FDIC is going after Appraisal Management Coupanies for Appraisal Deficiencies - mostly work from the height of the market.

List of some problems found:

1) inadequate analysis of a purchase contract, or failure to report prior listings.

2) Failure to report prior sales within 3-year of the subject property

3) use of improper comps or avoiding better comps

4) applying improper or inconsistent adjustments to comparables

5) omits or misrepresnets significant physical or locational characteristics of the propety

6) Appraiser reported "stable" prices when prices were declining.

75% of the appraisals reviewed - provided - were found to contain multiple egregious violations of USPAP and applicable industry standards.  I recognized a few appraiser names on the list - and one property was in my town.

Our Friends at Fannie and Freddie, have decided to change the way appraisers describe the quality and condition of homes we appraise and the comparables we use. 

Since I started appraising in 1977 - we described properties as being: Good, Average, Fair or Poor - sometimes adding "very good" or "excellent" or fudging with "low-average" or "average-" - knowing if you determined the condition or quality of the home as fair or poor - you probably killed the deal.  So many appraisers pre-set "average" in their appraisals for the subject & comps. Which I will admit is a problem.

On 9/1/2011 and beyond we will need to define condition on a C1 - to - C6 scale and quality on a Q1 to Q6 scale.  1 is considered the best - for condition a new or unlived in dwelling.  A C6 condition is a property with substantial damage or defered maintenance. 

For views we will need to use the following codes: A, B or N -- what do they mean: A = adverse (hurts value or marketability); B = Beneficial (that's good) and N = Neutral.  and if it is a view lot - how about B;MTn;Wtr -- what?  that is a beneficial view of mountains and water - not just for the subject, but also the comps get these codes and abbrevations.  Are you confused yet? 

Now if you have 2 and 1/2 baths the correct way to show the count will be 2.1 and if the house has 2 1/2 baths = 2.2 

For Kitchens and baths we will need to report if they have been "updated" "not updated" or "remodeled" and if the work was done in less than 1-year; 1-5 years, 6-10 years, 11-15 years ago or unknown.  An updated bath might have a new toilet, and remodeled bath an all new shower. 

We will need the have a cheat sheet to fill out our appraisals (no pre-set - boiler plate will do), and provide definations for all the abbreviations.  And will be clients be confused - yes, Sir! 

This all is going to add to the write up time of appraisals, coming in on the heels of a majority of our work coming from low paying AMCs who want the appraisals back in 2-days time. 

I understand the need for more specific information and by using numbers and not wiggle words like "average" will help in underwritting loans, but it will be a tough transition. 

Appraisers are already upset with the reasonable and customary fee requirements that started April 1 - as the AMCs think they can continue paying 40% of the appraisal fee to their appraisers - and not bump up to what we were paid before HVCC.  And there is still anger about the time needed to do the 1004MC report. 

We have already lost about 1/3 of appraisers in California - who is going to do the valuation work.  Yes, there are BPOs - but they are paying too low for an agent who has enough real work.  And the AVMs never did address quality and condition - just did some kind of averaging. 

Beverly A. Bayer, SRA

Temecula - Murrieta, CA * Real Estate Market Conditions: February 2011

Sales for Temecula and Murrieta - between January 14 to February 14 for the years 2010 and 2011.  Except for the Standard Sales the median prices per square foot are up in both Cities.  Data shows homes in Temecula sell for more, Standard sales pull the highest prices. 

Temcula (standard sale prices per square foot)   2010 @ $163 vs.  2011@ $138

Temecula (REO)  2010 @ $113.50 vs. 2011 @ $115

Temecula (short sale) 2010 @ $123 vs. 2011 @ $124

Murrieta (standard sales)  2010 @ $111 vs. 2011 @ $112

Murrieta (REO)   2010 @ $104 vs. 2011 @ $106

Murrieta (short sale)  2010 @ $94 vs. 2011 @ $95

 Based on the same 1-month period (as above) for 2010 and 2011 - there was a decline in the number of homes sold:

Temecula        139 in 2010     119 in 2011

Murrieta         170 in 2010     141 in 2011

Year over year shows prices up, however comparing the most recent 3-month period vs. the prior 3-month period. 

Temecula saw home prices on average go down: $45 per day

Murrieta saw home prices on average go down: $87 per day

Average difference in prices for the difference in square footages

Temecula for the current 3-month time period  $70         per square foot

Temecula for the prior 3-month time period       $78         per square foot

Murrieta for the current 3-month time period    $59         per square foot

Murrieta for the prior 3-month time period         $72         per square foot

Based on pending sales in 1-month vs. the current number of homes listed for sale - the months of inventory is:

Temecula            3.7 months                         vs.          2 months on 2/25/2010

Murrieta              4.6 months                         vs.          2.3 months on 2/25/2010

Appraiser Adjustment Matrix

Area                                      Murrieta                                 Date 1/5/2011

Data used is median sales prices in the area - for either current to 3-months or 4-6 months; by house square footage ranges.  In the gray boxes in the difference between the 2 median prices per the adjacent ranges.  Data indicates the current 3-month period found homes sold on average $62 difference per square foot (in the prior 3-month period the difference was: $70 per square foot). Between the median prices for the most recent 3-month period vs. the prior 3-month period median home prices went down on average $58 per day.

Data below finds most of the current listings in Murrieta are short sales, while most of the sales are REOs (for the current 1-month period and the same time frame from 1-year ago).  There has been a slight drop in the number of homes sold (188 in the current period vs. 194 in the same time period from 1-year ago).  The standard sales continue to pull the highest prices per square foot, while the REOs sell the fastest.  Note the average days on the market is growing, with the short sales taking the longest time to sell.

Not only are fewer homes selling and prices declining - I am also seeing the months of inventory grow (based on the current number of listings vs. 1-month of pending sales) - which is most recently at 5+ months, while just back to April 29, 2010 the months of inventory was at 2 and 1/2 months. 

Often in prior years the number of homes listed for sale drops between Thanksgiving and the early part of the next year (I believe because occupants don't want potential home buyers coming into their homes during holidays).  And as the new year comes along - new and older home sellers put their properties back on the market -- growing the inventory.  Unless, buyers come back soon - 2011 will not get off to a good start.  Prices might continue to drop as the inventory grows.  And if interest rates go up, lenders remain cautious, and heaven forbid they try to take away the mortgage interest IRS deduction -- things could be very bad. 

Appraiser Adjustment Matrix

Area  Temecula                                        Date 1/5/2011

Data used is median sales prices in the area - for either current to 3-months or 4-6 months; by house square footage ranges.  In the gray boxes in the difference between the 2 median prices per the adjacent ranges.  Data indicates the difference in prices per square foot on average in the most recent 3-month period was $77 ($81 per square foot in the prior 3-month period).  Prices have also declined at an average rate of $17.50 per day.    Data below finds about the same number of homes in Temecula sold in the most recent 30-day period vs. the same time frame from 1-year ago; but the largest percentage recently was standard sales, while most of the current listings are short sales - which take the longest to sell.

Appraiser Adjustment Matrix

Area              Hemet - San Jacinto                                    Date 12/15/2010

Data used is median sales prices in the area - for either current to 3-months or 4-6 months; by house square footage ranges.  In the gray boxes in the difference between the 2 median prices per the adjacent ranges.  The difference in median sale prices per square foot was $46 in the most recent 3-month period ($48 in the prior 3-month period).  Prices for the current 3-months vs. the prior 3-months finds prices on average going down $5 per day (or about: $150 per month).    The number of single family homes sold in the past month was 200 this year vs. 251 last year.  Most of the homes sold this year and last were REOs, The standard sales pull the highest prices, the REOs sell the fastest and the short sales are most of the current listings and take the longest to sell.  Listings vs. 1-month of pending sales found we now have a standing inventory of 4.5 months - and this has been increasing over time.

Appraiser Adjustment Matrix

Area              Perris - Nuevo                             Date 12/14/2010

Data indicates the difference in price per square foot was $44 for the 3 most current months (and $42 per square foot for the 3-month prior period) - this is a market driven amount - or an adjustment an appraiser should be using.  Homes are losing value at the current rate of $15 per day (between the most recent 3-months vs. the prior 3-month period). 

Next we see there are 507 single family homes currently listed for sale (with 111 pending sales and 110 closed sales in 1-month): most of the listings are short sales, most of the pending and closed sales are the REOs.  Year-over-year there has been a significant drop in the number of homes sold (110 in 2010 vs. 188 in the same 1-month period in 2009), but prices have move up (year-over-year) but not 3-months vs. 3-months.  The standard sales pull the highest prices per square foot and the short sales take the longest time to sell.

Based on 1-month of pending sales and current number of MLS single family home listings - there is now 4.6 months of standing inventory.  About 1-year ago there was about 2.4 months of inventory.  About 1-year ago (1/13/2009) prices per a Matrix at that time indicated home prices were moving up at a daily rate of: $67 - now they are going down at a daily rate of $15. 

Appraiser Adjustment Matrix

Area              Riverside                               Date 11/24/2010

Data used is median sales prices in the area - for either current to 3-months or 4-6 months; by house square footage ranges.  In the gray boxes in the difference between the 2 median prices per the adjacent ranges.  Data indicates the difference in price per square foot difference was: $100 in the most recent 3-month period ($94 in the prior 3-month period) - this would be a drive derived adjustment per square foot.  Data shows median prices dropped an average of %53 per day between the prior 3-month period to the most recent 3-month period (that would be a loss of value of almost $1600 per month).  Data below show the drop in 1-month of sales in 2009 (@ 381) vs. 2010 (@ 314) in the same time period.  In 2010 about 1/3 of the sales were Standard sales, REO sales and short sales - in 2009 52% of the sales were REOs.

Appraiser Adjustment Matrix

Area                          Moreno Valley                           Date 11/23/2010

Data used is median sales prices in the area - for either current to 3-months or 4-6 months; by house square footage ranges.  In the gray boxes in the difference between the 2 median prices per the adjacent ranges.  Data results: the difference in the most recent 3-month period per square foot was $66 (for the prior 3-month period $62 per square foot (= market derived square footage adjustment).  And the data is showing homes are losing value between the 2 time periods at the rate of $13 per day (= a loss of almost $400 per month).  Next chart shows the decline in the most recent 1-month period in the number of homes sold in 2009 (351) vs. 2010 (229) in Moreno Valley.  Most of the current listings (50%) are short sales; last year in the same time period most of the sales were REOs - this year most sales are short sales.  Short sales take the longest to sell, and the standard sales pull the highest prices.  Prices year-over-year have increased; but the most recent data shows prices declining.  Other research (listings vs. pending sales) finds we are approaching 5 months of standing inventory - about 1-year ago (12.7.2009) we had 2 months of inventory.

Appraiser Adjustment Matrix

Area              Murrieta, CA                                  Date 11/23/2010

Data used is median sales prices in the area - for either current to 3-months or 4-6 months; by house square footage ranges.  In the gray boxes in the difference between the 2 median prices per the adjacent ranges.  Data shows the difference in prices per square foot in the most recent 3-month period in Murrieta was $70 (that is a market derived adjustment per square foot).  Between the 2... 3-month periods the median prices went down on average $14 per day (that is a loss of over $400 per month).    

Chart above show the decline in the number of homes sold in a 1-month period in 2009 (236) vs. 2010 (147) that is a decline of almost 38%.  Most sales last year were REOs - this year most sales are standard sales.  Most of the current listings are short sales, with the short sales taking the longest to sale.  Additional research between listings and 1-month of pending sales were now have about 4.5 months of standing inventory; there was about 2.5 months of inventory at the end of April 2010.  So we have dropping prices, increasing inventory and fewer sales.