Appraisers Continue to Be an Asset
- Federal Valuation Agency Impact on Appraisers & the Public - July 22, 2022
- Is Georgia Going Rogue? - June 13, 2022
- Bias in Automated Valuation Models - February 28, 2022
The appraisal community has come together… stand strong, be resilient and continue to be an asset to your clients during these challenging times…
The appraisal profession came about because of the Great Depression and our relevance is still strong today. Exceptional circumstances such as the current pandemic create a need for temporary allowances for information gathering for the valuation of collateral. The appraisal community has come together to insure our clients’ needs are met. Be it extra precautions with masks and gloves or owner assisted property inspection software. Appraisers have once again adapted to market conditions in order to provide critical collateral analysis all within a reasonable timeframe.
While interior inspection software used by homeowners may be an accepted temporary alternative for information gathering in the time of a virus pandemic, it is less reliable than an interior observation performed by a credentialed appraiser during normal market conditions. Technology provides efficiencies and support of conclusions however it is inferior to the natural senses. It is known that photos and video do not reveal everything about property condition and photoshop technology is built into most cell phones right there at your fingertips. The natural senses allow for significant attributes to be observed with certainty:
Sight – upgraded appointments / quality features as well as deferred maintenance / cracks / sloping floors / leaks / deterioration / items effecting structural integrity & health and safety
Smell – Mold, mildew, pet damage
Hearing – floors creaking/mechanical issues with HVAC or plumbing
Touch – doors not shutting or opening, stuck windows, spongy floors due to deteriorated sub floor
VaCAP is proud of our members who have adapted unconventional methods to provide valuation services to clients. We do caution you that the reliance on these alternative tools come with some additional risks. Make sure the proper disclosures are within your reports and any altered certifications or limiting conditions adhere to your compliance with USPAP. Remember, despite what you may hear, no form is USPAP compliant. Only the appraiser can be USPAP compliant.
We have not even begun to see the fall out in the real estate market. Will prices continue to rise? Will credit score and down payment requirements continue to rise? What will happen with the millions of loans already in forbearance? How many foreclosures will we encounter? Will unemployment recover in the short term? Will lenders sell their REOs on the open market or will they be bundled and sold to corporation investors? How will this financial crisis impact non-bank lenders and servicers? Will Appraisal Management Companies survive? Will they be held liable for the quality of the appraisal?
All said and done, when the financial markets settle, and real unemployment takes hold, appraisers will be in more demand than ever. We must look for our local clients that engage us directly and avoid those who wish to capitalize at the expense of others. Community and Regional Banks, attorney’s and private money lenders, all are good resources to help your business and community grow. Appraisers – stand strong, be resilient and continue to be an asset to your clients during these challenging times.
VaCAP encourages each of you to support your local independent businesses. These are our neighbors and friends. They are the back bone of our economic success.
Now lobbyists are lobbying to get small business loans and unemployment benefits. Will the wonders of the fed never cease?
How does one develop an opinion of market value, when by definition, such market does not exist at this time? This is a serious question.
HW, The first step is defining which specific definition market value you are trying to develop. (Serious answer).
We all tend to assume it is the traditional MV used in GSE transactions. That may not be the case. California Code Fair Market Value (FMV) is sufficiently different to also allow ‘…any other approach that is deemed reasonable to produce credible results.’ I paraphrased a little because I don’t memorize all value definitions.
Generically, if asked to provide MV in a market that does not exist then I think we have to define the market that DOES exist that is most similar or comparable. Basically, almost everything has a ‘market’ at some level. Look at the recent negative value oil futures had. Definitely not the ‘normal market’ but equally definite is that it took place in ‘a market’ (stock market). Our definition of MV may be a disclosed surrogate, or it may be a newly defined MV or newly specified market.
Great question. I’ll be interesting other answers.
I think we are stuck with the USPAP definition of market value :..” the most probable price which a property should bring in a competitive and OPEN market under all conditions requisite to a fair sale…”. The market here is not Open, by any means—in my opinion. Realtor’s not allowed to show houses that are occupied or have any furnishings; travel restricted and so on.
Except that…The actual USPAP definition of “Market Value” (Page 5, lines 131-133 USPAP 2020-2021 is:
“A type of Value, stated as an opinion, that presumes the transfer of a property (i.e., a right of ownership or a bundle of such rights), as of a certain date, under specific conditions set forth in the value definition that is identified by the appraiser as applicable in an appraisal.”
Further reference is made to AO 22. Further USPAP Comments: “Appraisers are cautioned to identify the exact definition of market value, and it’s authority, applicable in each appraisal completed for the purpose of market value.”
Ok, point taken. To be precise, I was referring to Fannie Mae 1004 Forms with that stated / boilerplate definition; which then complies with USPAP. However, any way you want to define Market Value, at this precise point in time, we do not have an Open Market. How or why would you want to claim you could produce a credible 1004 appraisal? When the government is pumping Trillions of dollars into the economy, very little of which seems to be trickling down to homeowners; who may or may not be under significant duress to fire sale their house? With market Exposure limitations—etc Ad infinitum. Comparisons to oil futures are fallacious due to incomparability: a commodity on an active exchange or Open Market vs an essentially shut down real estate market. At least in California. Effective date of today
Right On Mike. Government Sponsored & other loans have changed dramatically over the years: VA loans were full recourse loans and they required information on seller payments to facilitate “discount” the loan. FHA allowed a verity of costs which confused everything and inflated the sales price. Different lenders; banks, saving & loans, Mortgage houses, and mortgage lenders allowed buy downs, prepaid interest, and discounts which, according to their requirements had to be recognized, or not.
On many assignments we felt it necessary to interpret the Market Value used whither as Financing typical to the market, cash equivalency; that is; 90% cash to a institutional loan, or with Seller carried and and we verified what typical financing was.
One National builder in a new tract in Ontario in 1989 or 90 was offering a 10% or 15% bonus CASH BACK. It only lasted a week and I’m not sure of any closed contracts, some builders were offering; pools, new cars, landscaping, and stuff.
Great question and, in my opinion, a concept often not fully discussed by most appraisers as it’s more theory and philosophically based and can get very complex. If you start to research the history of valuation theory, it dates back centuries and is super interesting how it’s evolved.
That said, if there is no supply and/or no demand, then the appraiser would actually be setting the value, which by definition contradicts the underlying principles of what we consider an open and free marketplace. E.G. there is one seller and one buyer for a property and you’re asked to render an exchange value for them. In this hypothetical scenario, the value being rendered would not be a “market value” but rather a “fundamental value” as it would be independent from an actual market, thus making it impossible for a market value to be determined. You could still render a value for the property, but it wouldn’t be a market value, which, by today’s definition, is the intersection of supply and demand.
To Mike’s point, a good place to start is with the definition of value you’re providing.
In reality, if there is no market then our services would likely only be useful in a court setting for eminent domain. This is actual where many of these definitions originated.
An excellent example of ‘other definitions and approaches (stipulated in the defined value) are options A and B in the California Code of Regulations definition oof Fair Market Value.”
Many value type definitions can be found under the “value” tab at http://www.mfford.com (may have to use firefox or explorer-Google chrome doesn’t like my non https site.
It is option B in particular that suggests thinking outside the box.
Keywords; Render an exchange of value.
Today, how many gold or silver pieces would you take for that house? For your services? How does the federal reserving adding trillions to their balance sheet effect the price and value of the housing market?
Prior to QE Infinity, they had buried the qe in the housing markets. Subsequently the pricing of most peoples homes tripled. The show revolves around a floating dollar tied to nothing, backed purely by market confidence. How much higher will it go with QE Infinity? Inflation will outpace earnings. Gold continues to jump like a track star. I’m going to pay my mortgage banker in barter instead. Fundamental value comes from the production of goods. It can not come from the printing press. Price will soon reflect that. Everyone is worried about not enough money. The problem will be the opposite, too much money. Even then, affordability will continue to climb out of reach.
Market value is all about the principal of substitutions. If people buy or sell, win, lose or trade, there is a market. Even if that is the worst kind of market, saturated with defaults, recalls, and other various reo activity. Get ready for it.
I agree, Baggins, you really have to stop and think about where this stimulus money is coming from and what long term impacts it will have on the economy. I feel like today, more so than ever before, it’s visible just how artificial our financial system really is. I wouldn’t be surprised that this short break from our absurd consumer habits gets people back in touch with what’s really essential for living. Imagine when restaurants open back up and far fewer people show up because they now see how much money they can save by not eating out.
Thank you. Or open up a history book.
Bank wars. Den of vipers. Revolution by the morning. Swindling futurity. More dangerous than a standing army. War is a racket. The Creature from Jekyll Island. To the modern day with Paul, McDaniel, Rossini, and many others. What’s new?
It’s nice to see people realizing we can’t print prosperity. Someone has always carried this torch for well over 250 years. Longer if one considers provincial times, when feudalism began to experience significant reformation. We’re not going back and are diligently working to correct what has slipped back already.
It is the concept of poisonous protectionism, the merits of a limited government. We do not trade liberty for security. Economic liberty is one of many important forms of liberty which prosperity is built upon.
I like this picture for this argument because it provides a sort of reverse perspective for effective illustration of the problem.
1998 to 2018 is not even a full 30 year lending term. Tag on a ‘value’ of a homes worth at the time image, watch it increase while purchasing power falls, consider the reverse relationships. QE gets buried partially in housing. Technological efficiency is just speeding this along. We should not embrace radical changes in any system or industry until we are able to first reign in the abuses. Who here has seen their incomes keep pace with this? One person beating out another, taking a bigger piece of a limited pie does not create prosperity. Wealth does not exist in a bubble or isolation.
The whole point of buying or owning individual RE for families is setting a base living expense (to a point) and paying back the loan using those same inflated dollars. At least so far, the interest is deductible.
For example my payment can be related to that shopping cart (or multiples thereof). In 1998 Im paying a pretty hefty payment. By 2019 the buying power of the same payment has dropped very very far.
When I sold houses in 1971-75 a 3 BR 2 bath in a decent area of Torrance California for a $27,500+- property was $227 a month, PITI. Same house today is selling in excess of $750,000 and rents for around $2,500-$3,000+-
I still laugh at the genius that decided not to buy it telling me “”Why over 30 years I will have paid almost $82,000 for that house. No one will ever pay that much for it and no one would ever rent it for enough to cover the payments.”
I wonder how much he’s paying in rent these days, or where he pitches his tent.
AND AMCs continue to be a LIABILITY.
WE CAN BANKRUPT ALL OF THEM SIMPLY BY NOT WORKING FOR THEM.
LAID OFF IBUYER EMPLOYEES now RETURNING to the AMCs they left last year….
THEIR NEXT STOP IS McDONALDS……
A picture is worth a thousand words, but an in person observation is worth a million. I am fortunate enough to still be able to work doing full appraisals. Just had to adapt by talking to POC beforehand about all our safety, wearing a mask, gloves, work only clothing and now have a station in my garage with sanitizer/wipes/spray and a change of clothing. So far so good. Stay Safe/Stay Healthy!
We will not comply.
This is the hoodwink of the century.
I’m a side more concerned with racketeering than the common cold.
The shopping cart: The fed creates a disincentive against saving, causing a variety of market climates which seek aggressive activity to substitute what could otherwise be more cautious conservative approach. This effect ripples throughout all society and businesses. Bubble busts, artificial crises often for profit, endless war, disenfranchised citizens. As those left standing fight for an ever larger piece of an ever dwindling pie.
Got a problem? Phone the fed! Have a debt you can’t manage? Whip out the printing press. When the monied interests win, they divide the breadstuffs among themselve. When they lose, they charge the debt back to the public through the money. If the dollar was required to be tied to silver and gold, the rigging would end. Some speculate a silver 1oz, which used to represent $1, should be moving at roughly 300-500+ dollars. How can the money supply be so far increased, the original dollar comparison indicates 98% devaluation, yet the silver round only moves at roughly $20? Hence the run on silver and gold every time the fed fires up the press.
Prior to the closing of the gold window in the early 70’s a gold round was under $40. The world witnessed our currency devaluation trends against grand claims of economic gains, as we simultaneously still offered gold exchanges for the dollar. The entire world ran on us and asked for the gold instead of the cash, requesting tender literally by the truck and plane load. They were forced to close the gold window because there was simply not enough gold to back that many dollars, coupled with the interest to suppress metals pricing to provide the illusion of a strong dollar.
The depression we’re primed to deal with now could have been managed then, but they refused to signal to the world the dollar was losing value, by demanding more for each gold piece. It’s not about true value or adherence to definition for honest analysis with the central planners, it’s about continuing the illusion of prosperity as they siphon off what’s left of the dollar, feeding the insatiable greed of the first receivers of the money (which there is an ever growing list of them to appease). Printing prosperity. We’re nearly to pure fiat and the confidence is fading fast, which is why they have to print so much of it these days. The printing process now costs more than the end product brought to market, creating the need for a more digital and cashless approach. Brand it as ‘technological advancement’ and see if the people go for it.
It’s easy to point back and say, wished I could have bought more of them or more of that or should have bought whatever. It’s easy to imagine that in the future, the home will certainly ‘be worth more’. The price of the home will eventually increase, wait out these predictable cycles. Tag an extra zero onto my ‘home value’. We must be in a great time of economic prosperity.
More dollars yes. More value, unfortunately no, far from it. The cycle of the fed promoting malinvestment continues. Now instead of assuring everyone will have a chair to sit on and a home to place it in, we’ll instead focus on helping corporations consolidate and make sure nobody runs out of masks and sanitizer. Over what is now identified as nothing more than being equivalent to a strong flue for most people. (0.03% death rate stats and falling.) We’ll all need digital tracking bracelets and unnecessary medical procedures, more oversight, and less liberty if we want to pull through this one. The central planners feel there are more important things right now than farming, housing, and employment.
Semantical arguments about value definition. How many bucket fulls and wheelbarrells of fiat dollars will it take to buy homes 10 or 20 years from now? Get ready for 100 dollar milk and million dollar homes for everyone. If we continue down this path, definition of value will be the least of our concerns. Adjusting or pushing a given political narrative or affiliation won’t help either. The power must be returned to The People. That is why we all need to be hardliners on Liberty right now. The value of an appraiser remains constant, to be objective in the face of interested party pressure.
How the fed promotes mal investment and benefits the first receivers of money. Illusionary wealth.
The individual(s) whom saw it coming, a premier source of unbiased logical information for the laymen whom is attentive to economic fraud today. ‘Bash the Fed Fridays.’
Having read this comment again later, I wanted to post another quick follow up.
Nobody really knows the true scale of corporate welfare that has been injected into the American and global economy, through subsidies, tax breaks, special interest programs like welfare and housing, compulsory participation which drains the purchasing power of citizens, the influence of the first receivers of the money through price of service manipulation, which all inevitably benefit a corporation somewhere, redirecting wealth away from the masses.
The CPI is reported to be entirely not accurate. Dollar devaluation is hard to track because it’s a statistical expression based on certain analysis points. If one were to also include all of the corporate welfare, that’s where the vast scale of this is unknowable, such events have been ongoing for generations now. Hence the rough estimate from those speculating on the matter, that silver would be 300-500 or more per $1 round. It’s not quite as simple as just extracting to $50 based on a 98% devaluation scale. Just wanted to clarify that in case interested persons may stumble across this post or have wondered where those figures came from.
This QE infinity is another great expression of the concept. Even in the first round they were saying every man woman and child in the US could have received just shy of $20k. We could have all saved, could have spent, could have reshaped society and as a free market group, could have directed market corrections and brought stability back swiftly with citizen purchasing and saving power being instantly renewed. All by purchasing power without even needing to appeal to or rely on government. Instead, now they need more stimulus, more bail outs, because disproportionate amounts went to corporations instead of individuals. Stimulus is a misnomer in this regard. What we are seeing is another round of special interest giveaways which confirm power consolidation. Now they’re saying the dollar will probably only hold up for another year or so if this does not turn around fast. The primary fear is what comes next. In the past, all out war has been the most effective mechanism to reset the value baseline to get currencies and economies moving again. This can happen by war of the countries, countries warring on their own citizens, or as often happens, both.
Currency manipulation is at the heart of all this. That is the primary take away. This circus is not about public health. It’s about currency manipulation as criminal networks with carte blanch permission continue to swindle the American people out of our prosperity and posterity. Many of them do not even understand they are engaging in criminal activity and well organized racketeering. It’s just the way it is, the way things are done, the way government under the federal reserve functions to float the dollar and keep massive corporations afloat. The better way is of course, a return to local, sound money, saving, promoting the free expression of liberty, allowing small businesses to flourish. Breaking up monopolies if they subvert the principals of free market economics through improper unethical pandering and pay to play influence to representatives and special interest favors.
Don’t worry about the banks or the big corps. There is hardly any market competition left, they’re doing just fine. It is our liberty and our individual posterity that should be everyone’s immediate focus point. I hear these slogans, if we don’t get this moving soon, there will not even be an economy. Sure there will be. The business of calling defaulted loan notes and shorting what’s left of futures is going to be absolutely booming. You are watching political theater. It is vital we all get back to work and just give up on this new normal nonsense immediately.