I recently did an appraisal of a house in northeast Vancouver.  The house is 3-4 years old, about 2,500 square feet of living area on a typical suburban home site.

When the appraisal was done the lender asked how the value could have dropped so much since an appraisal done last September.

In the first place, one appraisal is not the basis to judge another.  I’m not going to explain that.  If you don’t believe it, do some research.

Please examine the following graph.

The data represented is all from MLS area 21.  The search parameters were houses built from 1996 to 2008; houses of 2,100 to 2,800 square feet of living area.

The average sales price in the first quarter of 2008 was $282,239.  In the second quarter it was $275,363.  In the third quarter it was $257,947.  And, in the last three months it was $225,675.

The market has been declining.  It is no secret.  In the first quarter this particular market segment dropped 2.4%.  In the next quarter it dropped 6.3%.  In the next quarter it dropped 12.5%.  Today, the average list price for this product type in this location is $268,238.  And, the average marketing time has risen over the year.

The good news may be that the market is now busy.  Lots of sales and refinances are taking place.  As the bank owned properties get sold to private owners the value of residential real estate will have a chance to rise again.  But right now, the market is flooded with bank owned property and the sales of these houses are bringing the current market value of most all houses down.

Ralph K. Olsen

Pacific West Appraisal Services, Inc.

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The statistics are in for the last quarter of 2008.  In this post we will look at the last four years and see what they show us.

Below is a graph of the last four years.  You can see that 2008 continued to have large swings up and down.  The three hundred mark continued to be approached and even surpassed, but not sustained.

Following is a graph is the average monthly number of notice of trustee sales for each year, 2005, 2006, 2007,  and 2008.  As you can see, the statistics were reasonably stable in 2005 and 2006, hovering around 70 to 75 per month.

Then, in 2007 they doubled.  And, in 2008, they doubled again.

The business activity in this office was at a near stand still for the entire fall quarter of 2008.  Then, just at the end of December, activity welled up.  There is now a great deal of activity in both the sales and refinance categories.  Hopefully the money you and I lent the banks via the Federal Treasury Department is flowing through the system and fanning the flames of business and personal desires.  Interest rates are very low, but that would not make a difference if there were no money to lend.

Ralph K. Olsen, IFA

Pacific West Appraisal Services, Inc.

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People in a position to know suggest that somewhere between 20% and 40% of all residential appraisals are done fraudulently.  The state regulatory offices have little staff and time to peruse those who ignore the law and submit fraudulent reports.  The state offices do follow up on some, but can’t follow up on all bad reports and bad appraisers.

Last week I was asked by a local lender to look at an appraisal report from almost a year ago.  They wanted me to tell them if the property was worth what the report said it was then, and if it was they would order an appraisal from me.

There are two problems here:

One is, the lender has asked for an appraisal to be done with no fee paid and without the appraiser having seen the property.  If the pre-appraisal results in a high enough value conclusion, the lender will officially order an appraisal from the appraiser and pay them for doing it.  If you were the appraiser what would you do????  Both state and federal law make this illegal.  However, many appraisers will do it to get the business from the lender.  And, the appraiser wont’ get the business unless the appraiser comes up with a high enough value.  Now you tell me.  Could this lead to fraud????

Secondly, when I looked at the appraisal from a year ago that the lender supplied, I could see instantly that the appraiser had produced a fraudulent report.  And now, the lender was asking me to produce an appraisal the would meet or surpass the value conclusion of that earlier report.  I told them I would not do it.  They called again and asked me to do it.  I said no again.  They found someone else to do the task.

All this leads adds to support of the opening statement of this post.  That is, that a large percentage of residential appraisals are done fraudulently.

If you have gotten into a situation in this current economy where you’re having problems with your mortgage, the appraisal might be worth looking at.  If the appraisal was fraudulent you could persue the appraiser legally to recover some of your losses.

Good luck.

Ralph Olsen, IFA

Pacific West Appraisal Services, Inc.

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 Burlwood Estates, Vancouver, Washington

The houses began to be built in this subdivision on January 2, 2008.  The subdivision consists of 21 lots.  At the beginning of the year six houses were started.  Later two more were built.

It seemed a tough year to begin such a construction project.  There was lots of new product in existence near by.  With the economy cooling so drastically, how could they sell these houses?

Of the first six houses built only two sold in the fist half of the year.  While the remaining four sat on the market three more began construction.  Seemed like a bold move as the economy got worse.

As of this date eight of the nine houses built have sold and the remaining one is pending.  And, to make the story even better, there were no sales concessions (according to the Realtor).  Four of the houses sold conventional and the other five FHA.  Points paid by the seller were added on to the purchase price, so the net to the seller was the asking price (on the FHA deals).  Pretty good in this economic environment.

The Realtor suggested that what is stopping them from building more at this time is the scarcity of construction financing.

This mix of one and two story houses sold on average for $262,954 or $132 per square foot (land and building).  The average days on the market were 76 and the sales to list price ratio averaged 98.86%.

Not bad.

Ralph Olsen, IFA

Pacific West Appraisal Services, Inc.

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