An open letter to Landsafe Real Estate Closing Services
To the leadership and staff of Landsafe I am offering “congratulations for a job well done.”
The leadership of Landsafe has assembled a great, well trained, courteous and effective staff that gets the job done well.  I have worked for several years for Landsafe, and the experience has been great.
Landsafe has an excellent appraisal assignment system.  It is fair, objective and very easy to interact with.  It is the best in the United States.  Every part of it offers the appraiser an easy opportunity to communicate and follow up on assignments.
The on line review system works excellently.  The basics of the appraisal process are covered very well by this review process.  As an appraiser I always know what is needed of me.  The system lets me know if I have missed anything.  Upon further review, if necessary, the well trained and objective reviewers at Landsafe will give me a call.  I can say that I look forward to their calls.  Those calls are few, but when they come they arrive with courtesy, understanding and  knowledge of the business.  The reviewers are bright, straight forward and understand the nature of real estate appraisal, what’s possible and what is not.
Landsafe, as an organization, has never “twisted my arm.”  Everyone at Landsafe “asks” what questions they have and never tells me what it is that I must do.  I feel very respected by them.  I dare to say that all the appraisals provided by Landsafe to its customers are done without coercion or bias from Landsafe.
I have worked for Landsafe for several years.  It has been a very good working relationship.  I have worked for six other organizations that are competitors of Landsafe.  I will not name them, but I will say that none of them have the objectivity or respect that Landsafe maintains in relationship with appraisers.  (At least, not from my point of view.)
So, my hats off to Landsafe.  You always do what you say you’ll do; don’t do what you say you won’t do, and pay on time.  What more could an appraiser ask for??

P.S.
Due to the objectivity of the Landsafe system I will get no reward for saying these things.  And, that is as it should be.

Ralph Olsen, Appraiser

Pacific West Appraisal Services, Inc.

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I got a phone message from a loan officer at ‘Great Big National Lender’ yesterday, a very familiar company you’d all know the name of.  The loan officer wanted me to “check the value” on a property and if it did not reach a certain level they would not initiate a loan.

For those of you that don’t know it, it is illegal to do such a thing.  In the first place, I don’t know any more about the property than the loan officer does at this point.  In the second place, to do what the loan officer asked IS AN APPRAISAL.  To do such an appraisal legally there must be an auditable file to support the verbal report to the loan officer.  And, thirdly, Fannie Mae frowns on that kind of activity quite harshly.

I called the lender to see what their policy was.  They not only forbid such behavior, they have a team set up nationally to monitor and discourage such activity.

There was a time when such illegal activity was ignored by most lenders.  Some have always supported appraiser independence.  Without appraiser independence from the influence of loan officers the appraisals often become biased to the result the loan officer is looking for regardless of what the actual market value of the property might be.

Ralph K. Olsen,  Appraiser

Pacific  West Appraisal Services, Inc.

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FHA appraisal requests are up significantly this year.

I was a specialist for FHA appraisals before they went to lender selection of appraisers in the early 1990’s.  The FHA had chosen several appraisers locally to watch for indications of fraud in the market; flips and contract fraud, etc.  After lender selection of the appraiser went into affect seems the lenders did not want those appraisers that followed the FHA rules to do their appraisals.  They wanted those appraisers that would respond to the whims of the lender and not adhere to FHA insurance needs.  Then, the FHA got into trouble and the appraisers got blamed.  Probably rightly so.  At least, to blame the appraisers that ignored the FHA concerns about property condition would be justified.  But, those appraisers were chosen by the lenders for the appraiser’s pliability, not their integrity.  Oh, those rascally lenders.   Seems the stories about the lenders mistakes keep coming up, then someone else gets blamed and the lenders get bailed out.  They are all about FREE MARKETS until they stumble and fall.  Then it is “Where’s my government bail out?”    But, I’m whining, aren’t I?

Fannie Mae is now looking at the possibility of black listing lenders who manipulate the appraiser into producing fraudulent appraisals.  The pendulum has swung.  I have been complaining to FNMA since the 1980’s about the lenders black listing appraisers for not committing fraud on the lender’s behalf.  I guess a lonely voice was inadequate to affect the change.  A few hundred billion dollars in losses and loss of market confidence seems to have gotten their attention.

Ralph K. Olsen,  Appraiser

Pacific West Appraisal Services, Inc.

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As you can see from my previous writings I pick topics and write about different micro and macro markets in the Metro area. If you have a topic you would like explored, send it to me. I’ll take a look at it and see what can be developed. I use the MLS data and county records for my analyses. My focus is on Vancouver, WA appraisal topics, but I cover the entire Portland, OR appraisal area. Thanks

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A lot of people invested in the residential real estate market haven’t been in the market for more than a few years.  And, seem to think the  market has always just gone up, and up, and up.  They were still Big Bird and Barney fans in 1979.   However……………………

I was visiting this after noon with a fellow appraiser in the Portland Metropolitan area.  He just completed an appraisal of a house in the southwest suburbs.  Nothing unusual about the house.  Typical for the area.  His analysis based on the most recent sales available (all of them very similar houses on similar sites) produced a value conclusion in the low $300,000’s.  He followed up by putting three listings/pendings in the grid of his report and adjusting them just as he had the sales.  These listings and pendings were, again, very similar to the subject in all aspects.

Each of the sales he used in his analysis were from July, August, September.  They were the most recent available that matched the subject.  The listings and pendings, after adjustments, suggested a market value in the neighborhood of $270,00 to $280,00 or so.

His conclusion was that, for that product, during that time frame, in that market; the market value had dropped 2% per month since September till now.  Interesting!

I don’t see that to be true throughout the metro area.  However, it is an indication of market softness.  The new money being pumped into the system will have some effect.  I still think that by April we will have a clear view of the condition of the local residential real estate market.  As we continue to look at days on market, foreclosures and prices, we’ll be able to see which direction the lines on the graph point.

Ralph Olsen, Appraiser

Pacific West Appraisal Services, Inc.

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Wow!!  Looks like that new money being pumped into the system is having an effect.  New orders for appraisal services to support sales and re-finances are up this month.  I visited last week with a man who is re-financing.  He said he was getting a 4.75% fixed rate on a 15 year loan.  Not bad.

New work is coming from all directions right now.  It will be interesting to track the results of this activity.  I am looking forward to lots of sales activity in this mix of activity.  Right now, when I complete an appraisal, I find that the most useful sales data is often in the June-July-August-September-October range, with little available sales data in the November-December-January time frame.  That was a lean time for sales.

Other than the disaster situations (overextended developers and builders, etc.), residential real estate prices seem to be holding on pretty well.  Yet, marketing time has continued to rise.  I will look at another micro market soon to see what it has to offer for insight into these interesting times.

Ralph Olsen, Appraiser

Pacific West Appraisal Services, Inc

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I recently read about a state where the real estate appraisers are promoting legislation to prevent coercion of appraisers.  What they’d like to see is a law that makes it illegal for anyone to ask an appraiser to produce fraudulent appraisal reports.  It would be illegal to blacklist, bribe, extort, intimidate or refuse to pay an appraiser for not producing the specific appraisal results wanted.

This looks like a good idea.  If those who do these things to get their way with the appraiser’s work have no downside (fines and jail time) to discourage them, the so called “lender pressure” will never end.

Over the years I have gotten to know who the appraisers are that do “custom” work; appraisals that have a value conclusion based on the borrower’s or lender’s desires rather than a U.S.P.A.P. appropriate REPORT of the market value of the property.   I review appraisals for lenders.  Recently I reviewed an appraisal where the appraiser used four listings and one sale, ignoring all the other available sales data, in order to come up with a value conclusion that matched the developers sale price of a multi million dollar residential property.  What’s up with that???  It doesn’t meet the U.S.P.A.P.  It doesn’t meet FNMA guidelines.  It was a total piece of “custom” junk.   I don’t know what the conversation was between the lender and the appraiser, but the appraiser should be spanked good for that one.

I fall into a different category of opinion than those who are working to prevent the non coercion legislation (though it appears a good idea).  I say it is the appraiser who is at fault.  I mean to say, that if I was asked by someone to rob a bank and give them the money, I’d tell them to “buzz off!”  That’s an easy one.  But, if a lender asks me to produce a fraudulent appraisal report so they can close a deal that wouldn’t happen without the fraudulent report, and they offer to give me lots of appraisal assignments if I just “play along,” it is more tempting.  I can up my gross income working with a lender like that.  Really.  I can do great with those people.

I suggest here that most residential real estate appraisers work that way.  They roll over and give the lender any thing they want, as long as the work keeps coming.  And, they know that many state’s licensure and certification offices don’t have enough staff to pursue them if they get challenged for this kind of work.  Law with little or no teeth.

In an ideal world, every appraiser would “just say no” to coercive activities designed to get the appraiser to produce fraudulent appraisals.   If all appraisers said “NO,” the lending industry would have to live with appraisals that REPORT the market’s indication of what the property is worth.  This would leave lenders knowing what their level of risk is on loans they create.  And, it would make their real estate based securities more marketable.  And, the return they would get from the sale of those securities would be maximized due to the “known” risk rather than a great deal of “unknown” risk due to appraisal fraud.

Although an idealist, I do realize that I (and we) do not live in an ideal world.  When money is made available, integrity very often goes out the window.  It is on the news every day.

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The high end condominium market in the northwest quadrant of Portland, Oregon is the most active condominium market in the city. It also has, on average, the most expensive condominiums in Portland.

This quadrant of the downtown area consisted primarily of old, little used multi story industrial warehouse buildings that had fallen into disfavor as the industrial warehousing market moved to the suburbs. The old multi story, elevator served, close in industrial storage and distribution uses faded as the one story, suburban, high square footage, dock high, fork lift served industrial product took over.

In the wake of the warehousing exodus, the northwest downtown quadrant was very under used. Lots of the first floor space in the old warehouse buildings was occupied with the upper levels unused.

Then came the residential renaissance that began in the middle 1980’s. The first “experiment” with “artist loft” housing was in the old McKesson/Robins building between Hoyt and Irving on NW 14th Avenue. This project pioneered the new high rise condo market in NW downtown Portland. With its completion, and eventual sell out in the middle 1980’s the way was paved for other development. Today there are lots of condominium projects in this area. Some are high rise, some mid rise. Some re-used existing buildings. Many are new buildings. During 2007 it was common to see 6 - 12 cranes on the skyline, erecting new buildings.

This is now one of the best accepted areas of town with lots of single family condominium housing, served by lots of shops and restaurants. A true renaissance.

The recent real estate sales activity and price history is presented in the charts and graphs below. The segment studied was that of condominiums with a sale price over $1,500,000.

High End Condominium Sales in NW Portland

As can be seen from the chart, the sales prices have steadily risen. The Days on Market were relatively low, until 2007, when they nearly tripled. And, the current Days on Market for listings is at 281 days. And, these haven’t sold yet.

The following graph paints the picture.

(The Sales Price and Days on Market are Averages)

The graph shows the relationship between sales price and Days on Market. Sales prices had leveled off with a trend for a slow increase. Days on Market were low, then jumped in 2007. The Listing’s Days on Market have risen a lot. As that trend might continue, it would produce a downward pressure on sales prices.

It should also be noted that this High End market does not have a lot of sales activity. The sales activity for each of the time frames examined was: First Half 2006 = two sales; Second Half 2006 = 4 sales; First Half 2007 = seven sales; Second Half 2007 = nine sales. Also, there are now 28 listings in this category. If we look at the Second Half of 2007, with total sales of nine units over $1,500,000, and divide that into the current listings, we derive a suggestion that there is just over a three month supply of this category of housing. Of course, the market is changing speed, and perhaps course. The statistics at the end of the first quarter of 2008 will be very telling of where this market is headed.

Ralph K. Olsen, Appraiser

Pacific West Appraisal Services, Inc.

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The condominium market in Clackamas, Oregon has been showing some interesting changes. A review of all the data in the MLS for that area (zip code 97015) has been included in this analysis. The questions had been asked if property values were going up or down, if supply and demand were in balance and if marketing times were reasonable. Let’s see.

In the six months from December 1st 2006 to June 1st 2006 the average sales price of a condo in Clackamas was $134,887. In the six months from June 1st to December 1st 2007 the average sales price was $140,030. This is a 4% rise in sales price. So, we could say the market is up. However, the market has taken a turn and these statistics are past based. They can not look forward. We must keep in mind that as the market turns an “increase in the rate of decrease” may be occurring that the recent statistics do not show. I say that around April 1st 2008 this analysis might be done again and then we will have a much better reading of the market’s direction. Right now it is pointed downward, but this could be short lived. Also, there is a bell curve of activity over a typical year. It is cold in January and the market activity is lower. It is hot in July and the market activity is up. It is cold in December and market activity is down again. With this standard bell curve of activity in mind, it is understood that this time of the year would show lower activity than the summer. Yet, all signs appear to be down for now.

In the last six months there were 40 sales of condos in Clackamas through MLS listings. That equates to 6.67 sales per month. There are now 70 such listings. That suggests a ten and a half month supply on the market at this time.

And what is happening with marketing time??? Well, it looks like this. In the six months from December 1st 2006 to June 1st 2007 the average marketing time for condominiums in Clackamas was 11 days. Since June 1st 2007 the average marketing time was 36 days. AND, there are now 70 listings. AND, they have been on the market for an average of 129 days. Now that is an upswing!!! Or, should I say, downswing?

(It should be noted that none of the statistics in this analysis have been gleaned to remove anomalies. It is all the raw stuff.)

Ralph Olsen, Appraiser

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The way the law is structured it goes without saying that all that is published here is copyrighted. I have always wanted to begin the closing paragraph of an appraisal with “As any fool can plainly see………” How could anyone contest my conclusion with an intro like that???

Anyway, you have my permission to use anything you find here for you own use. And, if you use what you see here in any kind of publication, like an appraisal report, give credit to pwas.net. That is where you found it. That is its source. And, please hyper link it. Easy.

As time goes by more in depth analysis of local real estate markets will appear here. You are welcome to the info presented and encouraged to let me know what else you’d like to see examined (i.e. different market segments or product types). As our nervous markets continue to shake, rattle and roll there will be lots to talk about.

As a matter of fact, I was visiting a local appraisal office the other day. As you might expect, the topic of the condition of today’s residential real estate market came up. One of the appraisers said she had so little confidence in the market that she would not consider buying a US Treasury Note with a maturity of more than 12 months. Hearing this, another appraiser in the conversation said he had even less confidence than her and would not consider a Treasury Note with a maturity of more than six months. It was then the office manager spoke up and said that both of them had more confidence than she had. And, in fact she wouldn’t buy green bananas!

We all have our own crystal ball. The question is “how clear is it?”

My next posting will be a study of the high end, downtown Vancouver condominium market.

Ralph Olsen, appraiser

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