
- Machinery & Equipment
- Machinery & Equipment Appraisal
- present value
- Press release
- Public-Private Investment Program
- Real Estate
- Real Estate Appraisal
- Sample Reports
- SBA
- SBA SOP changes
- small business
- Small Business Administration
- small business loan incentives
- succession planning
- Tax issues
- Uncategorized
- Valuation Fraud
- Videos
Tags
Recent Comments
- Mortgages Home on Private Mortgage Insurance
- Highlight approved before making offers | Car loans Blog on The Importance of Inventory Appraisals and Asset Verification Services for Businesses and Lenders
- Selling your Business Step by Step Process on Four Methods to Determine a Property Value
- Home Equity Loans in Las Vegas | Shoppings Blogs on Four Methods to Determine a Property Value
- Casey Lafera on Small Business Lending Still Considered Sluggish, According to Federal Reserve