Archive for August, 2014

What home buyers and sellers should know about appraisals

August 29th, 2014


Original Posted on LA Times:,

AUGUST 24, 2014, 5:00 AM

family-homeWhen it comes to real estate, the appraisal is the linchpin around which all else
revolves. Both buyers and sellers are in a holding pattern until the appraiser arrives
at the property, looks it over and comes back with a figure for what he thinks the
place is worth.

Such is the case whether the property in question is a single-family house in the suburbs or a $200-million office tower in the city.

“Nothing happens in real estate until the appraisal report is signed and an opinion of the property’s value is provided,” says Brian Coester, an appraiser who presides over his own appraisal management company.

With that in mind, here are some things you should know:

•There is a major disconnect within the lending business. Some lenders — and real estate agents — think the appraiser’s job is to get the deal done, whereas appraisers generally think of lenders as money-hungry outfits that don’t understand the appraisal profession.
According to Coester, chief executive of Coester VMS in Rockville, Md., the appraiser’s job is to be unbiased and completely independent of the transaction, while at the same time being realistic and practical.

•The appraiser’s valuation is his or her opinion — repeat, opinion — of what the property is worth.It doesn’t matter what the buyer is willing to pay or what the seller is willing to accept.

“Two appraisers could do an appraisal on the same day, on the same house, come up with two different values and have them both be right,” Coester says. “The reality is that value is really the appraiser’s opinion, not an average, not a range, but a number the appraiser picks by looking at the data, understanding the market and all factors considered.”

If the appraisal comes in too low for the lender to accept the buyer’s application for a mortgage, the seller will have to lower the price or the buyer will have to come up with more cash to make the deal work.

Yet the appraiser’s valuation does not have to be the final word. Most appraisal companies offer a step-by-step procedure to follow if anyone involved in the deal thinks the valuation is off-base.

•The information available determines much of the results. Appraisers are only as good as the data available to them.

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10 Things every Lender should know about the Appraisal Industry

August 5th, 2014

property-valueAlbert Einstein once said, “Nothing happens until something moves.” Well, in the real estate industry you could say, “Nothing happens until an appraisal is done”. With most real estate transactions today, all parties involved are in a holding pattern until an appraiser looks at the property and puts a number on what they think it’s worth. This holding pattern stands true whether it’s a first time homeowner buying a single family home in the suburbs, Donald Trump wanting to build a 200 million dollar skyscraper in the city, or anyone in between. Nothing happens in real estate until the appraisal report is signed and an opinion of the property’s value is provided.

With that level of responsibility you would assume the appraisal industry would have an excellent relationship with the lending community; however, anyone working in the industry knows that appraisers are often seen as a necessary evil by most lenders. In turn, most appraisers believe lenders to be money-hungry deal makers that don’t understand an appraiser’s profession or the independence required to act prudently. The disconnects don’t stop there, as even from within the lending community you have a variety of opinions on the appraiser’s job within the transaction. Some lenders are under the impression that an appraiser’s job is “to get the deal done”, and, on the reverse, I’ve been told by some lenders that “they want an appraiser that everyone in production hates” as their job is to prevent risky situations. I personally lean towards the middle of the road, as an appraiser’s job is to be unbiased and completely independent of the transaction but simultaneously realistic and practical.

This post is designed to help mortgage lenders understand what appraisers go through and what they wish you knew about the industry.

What Every Appraiser Wishes Lenders Knew – Residential Edition

  1. The appraisal never goes away – Similar to the way a lender gets a repurchase request years later, once an appraisal is signed and delivered it never goes away and there’s no safe harbor. I haven’t personally done an appraisal in years, and I still get requests from time to time on appraisals that I did years ago asking for clarification. Unlike a repurchase request – which lenders get for deficiencies on loan and can be resolved with money – one bad appraisal can get an appraiser blacklisted for life. The worst part is most of the time it simply comes down to a difference of opinion, and the appraiser may never get a chance to defend their work. Appraisers are keenly aware that the appraisals they complete never go away and consider this when making their decision on a particular property.
  2. Appraising is a full-time profession – An average realtor will close 1-2 deals a year, an average appraiser will do 1-2 appraisals per day. Most appraisers have been in the business for 20+ years and want to stay in it for a very long time. They are trained to be very careful when it comes to what they will and won’t do when it comes to value, property condition, and selection of comparables. One deal or favor is very often one too much. What most Realtors don’t understand is that an appraiser’s job is to be completely unbiased about the transaction. Appraisers want to dig up everything they can on a property – both good and bad) – so that the lender (client) can make an intelligent decision about the property. The appraiser doesn’t approve or disapprove the loan but rather reports what they find.

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How Green Will Impact Housing over the next 20 years

August 5th, 2014

Green energyIt’s going to happen.Green energy will soon emerge as a viable option for the average consumer, no longer reserved for wealthy ecocentrics, in a variety of applications. But what will happen to housing once the green revolution starts?

Will it alter fundamental consumer perceptions of the product as experienced with the advent of the digital music industry?

Will it drastically change lifestyles similar to widespread access to home computing?

And how will regulators and investors react?

Until very recently the typical homeowner didn’t have access to innovative housing technology with most residential homes built to standards not vastly different than post WWII standards. Due to this fact, there exists over 60 years of technological development that most of today’s consumers haven’t experienced, nor completely understand. This is somewhat understandable, as the cost of these improvements were out of reach and typically beyond the traditional needs of a homebuyer, who was more interested in just having their own home rather than the latest and greatest in home technology and energy efficiency.

The advantage to missing the last 60 or so years of technological advancements is the consumer will essentially reap the rewards of the expensive trial and error process, conducted by scientific communities and commercial builders, with little to no investment. Based on my research and experience in housing, I’ve prepared the following points to illustrate my predictions for the next 20 years.

Now these changes won’t happen all at once, nor will the proposed period afford enough time to comprehensively implement them across all markets. However the goal is depict what the modern housing era may look like for a typical homeowner, and how “Green”, or more accurately, energy optimization technologies will effect housing and the daily life of people in the world.

1. You will still be hooked to “The Grid” – The traditional power grid is tried and true. It remains the simplest, most inexpensive option for consumers due to the vast network of existing infrastructure with even aesthetic maintenance, such as transferring lines below grade, becoming less costly than in the past. Despite advances in the efficiency and storage capacity of energy optimization technologies, most consumers pursuing alternative energy sources will likely maintain a connection with the grid to serve as a backup in the event of inclement weather, or even just an extended overcast period, which limit the ability of solar options. With this in mind, the grid itself is in the early stages of “Going Green” as well. Energy conglomerates, with the encouragement of government agencies at all levels, have begun researching and supplanting traditional power sources like coal with wind, solar and geothermal methods.

Transforming the grid will prove a lengthy political and economic battle, above all else. Conventional energy is big business and its proponents maintain the resources to significantly affect public opinion and lobbying efforts. These organizations will need time to adapt, and their employees will require assurance that Green Technology can provide equitable career opportunities. The grid isn’t going anywhere soon, but those who diversify their energy portfolio early will likely benefit most long term

2. Solar will become the primary energy source – If 15% of the sun’s energy was captured and stored for one day it would be enough potential energy to power the United States for an entire year. The reality is that even with all the other sources available, with products and programs popping up regularly for biofuel, wind and “Micro Hydro, Solar holds a significant advantage in potential output, as well as progress in research and implementation. As battery life, the primary limiting factor in solar application today, expands in capacity envision a typical residential home with a solar paneled roof linked to a large battery pack in the home to store this energy. As mentioned, many will maintain connections to reserve resources, such as the traditional power grid, but frequency of use will decline with advances in power storage.

3. Your home will be “smart” – The inefficiencies in most homes today are really astounding. Hot water heaters, lighting, and centralized HVAC systems waste a majority of the energy supplied due to antiquated technology. When I say homes will be smart, I really mean optimized, cognizant of their own efficiency in the context of internal functions and external inputs (misuse). Timers and motion sensors for electrical outlets are becoming increasingly common.. Research into 4D printing technology suggests building materials may soon have the ability to adapt to environmental conditions to maintain consistent internal temperatures without drastic energy spikes. Each of these developments indicates new homes will soon possess centralized “nerve centers” to analyze every system in the to make notify consumers of high consumption and eventually aggregate enough data to adjust settings without manual input.

4. Your toilet will flush but in a different way – Improper waste disposal, due to inefficient or outdated sewers systems, remains the primary means for the spread of infectious disease worldwide. Perpetuation of illness significantly affects energy efficiency both in direct and unintended fashions. Additionally, superfluous water consumption, and the subsequent shortages in certain regions, has been a point of emphasis for environmental observers over the past 50 years. Many predict fresh water to commoditize greatly in the near future, potentially resulting in global conflict. Flash sanitization, the incineration of human waste, and composting offer two notable remedies to these concerns. Both solutions provide sanitary, waterless options, while the latter may also afford a supplemental energy source. Many waterless technologies await widespread adoption, but it’s difficult to ignore the potential benefits for long, and governments in high risk areas like California have already imposed stricter consumption guidelines.

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