There are some resources available for appraisers, however, to be better equipped to appraise in this burgeoning market. The Appraisal Institute, membership association of professional real estate appraisers, offers seminars and a certification program that can help appraisers value green buildings, including its upcoming webinar: Residential Green Valuation: Tools for Valuing High Performance Properties. The proposed Green Resources for Energy Efficient Neighborhoods (GREEN) Act legislation will mandate that appraisers have all relevant information about residential property – including plans and specs, green energy labels, and certifications and Home Energy Rater Score (HERS) ratings.

It is clear that green building is only going to become more popular, especially once the real estate market turns around; although it may take some time, appraisers will need to understand all the new complexities in this field of appraisal and adapt.

By: Present Value

Additional Reading:

Obtaining Loans for Green Construction

What Exactly Are You Doing, Appraiser?

Industry experts, however, still appear to be concerned about issues surrounding real estate appraisals and the unintended consequences of the implementation of the Home Valuation Code of Conduct (HVCC). As we have discussed in other blog posts, the perceived problem is that appraisers, working for appraisal management companies, are often working outside areas with which they are familiar and may not have access to information about specific markets. Realtors argue that as a result of valuations that sometimes are too low, sales have been delayed and even cancelled.

This Banker & Tradesman article provides some interesting suggestions by realty agents of ways to work with the HVCC changes, including providing appraisers with detailed property comparison information and background materials to help appraisers achieve the most accurate appraisals.

As always, Present Value LLC is both an appraiser and an appraisal management company, which means that it can play the role of the third party required by the HVCC changes and save you the step of having to seek out a separate appraisal management company.

By: Present Value

The income approach generally is used to estimate the value of income-producing properties, including office buildings, hotels, warehouses, apartment buildings, and shopping centers. It is a method of appraising real estate based on the property’s anticipated future income.

The income approach, which is often viewed as the most reliable of the three approaches, is used when reliable financial data is available for recent sales of similar income properties in a given marketplace. The expected annual income of a property is divided by the capitalization rate to determine the market value of a property.

• The capitalization rate is calculated by a property’s net operating income and sales price for the sale of similar properties in a given area or marketplace. If sales of similar income properties in the area can be determined, one can establish a market capitalization rate by averaging the capitalization rate values of area sales.

• To determine the expected annual income of a property, an appraiser first estimates the annual potential gross income for a property, which includes how much rent each unit could generate in the market. The estimates of potential rental rates are generally derived from the current marketplace. The effective gross income for a property is generated by reducing the annual potential gross income by a vacancy allowance amount, which is determined by current market rental conditions for the type of property being analyzed. Additional income is added to the income estimates, including parking fees, laundry fees, and other profit-generating variables. Operating expenses are deducted from the effective gross income to determine the annual net operating income for the property.

It is important to note that when there is insufficient financial data for similar properties in a given market, appraisers may use all three appraisal approaches that we covered over the last three blog posts.

By: Present Value

Many believe that the $8,000 first-time home-buyer tax credit that was part of February’s stimulus package has contributed to these gains. Currently, the tax credit is scheduled to expire on November 30, 2009. If it is not renewed, market prices will likely decrease.

Experts, however, urge caution when praising the three-month gain. Some analysts are concerned that there could be more foreclosures on the horizon and fewer home purchases, given the uncertainty of the reauthorization of the first-time home-buyer tax credit and the reported decrease in the Conference Board’s consumer confidence index, which decreased to 53.1 in September from the 54.5 reading in August. And, home prices are still 13.3% lower than this time last year.

As we discussed earlier this year, real estate appraisal fraud is more of a threat in times of economic uncertainty so it is important for potential home buyers, owners, CPAs, and attorneys, faced with the challenge of accurately appraising real estate assets, to find appraisers who have experience in their specific regions.

By: Present Value

The Obama Administration’s Home Affordable Refinance Program loan-to-value requirement has been raised to 125%. Previously, the program, announced in February, only applied to borrowers whose first mortgage did not exceed 105% of the current market value of the property.

The rationale behind the change to the program is that with the drastic decrease in property values in many areas, an additional 5% over the value of a mortgage wasn’t enough to help many borrowers. However, the program applies only to those borrowers who haven’t missed loan payments in the past year, and borrowers must hold a loan that was purchased by Freddie Mac or Fannie Mae. For those who are unable to make their payments at all, there are different programs that apply, which we will cover in a later blog post.

As discussed in Present Value’s previous blog post, “Decrease in Home Values Correlates to Increase of Homeowners Who Are ‘Underwater,’” a report released by Zillow.com in May, estimated that 22% of homeowners had mortgage balances that were greater than the value of their homes and that an additional 2.2 million borrowers were at risk of falling into this position if housing values declined an additional 5%.

The additions to the program will be beneficial for homeowners whose only other options would be to hope for the best in terms of home valuations or would be at risk for foreclosure. For more information on finding out the most accurate value of your home, click here.

By: Present Value

There is an inverse relationship between PMI and the down payment: the cost of PMI increases as the amount of the down payment decreases. A PMI premium is added to the monthly mortgage payment.

Terminating a private mortgage insurance policy is a decision that rests with the lender. In most cases, the lender will allow cancellation of mortgage insurance when the loan is paid down to 80% of the property’s original value. Generally, PMI must be paid for one or two years before you can apply to remove it. A good real estate appraisal company can advise you on PMI removal when the time comes.

By: Present Value

Business brokers work similarly to real estate agents. They can help you with advertising, initial discussions with buyers, negotiations, and the final transaction processes. Most importantly, a business broker can be a decision-making partner during this crucial time for a seller or buyer.

It is essential to realize that deals are being done, despite the current economic climate. Although there is a lot of doom and gloom out there, there are businesses that are making money and looking to increase their opportunities through acquisition or purchase of assets or equipment. These deals are just being done differently than in the past. Because of the current state of the credit markets, buyers and sellers are developing creative deal-structuring strategies to facilitate transactions and satisfy both buyers and sellers.

In order to take advantage of the opportunities that are still out there and make sure that you are getting the most out of the sale of your business and equipment, partner with an experienced business broker.

In addition to valuation services, Present Value provides business and equipment brokerage services. Present Value has an extensive team of business and equipment brokers who help buyers and sellers come together for transactions with businesses, machinery, and equipment. Present Value’s research team also has relationships with hundreds of equipment and business brokers at both national and international levels.

By: Present Value

Apparently, approximately three-quarters of residential mortgage appraisals are arranged through brokers who only get paid if a loan closes, which creates a financial incentive for mortgage brokers to push appraisers toward higher valuations. Higher appraisals can also contribute to economic instability because homeowners can qualify to refinance their homes and borrow cash against them.

The announcement came in response to a yearlong mortgage investigation by New York Attorney General Andrew Cuomo. Fannie Mae has agreed with the Attorney General of the State of New York and the Office of Federal Housing Enterprise Oversight to assist the regulators in their efforts to enhance home appraisal practices on behalf of consumers. The New York Attorney General’s office also announced it has terminated its inquiry of Fannie Mae, which began in November 2007.

Fannie Mae also will take two steps to assist the regulators in their efforts to enhance the quality and independence of the appraisal process. First, to help ensure appraisal independence and valuation protection, Fannie Mae will adopt a Home Valuation Protection Code, which will establish requirements governing appraisal selection, solicitation, compensation, conflicts of interest, and corporate independence, among other requirements. Additionally, Fannie Mae will provide $12 million over five years to help establish an Independent Valuation Protection Institute, which will monitor and study the area of home valuations.

By: Present Value

Many older homeowners are turning to “reverse” mortgages, which allow them to convert part of the equity in their homes into cash without having to sell their homes or take on additional monthly bills. The money can be used to pay for health care expenses, pay for home improvements, pay off a current mortgage, or supplement retirement income.

Under the terms of a traditional mortgage, you make monthly payments to the lender. But in a reverse mortgage, you receive money from the lender and generally don’t have to pay it back for as long as you live in your home; the loan must be repaid when you die, sell your home, or the home is no longer your principal residence. Reverse mortgages can help homeowners in tight financial situations stay in their homes and still meet their financial obligations.

One popular type of reverse mortgage is a Home Equity Conversion Mortgage (HECM). HECMs are federally insured reverse mortgages, and are backed by the U. S. Department of Housing and Urban Development (HUD). The up-front costs of HECMs can be high, so they are generally most expensive if you stay in your home for just a short time. They are widely available, have no income requirements, and can be used for any purpose.

Before applying for an HECM, you must meet with a counselor from an independent government-approved housing counseling agency. The counselor must explain the loan’s costs, financial implications, and alternatives. Counselors will tell you about government programs for which you may qualify, and any single-purpose or proprietary reverse mortgages available in your area.

How much money you can borrow with an HECM or proprietary reverse mortgage depends on several factors, including your age, the type of reverse mortgage you select, the appraised value of your home, current interest rates, and where you live. In general, the older you are, the more valuable your home, and the less you owe on it, the more money you can get.

The HECM gives you choices in how the loan is paid to you. You can select fixed monthly cash advances for a specific period, or you can choose a line of credit, which allows you to draw on the cash at any time in amounts that you choose. You also can get a combination of monthly payments and a line of credit.

If you are considering a reverse mortgage, shop around to compare your options and the offered terms. Learn as much as you can about reverse mortgages before you talk to a counselor or lender. It will help you ask more informed questions, which could lead to a better deal.

Be cautious if anyone tries to sell you something, like an annuity, and suggests that a reverse mortgage would be an easy way to pay for it. If you don’t fully understand what they’re selling, or you’re not sure you need what they’re selling, be even more skeptical.

No matter why you decide to take a reverse mortgage, you generally have at least three business days after signing the loan documents to cancel it for any reason without penalty. Remember that you must cancel in writing. The lender must return any money you have paid so far for the financing.

By: Present Value

As part of President Obama’s economic recovery plan, the President and the Secretary of the Treasury, Timothy F. Geithner, announced the details of a public-private plan to buy up banks’ “toxic assets” and auction them off.

Administration officials outlined a three-part Public-Private Investment Program that offers private investors vast amounts of cheap, taxpayer-supported financing for every dollar they put up of their own money. The further expansion of the program would finance the purchase of existing troubled mortgage-backed securities, including those backed by commercial real estate loans.

The Treasury could infuse almost $1 trillion more into the toxic-asset effort through a program called the Term Asset-Backed Securities Loan Facility (TALF), a joint venture with the Federal Reserve. The Treasury would help finance a series of public-private investment funds to buy up unwanted mortgage-backed securities, or groups of mortgages that have been packaged into bonds with a credit rating.

According to the Treasury Secretary, the goal is to “use taxpayers’ money effectively and wisely to, again, help get credit flowing.” The idea is that banks will be relieved of the burden of carrying assets for which there is no market, freeing up cash and increasing the flow of credit for car, home, business, and other loans.

The Public-Private Investment Program will have banks bundle loans and offer them at auction. The Federal Deposit Insurance Corp. and Federal Reserve Bank would then lend money to large private investors that would bid on the loan packages. The Fed also would expand a program of loans – also up to $1 trillion – to entice private investors to buy mortgage-related securities. Five investment managers would be hired by the Treasury to raise pools of money, matched by the government dollar-for-dollar, that they would use to buy the troubled securities. The Treasury will also offer government loans to augment the money pools and increase the buying power of the managers.

The plan is to target legacy mortgage loans made during the housing boom, as well as securities – devalued assets, sitting on banks’ books – that haven’t traded since last year, when the mortgage-backed investment markets collapsed.

In response to the announcement, the Dow went up nearly 500 points, and the Standard & Poor’s 500-stock index rose more than 7%. There also are some positive signs for the housing market. The National Association of Realtors said existing-home sales rose 5.1% in February as buyers scooped up foreclosed homes. However, analysts warn that the recent gains could collapse just as quickly if the administration’s asset purchase program hits a snag or the housing market deteriorates further.

By: Present Value