I joined the Appraiser’s Coalition of Washington (ACOW).
They need the support of all the real estate appraisers in Washington.
You can see their website at http://www.acow-wa.org/
“The Appraisers’ Coalition of Washington (ACOW) is a Washington non-profit corporation organized by the Washington chapters of all appraisal organizations that are member organizations of the Appraisal Foundation Advisory Council.”
If you support the integrity of the real estate appraisal profession and are committed to its health and vitality, please review their website, then join.
It is time for residential appraisers to group together and hold their professional ground.
Since the early 1990’s the residential appraisal community has fragmented and become less professional than it was. During the ramp up of the residential mortgage boom that created the big bubble that burst in 2007, more and more lenders manipulated more and more appraisers. The result was inflated appraisal reports that left homeowners and securities investors vulnerable. It even drove some of them out of existence.
We all know what happened.
Up until the beginning of the 1990’s lenders looked to the professional appraisal organizations to provided training and education for appraisers. Lenders commonly chose appraisers that were members of the American Institute of Real Estate Appraisers (now the Appraisal Institute), the Society of Real Estate Appraisers (now merged with the Appraisal Institute), and the National Association of Independent Fee Appraisers.
The Federal Financial Institutions Reform Recovery and Enforcement Act of 1989 caused a change. Preference for appraisers that had credentials from professional organizations was discouraged. (A big mistake, I say.) New appraisal education companies arose, that offered lower quality education than did the professional organizations. The standard of education and ethics diminished over the last twenty years.
The advent of appraisal management companies (AMC’s) was part of the problem. Many of them looked for the newest, least educated and least successful of appraisers to add to their approved lists. With these lesser skilled and trained appraisers the AMC’s (and mortgage brokers and mortgage bankers) had a better opportunity to manipulate the results of appraisal reports.
It became common place for the loan originator, or AMC to tell the appraiser that the appraiser would get lots of work to do if the appraiser just provided a report with a value conclusion that the lender wanted to see, no matter what it took. And, a very large percentage of the residential appraisal community did just that.
I called all the lenders listed under the heading “Mortgages” in the 2008 - 2009 Yellow Book of Clark County Washington. There were 131 entities listed. Fifty five of them were no longer in business.
I followed up by talking to some of those still in business. I asked them some questions about what it is like dealing with the new appraisal guidelines for ordering appraisals. The responses were varied.
The last question I asked was “Do you give preference to appraisers who have designations from professional appraisal organizations?” I got three answers. One was, “What’ that?” Another was, “No.” The last was, “No, but I think we ought to.”
I see the last answer as an open door for the Appraisal Institute (AI) and the National Association of Independent Fee Appraisers (NAIFA) to make known to the lenders what is required for an appraiser to become an SRA (Senior Residential Appraiser), awarded by the Appraisal Institute; or an IFA (Independent Fee Appraiser), awarded by the NAIFA.
These two credentials, SRA and IFA, are equivalent to a Masters Degree in residential real estate economics. I have both designations and can attest to their credibility.
Most residential appraisers do not even associate with a professional appraisal organization, let alone do what is required to get the professional designation, SRA or IFA. I say that this fact is caused by two things. One, the professional organizations have been very lax in promoting the value of appraisers so highly trained. And, that the loan originators and AMC’s, by and large, have been bottom fishers, looking for the least amongst us to do their bidding.
It is time for the TRULY PROFESSIONAL APPRAISER TO TAKE BACK SOME TERRITORY. We SRA’s and IFA’s are the best of the best. There are lots of statistics that support this claim.
If you are a loan originator or AMC reading this, please respond and tell us all if you agree or disagree with my assertions.
In the east Hazel Dell area there is a condominium named Hidden Abodes. A look at its performance since coming on line in 2005 depicts the current state of the market.
Hidden Abodes was completed in 2005 and began selling. There are a total of 18 units in the development. All sold in 2005 except for one unit, which has never sold.
In 2005 the seventeen units that did sell were on the market for an average of 68 days and sold for an average of $135 per square foot. That equates to an average sales price of $164,606. The average size of these two story units is 1,221 square feet.
After having mostly sold out, there was one sale in 2006 for $192,500. That is a rate per square foot of $143. The market was still rising.
In 2007 there were three sales that averaged $162,933, or $137 per square foot. The market had gone past it’s peak.
In 2008 there has been one sale for $142,000. The rate per square foot was $120.
From 2005 to 2006 the market for these properties appeared to have jumped almost 17%. From 2006 to 2007 it appears to have declined about 15.3%. Then, from 2007 to 2008 it declined another 13%.
There is not enough data from the sales in this project to be statistically definitive, but they do track with the rest of the market pretty well.
Currently there are two listings in the development. They average $122,100. That is $103 per square foot.
The FHA was established in the 1930’s to insure residential real estate loans. It was designed to assist people (mostly first time home buyers) to get financing they otherwise might not afford. Only 3% down payment was required to qualify and gifts and grants can be used for down payments and closing costs. In their 70 years of business they have made over 34 million loans.
The FHA had a pretty stable percentage of the market for decades. Then, in the early and middle 2000’s the new ‘”creative” loan types came available that required nothing down. During that time frame the FHA insured few loans.
Now the FHA is on the rise. It is one of the most attractive loan programs available today. Also, the FHA lending criteria have been made more progressive to appeal to a larger segment of the market. The maximum loan value has been increased to $418,750. This, compared to the average home price of around $349,000 (RMLS stats.) is above average. The FHA, in decades past, had a loan ceiling that was below the average home sale price. So, they are reaching out to a larger segment of the market.
I did an appraisal several days ago. There were plenty of recent, conventionally financed sales in the area that were very similar to the subject. There were also REO sales (bank foreclosures) and some creatively financed and traded houses. The appraisal was pretty easy, but the market is a bit dicey.
I went to a neighborhood that is about five years old several days ago. There are about 150 houses in the sub division. As I looked for sales data I found that there haven’t been a sale in that development in the last six months that was not a foreclosure, and there were a number of foreclosure sales. There were no cash, conventionally financed or even creatively financed sales to be found.
It is difficult these days to read the data. It is very mixed. Some neighborhoods are doing pretty well. Others are not doing well at all. It will be interesting to look at the NTS statistics at the end of this month.
The Hillhurst subdivision in Ridgefield, Washington was placed in the county records in November 2003. There are 117 platted lots, including some with older houses on them. Roughly 24 of the lots, or 21% of the development appears to have been existing housing (according to on line county records). I was not able to tell from the county records how many of the lots have been built on. However, the MLS reports that since 01/01/2004 there have been 32 sales of new houses.
I went into the development yesterday to look at a house in foreclosure. I saw lots of for sale signs along the street. The MLS shows 19 active listings in the subdivision with an additional three pending sales.
Of the 19 listings there were nine noted in the listings or county records as being foreclosures or bank owned. There were five notations of “price reductions.”
Hillhurst has a lot of product on the market with little demand at this time.
Several days ago I did an appraisal of a house in the Woodlawn district of northeast Portland. It is a house that is about five years old amongst a lot of houses that are 50 to 100 years old. There are many of these newer infill houses in that part of town. (Appraisal Portland, OR)
The owner of this house paid $259,000 in the fall of 2006. I completed the appraisal and concluded the current value is $225,000. The average days on market for houses like this one, in that area of town was 85. Not bad. The high days on market for that data search was 230.
There is a lot of mixed indicators out there. However, several recent experiences are suggesting some market areas are falling back, even if the larger district shows positive statistics. We will keep watching.
Area 41 of the MLS is from Vancouver Lake to I-5 and from 78th Street to 119th Street. Much of the housing stock in this area was built in the range of 1960 to 1985 on single family lots ranging from 3,000 to 10,000 square feet in area. I chose this range of detached single family houses because in this geographic area there is pretty good uniformity in the houses. I looked at the statistics from the MLS for half year intervals starting in January of 2006 and ending with current listings. (Felida to Lake Shore Graph)
As you can see the blue line is sales prices and the red line is days on the market. After rising in the fist half of 2007, riding the market momentum, average prices dropped significantly (almost 7%). In that same time frame the average days on market statistics rose 20% from 45 days to 54 days. Still, this exposure time is not long and considered healthy. In the second half of 2007 the average days on market rose just over 7%, not a lot. But, look at the currently listed properties. They are not yet sold and have been on the market for an average of 92 days. This is still not an awfully long time. Marketing times of 90 days or less are considered generally healthy. But, by comparison, this 92 days is an increase of over 58%. Of course, as the marketing time continues to increase there will be downward pressure on prices. Unless the days on the market shorten up we can expect prices to fall. The recent list price to sales price ratio has been about 98%. Applying that to the average list price suggests an average sales price of the listing of about $235,000. If that ends up being so, the averaged trend line for sales prices over the last two years for this product category will have been quite flat. Not bad in the face of the recent changes in the national residential real estate market.
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?”
