Tagged: income approach

Is There a Fourth Approach to Real Estate Value? 16

Is There a Fourth Approach to Real Estate Value?

I want to talk to you about the fourth approach to value… …and specifically an occasion on which it truly saved my bacon. Now, I know a lot of you real estate appraisers out there probably started chuckling as soon as you read the words ‘fourth approach to value.’ If you did, I get it, believe me! I used to be the same way. Over time, however, I’ve grown to see how it can often be a vital part of the valuation process. Let’s have a quick recap for anyone who’s either forgotten the fourth approach, or never learned it...

The Site Value… A Walk in the Park or USPAP Nightmare? 10

The Site Value… A Walk in the Park or USPAP Nightmare?

Recognized methods to determine the site value… We have all been there, the subject is located in an established neighborhood, no vacant land sales in many years and the lender has requested the site value. USPAP Standard 1-1 states “be aware of, understand and correctly employ those recognized methods and techniques that are necessary to produce a credible appraisal.” The other key standard to keep in mind is Standard 2-2a (viii) – “Summarize the information analyzed, the appraisal methods and techniques employed, and the reasoning that supports the analysis, opinions and conclusions: exclusion of the sales comparison approach, cost approach...

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FHA Appraisal Reporting Requirements & Data Delivery

FHA – Addressing Appraiser and Property Requirements, and Appraisal Report and Data Delivery FHA Appraisers, You will want to review the newsletter below, especially the part showing the changes to reporting requirements. I suggest you copy and paste this new info into a word processor, then print it out as a reference tool. Secondly, if you use a template with pre-filled info to start FHA reports, I suggest you change it now to comply with their reporting requirements that take effect in June 2015. A Closer Look: Addressing Appraiser and Property Requirements, and Appraisal Report and Data Delivery As announced...

Appraisal Bias Appraiser Pressure ~copyright AppraisersBlogs 9

Appraisal Bias and Appraiser Pressure: Why All Appraisals are Always Wrong

Some appraisers give in to pressure… Real estate markets cooled down in the fourth quarter of 2014, and despite historically low interest rates, refinance volumes dropped as well. The increasing pressure on lenders and real estate agents to maintain loan and sales volumes has brought about renewed interest in appraisal accuracy and increasing concern that residential real estate appraisals are inflated. A recent Wall Street Journal article asserts that “home appraisers are inflating the values of some properties they assess (appraise), often at the behest of loan officers and real estate agents, in what industry executives say is a return...

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Cost Approach Required for USDA Condo Appraisals

Appraisers, New written instructions published by USDA ‘require’ a COST APPROACH for the condo being appraised. Interestingly, the pre-printed 1073 Form has NO PLACE on it to complete a Cost Approach – for good reason! While not impossible, it would be extraordinarily difficult to calculate a CA for a typical condo in a multi-unit building, without supporting documentation and a gigantic pile of cost info for the various components. And in fact, appraiser’s certification #4 on the 1073 form says that neither a Cost Approach nor an Income Approach are included unless the appraiser considers them necessary to arrive at a...

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Adjustments – Your Opinion Doesn’t Count

Regulations state that appraisal adjustments cannot be based upon an appraiser’s opinion. According to federal and state law, adjustments must be based on support and evidence- proof if you will, and an appraiser’s opinion is not considered to be “support.” Many appraisers have failed to support their adjustments and as a result have had their licenses revoked, penalties assessed and lawsuits lost, all because the they failed to understand a single but important requirement. Think about your appraisals. Are the adjustments based on your opinion or do you have proof of the adjustment in your workfile? Then one day I...

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Back to Basics (Part 2): The Cost Approach – An Approach to Value, Without Worth, Really?

The foundations of appraisal were based upon three independent approaches to value. A system, when developed correctly, presents a check and balance within the report. The idea being that when an appraiser takes the time to develop each report, the data will show three independent motivations and three separate value conclusions. Nonetheless, the conclusions will support one another because the underlying principle for each approach is the principal of substitution. For the purposes of valuation or real estate appraisal, the principle of substitution is defined by practical application. Simply the idea that a prospective purchaser will pay no more for...

You Need This In Your Reports 6

You Need This In Your Reports

Please consider utilizing the following statements in your reports… In my years of appraising, I have had had to argue with many Lenders, Attorneys, and general pains in the butt. What many of us have found is that when Banks screw up, they come knocking at your door. What we need to do as appraisers is to state the separation of Lending liability to appraisal liability. Please consider utilizing the following statements in your reports after your statements of intended users that is required in your reports. I have been using this for years in my reports as it returns...

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Self Evident Reports

Over the span of the last several decades, many residential appraisers were brought into this profession to meet the demand for residential mortgage lending reports. The problem with this has become clear as many were trained with one mindset, residential lending appraisals. They became “self-proclaimed experts” at filing out forms and meeting client expectations. All in the name of doing a good job and making a living. I hold all residential appraisers responsible for this sad state of affairs. Had more of the professional appraisers taken on one or two trainees and mentored them into producing credible reports then perhaps...

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