Baton Rouge Real Estate News

A Simple Fix for the HVCC

William D. Cobb FHA Home Appraiser (Accurate Valuations Group) — Tue, 11 Aug 2009 05:57:48 -0500

http://www.realestateappraisertips.info/ - Dave Towne: A Simple Fix for the HVCC

A Simple Fix for the HVCC

Unintended consequences of the HVCC agreement has come close to decimating the appraisal industry, and many in mortgage lending. The fix is simple, and easily implemented by Cuomo, FannieMae and FreddieMac and the other regulators. I can be done in just a few weeks.

The simple fix is to require a personally signed (digital signature permitted) appraisal order form which contains a mandated certification and compliance statement approved by FannieMae, FreddieMac and Cuomo, with the license number of the signer, which states the individual (not the ‘company’) who ordered the appraisal has not influenced the appraiser in any way to compromise the appraiser’s independence in the reporting of the Opinion of Market Value.

The new order form’s certification and compliance statement should be similar to items in the USPAP Ethics Rule, Management Section (Pg. U-8).

This new order form should be required no matter who places the appraisal order, and who ultimately funds the mortgage loan, or insures the loan. It should not be limited to only FannieMae/FreddieMac use, as the HVCC is now. The order form should also clearly state that a ‘reconsideration of value’ is not permitted once the original signed appraisal report is submitted.

By putting individuals who order appraisals on the same legal playing field as appraisers, the direct placement of appraisals by Mortgage Brokers, Loan Officers, Real Estate Agents and others can be re-implemented. Using a signed order form, with an approved certification and compliance statement, means that former industry business relationships can be re-established. Secondary ‘middlemen’ will not be needed.

Appraiser decimation has occurred due to 5% of the HVCC that is not based on existing appraisal independence policies codified in requirements of FHFA, OCC, FannieMae, FreddieMac, HUD/FHA, FRS, NCUA, FDIC, and OTS. Appraiser decimation is reaching epidemic proportions. The 5% has caused a major disruption in what was a reasonably efficient appraisal ordering process prior to May 1, 2009. As a result of this disruption, many competent, highly skilled and experienced appraisers are leaving the industry. These are the people we need to keep gainfully employed to provide accurate appraisals. And many mortgage lending people have been unfairly impacted.

Some will say this can’t work. Well, the HVCC is not working reliably either. It has caused more negative impacts than the problem it was intended to solve. 95% of the HVCC is based on existing regulations and policies. So it can’t be ‘postponed’ as some are suggesting. It can’t be ended in its entirety due to the aforementioned agency guidelines that apply to all segments of the mortgage lending business. But we can’t restore the former ‘status quo’ either when the appraiser was subject to influence. So what’s left is to modify the 5% that is causing the most problem by using a signed order form that says the appraiser is hired to value a property without any interference by members of the ‘production’ side of the business.

This can work if enough appraisers, mortgage brokers, loan officers and others begin to work together to solve a serious problem. You can help by forwarding this suggestion to everyone in the industry, congressional representatives, regulatory agencies and even Mr. Cuomo.

Dave Towne, Certified Residential RE Appraiser, WA State

Yes, I do have permission to publish Dave's article as I'm helping him syndicate it. Bill Cobb, Appraiser

Realtor.org Releases Tips To Keep Appraisal Issues From Stopping Your Deals...This Home Appraiser Has Some Tips As Well

William D. Cobb FHA Home Appraiser (Accurate Valuations Group) — Fri, 07 Aug 2009 01:58:25 -0500

http://www.realestateappraisertips.info/ - Realtor.org Releases Tips To Keep Appraisal Issues From Stopping Your Deals...This Home Appraiser Has Some Tips As Well.

Here's This Home Appraiser's Tips To Keep Appraisal Issues From Stopping Your Deals:

1.) Apply "Declining Markets Adjustments" To Price Your Listings Accurately......The Appraiser Will. Why Are Appraisers Applying "Declining Markets Adjustments" to their sold comps, per National Appraisal and Lender Guidelines, and some Agents don't even know that "Declining Markets Adjustments" exist? I was reading here recently on Active Rain about Agents that are shocked by "Low Appraisals", some because of this new term, "Declining Markets Adjustments". On 8/3/2009, Active Rain sent out this national email: "Under Appraisals! The Next Shoe To Drop?". In this post, Dean Moss, describes what seems to be a new phenomenon and says, "In the average neighborhood of Chicago, our Team has seen appraisers apply a one-percent depreciation factor per month to their appraisal reports. So, for example, a house appraising for $200,000 on May 1st, would now, theoretically, value at $197,000! " Why is this a new phenomenon to some Agents? Haven't some housing markets been declining now for almost 1.5 to 2 years? Did you just expect the appraisers to ignore obvious market trends and not apply "Declining Markets Adjustments"? Why is there a disconnect between Agents and Appraisers on this such obvious issue? I mean, if one looks at the housing market chart below, prepared from MLS data that both the Agent and Appraiser both have access to, one can clearly see the steep dropoff of pricing since 8/2008. Yet, there are still Agents out there that will price their listing as if it were the year 2007 or 2008. And, some of these Agents are the ones crying foul or "Low Appraisal" when it's obvious that some ignored the declining market when applying that listing price.

FNMA 1004 MC. This Chart above is what appraisers use to complete the new Fannie Mae Form 1004MC, effective 4/1/2009. The "Low Appraisals" Issue didn't begin with HVCC. It began with the 1004MC. The 1004MC provides numerous "sub-market" trends, those solds and listings that are actually comparable to the subject property, as opposed to general trends, which could be rosier and more broad. The 1004MC provides such trends as months supply of housing on the market, listing to sales price ratio, absorption rate, total comp sales and listings within past 12 months and opens the eyes of the appraiser regarding the prevalence or lack of seller paid concessions. For instance, the S.M.A.R.T. Appraiser software I use breaks seller paid concessions down into Percentage of Sales With Contributions and Percentage of Contribution To Sale. When both seller paid concessions and percentage of contribution to sales reach near 100%, then I know there is extreme seller motivation or duress in that market. THIS IS WHY I HAVE STATED: An 18-Month Moratorium Of HVCC Isn't Going To Entirely Solve The Low Appraisals Issue. Both Appraisers AND Agents must be truthful and responsible in defining market trends and pricing accordingly.

2.) If About Half Of US Mortgages Will Be Underwater By 2011, then shouldn't Agents be more realistic in their listing prices, be more clued in as to the perhaps declining markets they serve? The Lending Market Is. Reuters Just Released: "About Half Of US Mortgages Underwater By 2011", see here. The article states: "NEW YORK (Reuters) - The percentage of U.S. homeowners who owe more than their house is worth will nearly double to 48 percent in 2011 from 26 percent at the end of March, portending another blow to the housing market, Deutsche Bank said on Wednesday." "Home price declines will have their biggest impact on prime "conforming" loans that meet underwriting and size guidelines of Fannie Mae and Freddie Mac, the bank said in a report. Prime conforming loans make up two-thirds of mortgages, and are typically less risky because of stringent requirements."

3.) Don't Price The Listing Based On The Seller's Price Or What The Seller Wants Just To Get The Listing.....Price The Listing Based On Solid Recently Sold Comps And Pending Listings Adjusted To Local Listing-To-Sales-Price-Ratios. And, have those comps in your listing workfile. I can't tell you how many times, PRE HVCC when appraisers were able to call Agents after the appraisal inspection, when I would be appraising a purchase where I needed to find out the comps used to market the home that high. Instead of reaching into their workfile, the Agents would get on the computer and send me an MLS CMA of 10 active listings (not pendings) and 6 sold comps, which had sold over 6 months ago and some were 500sf smaller in living area size, but matched the listing prices price per sq. ft. (not by any stretch of the imagination an apples-to-apples comparison). By them sending me a current MLS CMA from that day (the date is on the printout), I knew some of them had not done their homework and how much weight to give to their method of pricing.....not much. Appraisers know when the Agent priced just to get the listing as opposed to pricing based on market support.

4.) Don't Just Run A Simple MLS CMA And Think You've Done Your Sellers or Buyers A Great Service. Deduct 100% Of Seller Paid Concessions From Each Sold Comp You Use......because the appraiser will to bring the sales price to "Cash Equivalency". If you use a comp that sold for $299,900 having 2,500sf living area with $9,000 in seller paid concessions, then deduct that $9,000 for a net sales price for that comp of $290,900 and base your listing price on that $290,900, not the $299,900 reported in MLS. The appraiser will deduct that $9,000 as well to bring the transaction to "cash equivalency". The true sold price per sq. ft. is $116.36/sf, not $119.60/sf.

If you're using Pending Listings as comparable indicators, then apply the local Listing To Sales Price Ratio to that Pending Listing Price........because the appraiser will as well.....we're required to. Say you're using 1 pending listing in the same subdivision, listed at $305,445 and in that market, there is a solid 95% Listing-To-Sales-Price-Ratio. What do you do? Responsibly, you would apply the 95% to the current listing price of $305,445 to arrive at support of $290,173. Get that number or support and then if you know that market is going to ask for some closing cost, adjust upward some. But beware that appraisers are deducting seller paid concessions to arrive at cash equivalency. MLS systems across the U.S. don't deduct for seller paid concessions, so when Agents run their MLS CMAs in markets where seller paid concessions are prevalent, then the CMA results are usually over-inflated.

5.) To Avoid Low Appraisal Issues, Actually Physically Measure The Home You're Being Paid 6% +/- To Represent. Then, own and use a sketching software that calculates the accurate living area and provide your seller with that sketch. There have been deals this year that had to re-negotiated all because the Agent just didn't bother to measure the home they were representing....or the agent just chose to copy the previous mls sheet. One deal appraised $20,000 less than P.A. all because the Agent failed to measure the home. This was a $500K+ deal where the Agent was making a $30,000 fee at 6%. Do you think the Sellers were not upset with the Agent by losing out on that $20,000 and having to pay the Agent $30,000 for mis-representation? Probably So. The buyer was ecstatic. If appraisers are paid between $225 to $300 now AFTER HVCC (appraisal fees are about 30% lower now because of HVCC and advent of using AMCs - appraisal management companies) and are required to submit a sketch of the home, then why aren't Agents required to do the same as part of the profession BEFORE REPRESENTATION OF THE HOME AND A PURCHASE AGREEMENT IS WRITTEN when they are paid 6% +/- of the sales price. If the average home sells for say, $225,000, that's a 13,500 fee. If you asked the average seller if they thought that they should receive an accurate sketch of their home as part of the $13,500 fee, they would overwhelming say yes. If you asked the seller if it was OK for the appraiser to perform an appraisal of their home but just not bother with measuring the home, what do you think the average seller's answer would be? See the disconnect here.

JUST FOR THE RECORD HERE!

MANY PROFESSIONALS IN OPERATION. I believe that in any home sale transaction, there are several "Real Estate Professionals" at work - the Listing Agent, Selling Agent, Lender, Home Inspector, Appraiser and Title Company. I believe that if after my appraisal inspection of the home, I'm coming in below the sales price, I should be able to communicate with the Listing Agent to find out exactly what was used to market the home, what comps I'm missing or may have overlooked. My understanding is that HVCC now prevents this communication with the Listing Agent, AFTER the initial home appraisal inspection. However, when setting up the initial appraisal inspection with Listing Agent, I have my staff ask for the comps used to market the property and document this in the workfile. If the Agents don't want to provide these comps and then later complain that I didn't give them professional courtesy, I pull out the workfile and remind them of when I asked for the comps upfront. The Hint Here: When The Appraiser Calls For The Initial Inspection Of Your Listing, Provide Them With Any Extraordinary Features Of The Home And Your Comps From Your Workfile.

HVCC. This Appraiser wasn't for the passage of HVCC, which has resulted in appraisal ordering through AMCs, resulting in "Low Appraisals" in some cases, 30% +/- Lower Appraisal Fees For Home Appraisers And The Use Of Out-Of-Town Or In-Experienced Appraisers That Don't Know YOUR Local Housing Market. This Appraiser didn't need the touted "Appraiser Independence" that HVCC was supposed to be bestow on appraisers as I didn't bow to the pressure. I fired the mortgage brokers that pressured and worked for the lenders that did not. YES, I clearly understand that HVCC has it's problems. Yes, mortgage underwriting that requires comps that sold within 3 months and within 1 mile of subject isn't always realistic or logical. But, from my tips above, one can see that HVCC isn't entirely to blame for the "Low Appraisals" issue as this issue begins with the initial listing price and whether that price is realistic based on a 1.5 to 2 year history of some declining markets, supportable and RESPONSIBLE. Responsible could apply to those statements on the MLS Sheets like, "Measurements Not Warranted By Realtor or Broker". If the Agent or Broker aren't responsible for the initial presentation of the listing's facts, at say $150/sf, then who is? The appraiser that later on after the P.A. has been written discovers that home is actually 200sf smaller in size and then the P.A. has to be re-negotiated? Agent-Due-Diligence has a part to play here.

Prairieville Louisiana 70769 Real Estate News, Housing Trends, Home Prices, Appraiser Market Studies...

William D. Cobb FHA Home Appraiser (Accurate Valuations Group) — Fri, 31 Jul 2009 03:46:24 -0500

http://www.ascensionrealestateappraisers.com/ - Prairieville Louisiana 70769 Real Estate News, Housing Trends, Home Prices, Appraiser Market Studies...

Manchac Commons Appraiser Housing Market Study

Solds from 01/01/2008 to 12/31/2008 revealed:
Average Sales Price: $232,247
Average Sold Price Per Sq. Ft.: $112.70
Median Sold Price: $239,900
Average # of Days On Market: 56
# of Sales: 16
Average Sq. Ft.: 2,073sf

Solds from 01/01/2009 to 07/31/2009 reveals:
Average Sales Price: $227,538
Average Sold Price Per Sq. Ft.: $110.70
Median Sold Price: $227,000
Average # of Days On Market: 238
# of Sales: 7
Average Sq. Ft.: 2,083sf

Therefore, based on the median sale price barometer (the barometer used by the NAR National Association of Realtors) within Subdivision, the market direction appears to be declining since 2008. Average Sales Price has declined -$4,709 or -2.03%. Median Sales Price has declined -$12,900 or -5.38%. Average Sold Price Per Sq. Ft. has declined -$2.00/sf or -1.77%.

A further S.M.A.R.T. Analysis of the Manchac Commons data since 8/1/2008 to 7/31/2009 reveals a -13.45% Decline

New Kodak Pocket Flip Style "HD" Camcorder With EXTERNAL MIC JACK $179.95 AND Why You As A Real Estate Professional Should Care!

William D. Cobb FHA Home Appraiser (Accurate Valuations Group) — Thu, 30 Jul 2009 04:29:24 -0500

New Kodak Pocket Flip Style "HD" Camcorder With EXTERNAL MIC JACK $179.00 AND Why You Should Care!

There's a new review out on this new "Flip" style camcorder. "HD" quality in these small devices is nothing new as the FLIP Mino HD has been out for a while now.....I own one and love it:

What is so spectacular about this new Kodak Zi8 is it's the first truly pocket cam with an EXTERNAL Mic Jack (Yes, I know about Aiptek). Up until now, the FLIP style camcorder has RULED the landscape because of it's superior builtin mic quality. However, high quality video requires high quality sound and that's something most of these have a challenge with - the FLIP having the highest quality sound without a built in External Mic Jack.

Why Should You As A Real Estate Professional Care? Well, if you use video in your online marketing or on your website(s), video interviews of local professionals is helpful to the audience base you're trying to build. Here's an example below of Jeremy interviewing Virginia Real Estate Appraiser, Leslie Frantz, on the changes within the Appraisal Industry (Nov 1 2008). While the interview is creative (a good idea), when they sit down and begin talking the sound quality is not, making me almost not want to watch the entire video. This is why a small HD camcorder (good quality) with a built in external mic jack would produce a better quality sounding video that viewers can actually hear well and want to watch all the way through.

The link to the Kodak Zi8 Review is here: http://www.crunchgear.com/2009/07/29/kodak-outs-the-1080p-zi8-pocket-camcorder/

If You Want To View An External Mic Jack Test Video, Watch Below. The Illustration I want to show reader is at approximately 2:30 into the video:

Baton Rouge Townhome and Condo Market Still Faces Challenges in 2009

William D. Cobb FHA Home Appraiser (Accurate Valuations Group) — Tue, 21 Jul 2009 09:29:47 -0500

http://www.batonrougerealestateappraisers.net/ - Greater Baton Rouge Townhome and Condo Market Still Faces Challenges in 2009

I recently performed an appraisal in the gated townhome development, Bromley Townhomes in Baton Rouge 70810, which was further evidence to me that the Post Katrina Very High Pricing and overbuilding of Condos and Townhomes (not to mention too many condo conversions) across Greater Baton Rouge will take some time to absorb and correct. And, the correction is not pretty.

Bromley Towhomes is an upscale, gated townhome development within 1/2 mile of Perkins Rowe where in 2004 to 2006, new 2 bedroom 1,460sf units sold between $189,500 up to $204,900. Legal News records show that resales of the same units have been from $150,000 up to $175,000. In fact, the differences in resale prices were -23%, -12%, -17% and -11%. The unit appraised was valued at only 79% of original sales price. Marketing time periods for these resales was from 80 days up to 899 days on the market. And, there are 2 listings that have been on the market since mid 2008, one of these listings is finally pending after the price was reduced to $160,000. If it sells at 97% List-To-Sales-Price-Ratio, it will sell for $155,200, a difference of -21% off original price. Specifically for these 1,460sf 2 bedroom Bromley Townhomes, a "SMART Appraiser Software" FNMA 1004 MC (market conditions) Study, a much more narrow "Sub-Market" study, showed declining market values of -5.44% since 7/2008, an 8.4 month supply of competing listings and between 29 to 45 competing listings.

A recent search in MLS Areas 52, 53, 61, 62 shows a total of 620 current listings (active, contingent or pending) of Townhomes and Condos - certainly a large number that will take some time to absorb. With some short sales of attached units taking place in this market, it's an opportunity for investors to buy low hoping to seller higher in the years to come.

CAUTION........When Purchasing A Condo Or Townhome!

Notes Of Caution Before Purchasing In Any Condo Or Townhome Development

1.) Make Sure The Managing Agency Is Well Intact (that the development is managed well with a good paper trail).

2.) That ALL Association Dues Are Fully Paid (Review The "Current" Budget with a real estate professional that understands and can interpret). Make sure there are ample reserves built up to handle the development into the future. This is brought up to help explain that appraisers across the U.S. are being educated and directed to request documentation on Condo AND Townhome budgets and that IF the budgets are not satisfactory or not funded adequately, to discount the value(s) in those developments. And, my experience has been that these are the developments with some short sale activity - absentee owners not paying their dues. This is a major problem in the overbuilt markets like the State of Florida.

3.) Just because the listing price is lower than the 2006 offering price doesn't necessarily make it a good deal in 2009. The chart below shows a -10.25% decline in sales prices/market value and represents 955 attached 2 bedroom sales from 1/1/2006 to July 2009, from $100,000 to $200,000 in MLS Areas 52, 53, 61 and 62. Also note that it took 3.5 years to absorb these 955 units or 273 units per year. With 620 units on the market, a portion priced higher than $200,000, it could take 2.5 to 3 years to absorb these excess units. AND, this doesn't include the large number of units taken off the market that are now rentals because they couldn't be sold. Again, check out the management and current budget before taking the plunge.

Author's Bio:

Bill Cobb, CREA, is Greater Baton Rouge's favorite and most reputable home appraiser frequently called upon by banks, homeowners, and savvy real estate investors to assess property values. A home appraiser with 18 years experience, Bill Cobb brings a wealth of knowledge to the table as a home appraiser.

Bill's company, Accurate Valuations Home Appraisal Group, serves Greater Baton Rouge (East Baton Rouge Parish, West Baton Rouge Parish, Western Livingston Parish and Northern Ascension Parish).

Contact Bill Cobb and Accurate Valuations Home Appraisal Group for your next home appraisal:

Office: 225-293-1500, Cell: 225-953-0638

Fax: 1-866-663-6065

fastvalue2@cox.net

http://www.batonrougerealestateappraisal.com

Will Cap & Trade 'Green' Turn To RED For Home Appraisers?

William D. Cobb FHA Home Appraiser (Accurate Valuations Group) — Thu, 09 Jul 2009 04:42:13 -0500

http://www.realestateappraisertips.info/ - Will Cap & Trade 'Green' Turn To RED For Home Appraisers?

Washington Appraiser, Dave Towne, Asks A Good Question Here!

Appraisers.........

At present, there are very few specifics known about the Waxman ‘Cap and Trade (Tax)' energy bill just passed by the House, that few of our Representatives actually read before voting. After all, it's about 1,500 pages of legalese.

But there is major concern that some provisions in the bill may impact the ability of homeowners to sell their property in the future unless certain ‘mandated' energy improvements are made prior to the sale.

This could directly impact your business, especially if fewer homes are sold due to their age, and the lack of updating by older age owners (that's a whole bunch of ‘us' by the way) who may not have the resources to improve the property....despite the so called ‘credit' in the bill.

Think about it for a moment. To improve the energy efficiency of a dwelling, windows and doors would have to be replaced/retrofitted, and insulation added or supplemented. These are expensive components that cost far more for most homes than the amount of credit granted per this bill.

More info as provided by the Appraisal Institute's Appraiser News Online of July 8, 2009:

Houses Passes Green Bill; Senate to Take Up Late July

In a 219 to 212 vote, the House of Representatives passed the American Clean Energy and Security Act of 2009, which includes green building incentives for both residential and commercial buildings across the country. The landmark energy and climate bill is now in front of the Senate for debate, and a vote is expected in late July. If enacted, the comprehensive bill is expected to create millions of clean energy-related jobs and to help increase the energy efficiency of existing residential and non-residential buildings.

Included in the bill is the Retrofit for Energy and Environmental Performance program, which includes retrofitting incentives for residential and commercial buildings. Under REEP, homeowners could [does not say they ‘will'] qualify for up to $3,000 in financial incentives for achieving a 10 to 20 percent increase in energy efficiency, with another $150 for every additional percentage point of energy savings achieved. Buildings on the National Register of Historic Places would be eligible for an additional 20 percent in financial incentives. [Since very little is yet known, the presumption is increased taxes and more gov't control to pay for this...are you really comfy with that?]

Another feature of the bill would establish national building codes for commercial real estate that would mandate energy improvements for existing structures. It also would provide businesses up to $2.50 per square foot for implementing major energy reduction enhancements.

"This bill recognizes that green building is a major part of the solution to our economic and energy challenges," said U.S. Green Building Council President and Chief Executive Officer Rick Fedrizzi. "With this federal commitment, green building can help propel the new green economy by creating enormous energy and cost savings for millions of Americans while accelerating unprecedented job creation."

In related news, the USGBC recently added a requirement for building owners pursuing Leadership in Energy and Efficient Design (LEED) certification. In a move to eliminate the gap between green-related design features and actual post-development performance and operations, the organization now will require building owners to provide operational performance data on a routine basis to maintain certification.

"We're convinced that ongoing monitoring and reporting of data is the single best way to drive higher building performance, because it will bring to light external issues such as occupant behavior or unanticipated building usage patterns, all key factors that influence performance," said USGBC Senior LEED Vice President Scot Horst.

Dave Towne

Gonzales Louisiana 70737 Villa Gardens Housing Report Midyear 2009 by Ascension Parish FHA Appraisers

William D. Cobb FHA Home Appraiser (Accurate Valuations Group) — Thu, 09 Jul 2009 04:07:00 -0500

http://www.ascensionrealestateappraisers.com/ - Gonzales Louisiana 70737 Villa Gardens Housing Report Midyear 2009 by Ascension Parish FHA Appraisers

Solds In Villa Gardens Subdivision from 07/01/07 to 07/01/08 revealed:
Average Sales Price: $161,250
Average Sold Price Per Sq. Ft.: $115.13
Median Sold Price: $161,000
Low Sales Price: $160,000
High Sales Price: $163,000
Average # of Days On Market: 36
# of Sales: 4

Solds In Villa Gardens Subdivision from 07/01/2008 to 07/09/2009 reveals:
Average Sales Price: $170,975
Average Listing Price: $174,200
Average Sold Price Per Sq. Ft.: $114.40
Median Sold Price: $181,000
Low Sales Price: $155,000
High Sales Price: $182,000
Average # of Days On Market: 79
# of Sales: 4
Listing Price To Sales Price Ratio Has Been: 98%

Therefore, based on the median sale price barometer (the barometer used by the NAR National Association of Realtors) within Subdivision, the market direction appears to be increasing.

The Average Sales Price has increased by +$9,725

Median Sales Price has increased by +$20,000.

Average Sold Price Per Sq. Ft. has decreased by -$0.73/sf.

See 1004MC "Sub-market" Charting Below. Overall Stable Market To Slightly Increasing Market (+2.81% Since 7/2008). 6 Months Supply of Housing On Market. 17 Competing Listings Does Indicate a Slight Over-Supply. 98% List-To-Sales Price Ratio.

Market data used with the permission of Greater Baton Rouge Board of Realtors.

Author's Bio:

Bill Cobb, CREA, is Greater Baton Rouge's favorite and most reputable home appraiser frequently called upon by banks, homeowners, and savvy real estate investors to assess property values. A home appraiser with 17 years experience, Bill Cobb brings a wealth of knowledge to the table as a home appraiser.

Bill's company, Accurate Valuations Home Appraisal Group, serves Greater Baton Rouge (East Baton Rouge Parish, West Baton Rouge Parish, Western Livingston Parish and Northern Ascension Parish).

Contact Bill Cobb and Accurate Valuations Home Appraisal Group for your next home appraisal:

Office: 225-293-1500, Cell: 225-953-0638

Fax: 1-866-663-6065

fastvalue2@cox.net

http://www.ascensionrealestateappraisers.com/

HR 3044 18 Month Moratorium On HVCC WILL NOT Cure The "Low Appraisal" Disease Issue

William D. Cobb FHA Home Appraiser (Accurate Valuations Group) — Sat, 27 Jun 2009 11:54:11 -0500

http://www.realestateappraisertips.info/ - HR 3044 18 Month Moratorium On HVCC WILL NOT Cure The "Low Appraisal" Disease Issue

I'm reading this morning from the Mortgage New Daily Email about "HR 3044: To Impose 18-month Moratorium on HVCC". The reasons given for the moratorium are these below as directly quoted:

"In the period of time since its implementation, the HVCC has increased costs to consumers and decreased the quality of appraisals and has provided a level of uncertainty in an ailing housing market. Tens of thousands of consumers have already been robbed of their opportunity to enjoy historically low rates by Attorney General Andrew Cuomo's rule."

However, according to the media generated buzz, the outcry in the past 3 weeks hasn't been so much been about HVCC but the media issue of "Low Appraisals". Just look at these recent headlines:

Bloomberg: Home-Price Recovery May Be Undermined by Appraisals

Christian Science Monitor: Are low appraisals slowing US home sales?

CNN Money: Appraisers wrecking builder sales?

The Tennessean: Low appraisals nip real estate deals

Steamboat Pilot, CO: Appraisal rules wreck real estate deals

and my favorite of all:

Joe Weisenthal: The NAR's Appalling Fight Against Honest Appraisals

Yes, it's true that if the Appraisal Management Companies (AMC) are sending appraisers from 2 hours away to perform an appraisal on a home just because they must use appraisers from a rotating roster, an appraiser that doesn't know the market in the subject's neighborhood, then that's a problem and could result in a "low appraisal". However, wouldn't the interpretation of if an appraisal is "low" or not be based on "market expectation"? And, couldn't the expectation by the seller, buyer, agent and lender be unrealistic in so many of the declining markets across the U.S.? Absolutely!

I like Ben Goheen's response to the irresponsible comments NAR's Chief Economist, Lawrence Yun, made this past week blaming appraisers for the lack of a housing recovery, and I quote:

"Mr. Yun is now insisting that appraisers ignore market conditions so houses can sell – isn’t that convenient?

Since every market is local, nobody can rightfully make generalizations about how foreclosures should or shouldn’t be used as comparables in an appraisal. They may be inconvenient, but they are real and often can’t just be ignored. As a Realtor you just have to be aware how they effect your market when writing an offer."

An 18 Month Moratorium WILL NOT make the Fannie Mae 1004MC Addendum disappear - the 1004 MC is the chief determiner of housing "sub-market" direction and quantification. An 18 Month Moratorium WILL NOT keep appraisers from interpreting housing markets properly. An 18 Month Moratorium WILL NOT all of a sudden give appraisers a set of rose-colored glasses to view their local housing markets. An 18 Month Moratorium WILL NOT keep appraisers from applying "declining markets adjustments" when they are obviously evident and provable by a simple MLS chart. An 18 Month Moratorium WILL NOT keep appraisers from applying the mandated "listing-to-sales-price-ratio" to the 3 current listings they are now required to use in their reports. No, an 18 Month Moratorium WILL NOT keep appraisers from obiding by USPAP, lender guidelines, general appraiser liability issues and/or erase common sense. When an appraiser studies a housing "sub-market" and sees a chart like this below, the appraiser has to do what they have to do - apply declining markets adjustments if warranted.

Bill Cobb is a Louisiana State Certified Residential Appraiser operating as Accurate Valuations Group in the Greater Baton Rouge Market. Bill has 17 years experience as a residential appraiser and carries on the family appraisal career tradition as a third generation appraiser. To learn more about AVG, visit: http://www.batonrougerealestateappraisers.net/

Ascension Parish Real Estate News - $7.7 Million Lots Sale Indicates Trend Towards Smaller, More Affordable Homes To Be Built and Sold

William D. Cobb FHA Home Appraiser (Accurate Valuations Group) — Wed, 03 Jun 2009 13:24:50 -0500

http://www.ascensionrealestateappraisers.com/ - Ascension Parish Real Estate News - $7.7 Million Lots Sale Indicates Trend Towards Smaller, More Affordable Homes To Be Built and Sold

The Baton Rouge Business Report is reporting a $7.7 Million Lots Sale In Keystone Of Galvez Subdivision, purchased by the very active Vicknair Builders. At a time when some local builders who built on the higher end of price range and still can't sell their inventory and now with Allstar Homes offering a free $15,000 with a home purchase, Vicknair Builders, who builds in the more affordable $130K to $180K market, is in a building boom in several local developments.

Here's the link and snippet:

http://www.businessreport.com/archives/daily-report/2009/may/27/1000/

"Developer Kevin Nguyen sold 199 lots in his Keystone of Galvez subdivision to A and T Management. A and T, headed by Allen Tomlison, paid $7.7 million for the lots off La. 933 in a deal that happened Tuesday. Tomlinson bought 145 lots at $40,000 each and 54 lots at $35,000 per lot. They will construct houses on them for sale. Tomlinson and Vicknair builders have been buying lots in Galvez in blocks of 10 for the past year before they went ahead and bought out the rest of the developed properties in the subdivision. Nguyen kept the remaining land that has been approved for an additional 500 lots. He will install utilities and develop the lots as market conditions improve.-Tom Cook"

Woodridge Subdivision 70809 May 2009 Update: Baton Rouge Subdivision Videos

William D. Cobb FHA Home Appraiser (Accurate Valuations Group) — Fri, 15 May 2009 21:54:21 -0500

http://www.batonrougerealestateappraisers.net/ -

Woodridge Subdivision 70809 May 2009 Update: Baton Rouge Subdivision Videos

Current Video: http://www.viddler.com/explore/fhaappraiser/videos/49/

Solds In Woodridge Subdivision from 01/01/2007 to 12/31/2007 revealed:
Average Sales Price: $346,578
Average Sold Price Per Sq. Ft.: $138.84
Median Sold Price: $349,000
Low Sales Price: $271,000
High Sales Price: $409,000
Average # of Days On Market: 112
# of Sales: 36

Solds In Woodridge Subdivision from 01/01/2008 to 01/12/2009 reveals:
Average Sales Price: $336,160
Average Sold Price Per Sq. Ft.: $137.03
Median Sold Price: $349,500
Low Sales Price: $263,000
High Sales Price: $407,299
Average # of Days On Market: 96
# of Sales: 25

Solds In Woodridge Subdivision from 01/01/2009 to 05/15/2009 reveals:
Average Sales Price: $330,093
Average Sold Price Per Sq. Ft.: $138.96
Median Sold Price: $315,840
Low Sales Price: $260,000
High Sales Price: $439,000
Average # of Days On Market: 80
# of Sales: 9

Therefore, based on the median sale price barometer (the barometer used by the NAR National Association of Realtors) within Woodridge Subdivision, the market direction appears to be declining from a high in 2007 of $349,000 down to $315,840 currently. The Average Sales Price has decreased by -$16,485 or -4.76%. Median Sales Price has declined by -$33,160 or -9.5%. However, the Average Sold Price Per Sq. Ft. has remained stable from $138.84/sf to $138.96/sf - a strange phenomenon where the median sales price declines -9.5% but the average sold price per sq. ft. remains stable.

Pelican Point Golf Community Video 2009 - Gonzales Louisiana 70737

William D. Cobb FHA Home Appraiser (Accurate Valuations Group) — Mon, 04 May 2009 08:59:40 -0500

http://www.ascensionrealestateappraisers.com/ - Gonzales Louisiana 70737 - Pelican Point Golf Community Video 2009
Solds In This Subdivision in MLS from 6/01/07 to 6/01/08 reveals: Average Sales Price: $356,656 Average Sold Price Per Sq. Ft.: $130.00 Median Sold Price: $339,400 Low Sales Price: $233,000 High Sales Price: $560,000 Average # of Days On Market: 121 # of Sales: 43
Solds In This Subdivision from 6/01/08 to 5/03/09 reveals: Average Sales Price: $319,717 Average Sold Price Per Sq. Ft.: $122.28 Median Sold Price: $308,250 Low Sales Price: $170,000 High Sales Price: $520,000 Average # of Days On Market: 148 # of Sales: 36
Therefore, based on the median sale price barometer (the barometer used by the NAR National Association of Realtors) within Subdivision, the market direction appears to be declining. The Average Sales Price has declined -$36,939 or -10.36%. Median Sales Price has declined -$31,150 or -9.18%. Average Sold Price Per Sq. Ft. has declined -$7.72/sf or -5.94/sf.
THERE ARE "57" (46 in MLS and 11 in www.fsbobr.com) HOMES FOR SALE IN PELICAN POINT, MORE THAN THE AMOUNT THAT SOLD IN THE PAST 12 MONTHS.

DECLINING MARKET CONDITIONS ADJUSTMENTS APPLIED TO THE CONTRACT DATE, NOT THE SOLD DATE EXPLAINED.

William D. Cobb FHA Home Appraiser (Accurate Valuations Group) — Sun, 19 Apr 2009 22:04:55 -0500

http://www.denhamspringsappraisers.com/ - DECLINING MARKET CONDITIONS ADJUSTMENTS APPLIED TO THE CONTRACT DATE, NOT THE SOLD DATE EXPLAINED.

DECLINING MARKET CONDITIONS ADJUSTMENTS APPLIED TO THE CONTRACT DATE, NOT THE SOLD DATE. When we easily see clear declining market proof, the exact same proof a Listing Agent can see in their own MLS, let's say of -12% in the past year, we adjust the sold comps at -1% per month and apply that adjustment to the "CONTRACT DATE", NOT THE SOLD DATE, per lending guidelines. If the appraisal is being performed on 4/1/2009 and our 3 sold comps were under contract 4, 5 and 6 months from that 4/1/2009 date, then they are adjusted downward by -4%, -5% and -6% of the sales price. Again, these are the instructions for both Conventional and FHA appraisals. Believe me, if an appraiser fails to make these declining markets adjustments to their Sales Comparison Grid, then we will receive a call from the AMC and/or underwriter and/or Chief Appraiser with a reprimand. Major Banks are very, very, very serious about this issue. The first time I forgot to make this adjustment in a report, I found myself on a conference call with 1 chief appraiser and 2 managers of 1 major AMC asking me to explain why I overlooked this. That's how serious an issue this really is.

WHY DO APPRAISERS MAKE DECLINING MARKET CONDITIONS ADJUSTMENT? Because, as a real estate professional, it's unethical not to do so, And, It's in our appraisal instructions to do so, to adjust for declining markets. Appraiser's Instructions for both Conventional and FHA now are that we use 3-4 solds, which are "lagging indicators" and 2-3 listings adjusted to Listing-To-Sales Price Ratio of whatever that is, say 94%. Guess what? In today's market more emphasis is place on the current listings adjusted to List-to-sales price ratio that on the older sold comps, depending on which underwriter you're dealing with. Today's underwriters make value decisions based on the most current data, not on homes that sold 3-6 months ago. YES, LISTINGS DO TRUMP OLDER SOLDS IN THIS MARKET.

What Fannie Mae 1004 MC Comments Am I Using In My Real Estate Appraisals

William D. Cobb FHA Home Appraiser (Accurate Valuations Group) — Sun, 19 Apr 2009 21:59:48 -0500

http://bestfanniemae1004mcsolution.ning.com/ - What Fannie Mae 1004 MC Comments Am I Using In My Real Estate Appraisals

Question 1.) Explain in Detail the Seller Concessions Trends For the Past 12 Months.

In the subject's market, it is typical and has been traditional for the seller to pay up to 2-3% in closing costs. Over the past 12 months, the amount of seller paid concessions has increased slightly from 2.5%, 2.5% to 3.4% current 3 months. Also, percentage of sales with contributions has been 50%, 63% and currently 66%, increasing. The increased seller contributions appears to be driven by competition for buyers in the current "buyers market". Many buyers in the current market lack the necessary down payment to qualify for loans, therefore sellers needing to sell a home opt to assist a potential buyer qualify.

Question 2.) Are foreclosure sales (REO sales) a factor in the market?

The SMART MLS Analysis showed only 5 REOs sales of 240 total comparable sales since 1/1/07, or 2.08% of Total Sales, which doesn't appear to be an indication that REOs are negatively impacting this market. It's also stated here that a recent article (The Landmines Within by Michael Tarabotto
http://activerain.com/blogsview/927638/The-Landmines-Within ) stated that as much as 70% of REOs never make it into the MLS. MLS is reporting ZERO comparable REO listings. However, since it's possible that 70% of REOs and/or Sheriff Sales never make it into the MLS System, it's almost impossible to
know exactly how many competing REOs there really are out there.

Question 3.) Cite Data Sources For Above Information.

The data provided in this analysis was generated using a proprietary data analysis tool, S.M.A.R.T. Appraiser. This tool enables the appraiser to extract records from _________ MLS and analyze both the General/Macro market and Micro/Sub Market of homes from the defined neighborhood.

Question 4.) Summarize the above information.....

The data utilized in the tables above was extracted from _______ MLS. This data is considered to be reliable by the appraiser's peer group. The amount of research to analyze this information is consistent with "normal course of business" of the local peer group. The analysis of some portions is limited by
the lack of data or search features of the MLS system. The accuracy of the data above is solely dependent upon the accuracy and timeliness of the data provided by the users of the MLS system. When possible the appraiser included in the analysis any pending sales, expired and withdrawn listings in order to have a more thorough understanding and awareness of current and past market conditions. All of these factors combined have an impact on the opinion of the market's trends and the final opinion of value. NOTE: THE _______ MLS DOES NOT ACCRUE LISTING HISTORY, THEREFORE, THE ANSWERS OF "N/A" ABOVE ARE ACCURATE ANSWERS BECAUSE MY MLS DOESN'T SUPPLY THIS DATA.

Appraisers AND REALTORS, Are You Reconciling HOA Budgets for Both Condos and Townhouses (Shortfalls in Reserves) In Your Value Decisions?

William D. Cobb FHA Home Appraiser (Accurate Valuations Group) — Mon, 06 Apr 2009 02:20:48 -0500

http://realestateappraisertips.info/

Appraisers AND REALTORS, Are You Reconciling HOA Budgets for Both Condos and Townhouses (Shortfalls in Reserves) In Your Value Decisions? Is it a good idea to ask the question, "What is the outstanding balance of unpaid dues?"

I sent this reply below to a Realtor who complained that their condo listing recently didn't appraise because the appraiser was considering 2-3 short sales in the development..... It's a MUST for you to be obtaining the budgets for both condos and townhouse developments and reviewing them (updated budgets). I won't even begin an assignment on these until I have been supplied with the budget. And if they tell you to pay $50 for a copy of the budget.....well, I think you can handle that one!!!

Hi XXXXX,
A while back, you asked me about the local condo situation that wasn't appraising. As I told you then, there is and was a glut of these on the market. Here's the Verification: see this link (link removed)

I was in Atlanta 1.5 weeks ago for a 7 Hour CE Fannie Mae Update Seminar on how to appraise in this national downturn. It was a small, informal gathering of 13 appraisers, 12 of them from Atlanta where the condo market is especially horrible. I asked them about your specific situation with the condo not appraising and short sales taking place and every single one of them sided with the appraiser who appraised your condo deal, taking into consideration the short sales. Also, they asked, "Was the Condo Budget examined by by the Realtor who listed the property and the appraiser who appraised it?". You see, as problems occur in Condo developments (as they are doing all over the country now) and dues doesn't get paid, taxes don't get paid, etc.., it presents a major challenge to the HOA and/or management agencies. If 10% to 20% of units aren't paying dues, then that's a major value issue. A shortfall in reserves is a pre-cursor to problems in the development and values later on. I don't know if this was the case in your situation or not. Did the appraiser examine the condo budget and were red flags flown? It's a reminder that it's not only comps that determine value, but that it's the Listing Agent's responsibility to examine the Condo Budget as well. Would a lender in 3/2009 lend on a condo development where 30%+ of the units aren't paying dues? Is the development you want to list in "lendable?". I think you will see this become much more of an issue in the future, if it isn't already an issue.

Hope this helps! Bill

NOTE: While we don't generally examine the budget of a Townhouse, couldn't a shortfall in reserves in a townhouse development be just as serious as in a condo development? Food For Thought!

Real Estate Appraiser Tips On Using Dual Vertical Monitors

William D. Cobb FHA Home Appraiser (Accurate Valuations Group) — Mon, 06 Apr 2009 02:13:10 -0500

http://realestateappraisertips.info/ - Real Estate Appraiser Tips On Using Dual and Dual Vertical Monitors

In the photo below, I have two (2) 19 Inch Dell Monitors. For the right monitor, I positioned it vertically so that I can see almost a whole page of an appraisal at a time. The benefits are that I can see more of the appraisal page and there is less scrolling needed. By being able to see one page of an appraisal at a time, I can a whole page of home photos, a whole map page at a time, a whole page of additional comments at a time, and makes it possible to see two to three half or 1/3 pages at a time. I am loving this new setup because of how much more productive it's allowing me to become. I also placed a roll of duct tape below the right monitor, which raised it slightly and so it's totally stable now and won't move or fall at a slight tilt.

The Appraisal Software in the photo is SFREP's Appraise-It, which I have been using since 1991.

If you try this, please email me @ appraisertips@gmail.com and let me know how it worked out for you - Subject: Real Estate Appraiser Tips On Using Dual and Dual Vertical Monitors.

I Hope This Helps! Bill Cobb

Appraisal Data Backup - I Finally Bought An External DVD Burner For Real Estate Appraisal Data Backup

William D. Cobb FHA Home Appraiser (Accurate Valuations Group) — Sun, 05 Apr 2009 20:47:28 -0500

http://www.realestateappraisertips.info/ - I Finally Bought An External DVD Burner For Real Estate Appraisal Data Backup

Today, after doing some reading, I bought an External Memorex CD/DVD Recorder (MRX-530LE) @ Office Depot for $99 plus tax. Backs up my appraisal files on CDs or DVDs (up to 9.4 Gigs on 1 DVD), plus other files, such as my workfile folders, comp photos backups, etc... Yes, I have External Harddrive Backups, but that's "on-site". This way, I can burn all I need to do and keep it "off-site", plus mail or deliver weekly backups to a trusted location. In the past, I tried Mozy and that didn't work well for me. An appraiser friend tried Carbonite, but when his computer went down, it was going to take several days for him to download his appraisal files....and his clients didn't want to wait several days to get their reports.

I burned 38 Gigs of appraisal data on 4 DVDs in just a few hours with no problems at all and feel much better about my data backup solution.

Details:

General
Device Type	DVD±RW (±R DL) / DVD-RAM drive
Enclosure Type	External
Enclosure Color	Black, silver
Interface	Hi-Speed USB
Optical Storage
Type	DVD±RW (±R DL) / DVD-RAM
Read Speed	48x (CD) / 16x (DVD)
Write Speed	48x (CD) / 20x (DVD±R) / 8x (DVD±R DL)
Rewrite Speed	24x (CD) / 6x (DVD-RW) / 8x (DVD+RW) / 12x (DVD-RAM)
Disc Labeling Technology	LightScribe Technology
Supported Media Types	CD-ROM, CD-R, CD-RW, DVD-ROM, DVD-R, DVD-RAM, DVD-RW, DVD+RW, DVD+R, DVD+R DL, DVD-R DL
Buffer Underrun Protection	Yes
Features	Firmware upgradable
Expansion / Connectivity
Interfaces	Hi-Speed USB
Miscellaneous
Included Accessories	Vertical stand
Software / System Requirements
Software Included	Nero Toolkit, NERO BackItUp, Nero Cover Designer, Nero Recode 2, Nero ShowTime, Nero Vision, Nero 7 Essentials

Here's My Latest Fannie Mae 1004 MC Completed In S.M.A.R.T. Appraiser Software - I'm Improving - Do You Have Any Tips To Help Me Improve?

William D. Cobb FHA Home Appraiser (Accurate Valuations Group) — Sun, 05 Apr 2009 18:52:14 -0500

http://bestfanniemae1004mcsolution.ning.com/ - Here's My Latest Fannie Mae 1004 MC Completed In S.M.A.R.T. Appraiser Software - I'm Improving - Do You Have Any Tips To Help Me Improve?

I'm Improving. How are you all doing on this addendum? If you need help, check out these attachments.

For the First Question about Seller Paid Concessions, I've also added a disclaimer than only MLS was searched for ALL competing listings (in my area, we have about 10 FSBO sites).

For the REO/Foreclosures question, I've added Realty Trac data along with MLS data because of the Michael Tarabotto The Landmines Within article (http://activerain.com/blogsview/927638/The-Landmines-Within ), which states that 70% of REOs never make it into the MLS system.

Have any feedback or tips to help me/us? Please add a comment. Hope this helps! Bill Cobb

To View All Attachments With This Post, see: http://bestfanniemae1004mcsolution.ning.com/forum/topics/heres-my-latest-1004-mc-1

Appraisers Water Cooler Offers 1004 MC Help For Appraisers In Non-Disclosure States

William D. Cobb FHA Home Appraiser (Accurate Valuations Group) — Tue, 31 Mar 2009 14:34:50 -0500

Best Fannie Mae 1004 MC Solution - Not An MS Excel Spreadsheet

Join The Appraiser's Water Cooler Today

How To End A Day Of Appraisal Inspections - Louisiana Style!

William D. Cobb FHA Home Appraiser (Accurate Valuations Group) — Tue, 31 Mar 2009 14:30:41 -0500

The Absolute Best Fannie Mae 1004 MC Solution On The Market Today - This IS NOT An MS Excel Spreadsheet

Real Estate Appraiser Tips Video On Avoiding Collections Issues

William D. Cobb FHA Home Appraiser (Accurate Valuations Group) — Tue, 31 Mar 2009 14:21:38 -0500

Best Fannie Mae 1004 MC Solution - Not An MS Excel Spreadsheet

Here's A Fannie Mae 1004 MC Trends Question I Need Help On. The question is in video format, but how far back does one have to go to establish a declining market trend?

William D. Cobb FHA Home Appraiser (Accurate Valuations Group) — Tue, 31 Mar 2009 14:16:21 -0500

Best Fannie Mae 1004 MC Solution - Not An MS Excel Spreadsheet

Realtors & Appraisers - New S.M.A.R.T. Fannie 1004 MC Housing Market Analysis In Real Time Software - This Is Not A Tedious Non-Solution Excel Spreadsheet

William D. Cobb FHA Home Appraiser (Accurate Valuations Group) — Sun, 22 Mar 2009 21:09:34 -0500

http://bestfanniemae1004mcsolution.ning.com/

This Is How Our Nation's MLS System Aid In Over-Inflating Housing Markets and How Markets Get Over-Inflated!

William D. Cobb FHA Home Appraiser (Accurate Valuations Group) — Tue, 17 Mar 2009 17:42:59 -0500

This Is How Our Nation's MLS System Aid In Over-Inflating Housing Markets!

MLS Systems Across the USA Assist In Over-Inflating Home Values.

There's a major flaw built in to our MLS systems. MLS systems don't automatically deduct seller paid concessions, don't adjust for cash equivalency, nor do real estate practitioners understand their responsibility to do likewise. So, in the 2 examples below, the first is over-inflated by $7,000 and the second by $6,500 based on "reported seller paid concessions". When the next Agent pulls an MLS CMA to price their new listing, and they use either of these 2 sales which bumped the price per sq. ft. upward by $2/sf to $3/sf, which are not adjusted for cash equivalency, this new listing is automatically priced at an inflated value. And, therein lies a partial contributor to over-inflating home prices - The Nations' MLS Systems That Don't Adjust Seller Paid Concessions To Cash Equivalency. If this newly listed home receives a P.A. and the appraiser has a problem reaching this new inflated sales price, the real estate practitioner will say that the comps are selling for $110/sf based on an MLS CMA (not adjusted for cash equivalency), therefore supporting the sales price. However, when the appraiser applies the cash equivalency standard and has to deduct -$7,000 from comp. #1, -$6,500 from comp. #2 mentioned above and $0 for comp. #3, then the home doesn't appraise. The appraiser is labeled the bad person in the transaction because they didn't go along with "the deal". In reality, it was the real estate practitioner's responsibility to have subtracted (bring to cash equivalency) seller paid concessions from each comp they used to price this home.

CASH EQUIVALENCY.

In this seminar, it was stated that the correct school of thought taken is, "An impact on sale price caused by any sales or financing concessions, incentives or other schemes should be adjusted out of the sale prices of the comparables. Doing this would net a cash-equivalent price that is similar to the defined value. This essentially means that all comparable sales should be adjusted to a level where the price is equal to what a "cash" buyer would have paid. Without a doubt, seller concessions impact the contract price of a property. If the seller pays any of the closing costs that on virtually all transactions are paid by the buyer, or are deemed to be the buyer's closing costs, then the seller has paid concessions to the buyer." Cash Equivalency means that when a home is listed for $171,900, sells for $176,900 because $5,000 was added into the deal to pay the buyer's closing cost, when that new sale is used as a comp, the appraiser deducts $5,000 for a net sales price of $171,900. Although it's reported in the MLS system at a sales price of $176,900, this transaction worked to over-inflate that local housing market and the appraiser is duty-bound to correct this when using this sale as a comp.

***This section below was written based on my own opinion and was not exactly discussed in class.***

How Real Estate Practitioners Assist In Over-Inflating A Housing Market.

Here's An Example: I just used a sold comp in an appraisal where the home was listed for $179,900 and it closed for $186,900 with seller paying $7,000 in buyer's closing costs. My questions in this transaction are: If the seller wasn't willing to pay any closing cost, would this transaction have taken place? Also, in reality, the seller didn't pay closing cost. The sales price was raised by $7,000 by raising the appraised value, but the listing agent believed this home was only worth $179,900 when listed. Was the appraisal manipulated to seal this deal? To hit that target number? I'm not pointing the finger at anyone here. Remember that one of the helps of this seminar was to show and remind home appraisers "how" housing market become over-inflated and to properly adjust for such actions. This is how the housing market operates and this type of operation - of adding in seller paid concessions to bump up the sales price above listing price on a home for sale - is what assists in over inflating home prices.

Mortgage Lenders Assist In Over-Inflating Values.

With mortgage lenders, it all begins with the appraisal order having the target value needed on the appraisal order for refinance and 2nd mortgages. The Major National Banks, on refinance or 2nd mortgage orders, stopped stating target values needed on their appraisal orders about 5 years ago. Today, it's generally the local mortgage brokers that still state target values on their appraisal orders.

Real Estate Practitioners Assist In Over-Inflating the Market.

Have these seller paid concessions artificially inflated this National Real Estate Market? All of this discussion brings up an interesting question. It's been said that part of this national housing problem has to do with inflated home values. Well, one way home values become "inflated", is when real estate practitioners list a home for $159,900, it's on the market for over 6 months, lowers the price to $154,900, receives a P.A. and the appraiser receives the appraisal order with selling price of $166,400 with the seller paying $6,500 in buyer's closing cost plus contributing $5,000 toward a non-profit for down-payment assistance. There is opinion that says that appraisers that go along with this type of transaction are committing fraud (see Active Rain post: http://activerain.com/blogsview/109183/Are-You-Committing-Fraud ). After all, the home was listed initially for $159,900 believing that this home wasn't worth more than $159,900. This home was on the market for over 6 months and reduced to $154,900. When the lender goes to hire an appraiser, they get on the phone and call around until they can find an appraiser willing to go along with this type of deal. During the appraisal inspection, the buyer meets the appraiser and states that without the seller paying their closing cost, they couldn't afford to buy the home. Clearly, the market doesn't support this transaction, but with the "right appraiser", it's no problem.

This sale is recorded in the MLS for $166,400 with only $6,500 in seller paid concessions reported, not the correct total of $11,500 in seller paid concessions (the $5,000 in down payment generally isn't reported). So, the sale is actually recorded at an inflated sales price $11,500 more than the market was willing to pay. Based on cash equivalency standard, the appraiser will use this sale as a comp at $166,400 and subtract the $6,500 in "reported seller paid concessions" reflecting a net sales price of $159,900.

It's my understanding that after October 1, 2008, many of these non-profit down-payment assistance programs are being banned from use in home purchases, at least for FHA Financing. From what I have read, this move is believed to lessen the future number of foreclosures because, if a person has nothing invested in the home, then they're more willing to let the home go into foreclosure. This will help lessen the pressure applied to appraisers to hit the inflated and unsupportable target price. NOTE: There may be behind the scenes negotiations to save seller funded down-payment assistance programs. However, both lenders and Realtors will find it more difficult to find appraisers to go along with these situations when the purchase price is raised $10,000+ than listing price just for the purpose of trying to get a buyer into a home. If the home is listed for 3 to 6 months for $169,900 and finally receives a P.A. for $180,900 with seller paying $5,000 in closing cost plus $6,000 in seller paid down-payment assistance, $11,000 more than listing price, why is the appraiser obligated to hit this number? After all, the original listing price was $169,900.

Builders Also Assist In Over-Inflating Home Values.

As mentioned above, it's reported that some in the Southwestern US are being investigated for allegedly paying off buyer's debt to get buyers into new homes. It also shows up when the builder offers to pay $5,000 in buyer's closing for all homes in the new development across town. Without the builder paying $5,000 in closing cost, some buyers wouldn't be able to afford these new homes. Remember what was stated above, This essentially means that all comparable sales should be adjusted to a level where the price is equal to what a "cash" buyer would have paid. Without a doubt, seller concessions impact the contract price of a property. If the seller pays any of the closing costs that on virtually all transactions are paid by the buyer, or are deemed to be the buyer's closing costs, then the seller has paid concessions to the buyer....and those concessions should be deducted when that sale is used as a comp.

And, Yes, Home Appraisers Assist In Over-Inflating Home Values.

It's believed by this appraiser that all players in the real estate arena have helped assist in the current over valuing of the National Housing Market. Yes, appraisers have contributed as well by simply over-valuing homes in hopes of keeping the orders coming from that lender (Going Along With The Target Value On The Appraisal Order) and Failing To Adjust Sold Comps With Seller Paid Concessions To Cash Equivalency.

Ascension Parish FHA Home Appraisers Report On Oak Alley Estates March 2009 Update

William D. Cobb FHA Home Appraiser (Accurate Valuations Group) — Thu, 05 Mar 2009 07:56:05 -0600

http://appraisersinascension.info/ - Ascension Parish FHA Home Appraisers Report On Oak Alley Estates March 2009 Update

Solds In Oak Alley Estates Subdivision from 01/01/2007 to 12/31/2007 revealed:
Average Sales Price: $359,232
Average Sold Price Per Sq. Ft.: $135.28
Median Sold Price: $355,000
Low Sales Price: $277,900
High Sales Price: $469,480
Average # of Days On Market: 147
# of Sales: 21

Solds In Oak Alley Estates Subdivision from 01/01/2008 to 02/02/2009 reveals:
Average Sales Price: $355,307
Average Sold Price Per Sq. Ft.: $130.86
Median Sold Price: $348,000
Low Sales Price: $293,000
High Sales Price: $437,000
Average # of Days On Market: 136
# of Sales: 15

Therefore, based on the median sale price barometer (the barometer used by the NAR National Association of Realtors) within Oak Alley Estates, the market direction appears to be declining. The Average Sales Price has declined -$3,925 or -1.09%. Median Sales Price has declined -$7,000 or -2%. Average Sold Price Per Sq. Ft. has declined -$4.42/sf or -$3.27/sf. Remember that a "Declining Market" is "A stage of diminishing demand in a market area's life cycle." In 2009, the Avg DOM was 188 days or close to over 6 months. There is still generally an over-supply of new homes between the $300,000 to $600,000 range. In Oak Alley Estates, there are 8 listings in MLS, from $339,900 up to $435,000, and 7 of the 8 were listed in 2008 and have been on the market for several months now. 12365 Oak Colony
has been on the market since 2007. In MLS, in Upper Ascension Parish, there are 77 Competing Listings between $350,000 and $509,000.

Oak Alley Estates Subdivision data is provided with the permission of the Greater Baton Rouge Board of Realtors.

Zachary Louisiana FHA Appraisers Report On Beaver Creek February 2009 Update

William D. Cobb FHA Home Appraiser (Accurate Valuations Group) — Thu, 05 Mar 2009 07:46:19 -0600

http://zacharylouisianarealestate.info/ - Zachary Louisiana FHA Appraisers Report On Beaver Creek February 2009 Update

Sold In Beaver Creek Subdivision from 01/01/2007 to 12/31/2007 revealed:
Average Sales Price: $305,403
Average Sold Price Per Sq. Ft.: $127.06
Median Sold Price: $276,888
Low Sales Price: $216,600
High Sales Price: $534,500
Average # of Days On Market: 79
# of Sales: 12

Solds In Beaver Creek Subdivision from 01/01/2008 to 02/25/2009 reveals:
Average Sales Price: $294,422
Average Sold Price Per Sq. Ft.: $128.82
Median Sold Price: $299,000
Low Sales Price: $237,500
High Sales Price: $341,900
Average # of Days On Market: 162
# of Sales: 9

Therefore, based on the median sale price barometer (the barometer used by the NAR National Association of Realtors) within Beaver Creek On The Plains Subdivision, the market direction appears to be increasing. The Average Sales Price has declined -$10,981 or -3.6%., indicating a new trend of scaling down from buying the larger homes to the smaller homes, from more expensive homes down to the less
expensive homes. Median Sales Price has increased +$22,112 or +8%. Average Sold Price Per Sq. Ft. has increased +$1.80/sf or +1.39%. Overall, this market appears to be stable. HOWEVER, the two (2) 2009 sales in Beaver Creek averaged $117.47/sf, $286,250, $286,250 median sales price and were on the market for an average of 365 days, 285 DOM and 445 DOM. So, the 2009 market is reflecting a slowdown, higher DOM and less per sq. ft.. A declining market is defined as, "A stage of diminishing demand in a market area's life cycle." There is certainly less demand for homes in this price range and less homes selling in this price range. Therefore, while property values appear to be stable, there is an oversupply of competing housing and marketing time periods over 6 months - subject's marketing time period was 209 days.

Beaver Creek Data Is Provided With The Permission Of The Greater Baton Rouge Board of Realtors.