Cockroaches and Housing Seem To Survive Anything

With this recent Polar Vortex event and how they are becoming more regular and that we should name them like hurricanes…I thought about the “name a star” promotion many year’s ago that would enable a person (not officially) to name a star after a loved one. Now we’ve come full circle in the naming rights department with a new affordable service: You can name a cockroach after your ex in time for Valentine’s Day, and it costs only $2!

From stars: To cockroaches:

What a time we’re living in!

But I digress…and I’m somewhat brief today (too much to talk about in Appraiserville!)

Manhattan Townhouse Annual Numbers

From our research for Douglas Elliman (formal report with a lot of drill-down information will be online soon) which is a ten-year moving window of annual sales activity:

General observations

“Sales and price trends outperformed the apartment market over the decade.”

– Market share of townhouses was 2.2% of all residential sales, consistent with the decade average
– Price trend indicators showed mixed results as sales size expanded
– Inventory fell expanded from year-ago levels while sales declined
– The number of Downtown sales rose sharply, the only region to see an annual gain
– Since the financial crisis, the median price of a townhouse is up more than fifty percent
– Townhouse median sales price rose twice as fast as the co-op/condo market from 2009
– Every region saw a shift towards larger sized sales
– Northern Manhattan prices more than doubled since 2009

Manhattan Apartment (Co-op+Condo) Annual Numbers

From our research for Douglas Elliman (formal report with a lot of drill-down information including neighborhoods will be online soon) which is a ten-year moving window of annual sales activity:

“The decade demonstrated a noticeable shift to more large-sized sales and their higher price levels.”

– While the overall sales volume rose nearly 40% since 2009, the sale of 4+ bedrooms jumped more than 90%
– The overall median sales price has remained remarkably stable for the past four years
– Price trend indicators all declined year over year as the legacy contract pipeline ran out of product in early 2018
– Annual sales saw the largest year over year decline since the financial crisis
– The annual number of sales declined for the fourth time in the last five years
– The largest sales surge occurred in 2010 when sales quickly rebounded from the “bottom” reached in 2009

This Week in Aspirational Pricing: $239,958,219.15

The buzz of last week’s mega-million sale of $238 million still floats through the air of the real estate market but with a clear understanding that the sale represents a simpler time – when homes were worth whatever the seller wanted. In the New York Times real estate section, the precise number filed in public record was $239,958,219.15.

The hard math provided in the subtitle was brutally straightforward: “What’s the difference between a $200 million penthouse and a $100 million penthouse? About $100 million.” The context was provided in a world where little is offered. Even with the context, however, mere mortals will continue to process how hard it is to relate to housing for us mere mortals. It reminded me of my visit in 1970 to Dover Air Force Base in Delaware as a ten-year-old. I still remember that a C5-A transport plane could carry 100 VW Beetles or 58 GM Cadillacs. Perfectly valid comparisons but I couldn’t imagine all those cars in our driveway.

Getting Graphic: New Home Sales By Price

h/t Steven Miller

Love this visualization! Click to expand.


(For earlier appraisal industry commentary, visit my old clunky REIC site.)

Appraisers Sue New Jersey Appraisal Board Saying They Don’t Have To Follow USPAP

Gerald McNamara and Colleen Kudrick were admonished by the board in a five-count takedown. There is a lot of nuances here but the sanctions seemed to be based on the fact that one of the appraisers wasn’t licensed at the time and could not explain how she valued the property. The other who was certified said he did not assist in the preparation but did inspect the property. The client made a complaint and the board investigated.

Seemingly doubling down on damaging their reputations, they filed a lawsuit against the appraisal board and seem to be saying that USPAP is unconstitutional because The Appraisal Foundation is a private organization. This has ramifications for many reasons including:

1. The evidence presented against the two individuals is quite detailed, and if accurate, shows that the appraisers were negligent enough for a financial services firm to complain.
2. It questions appraisal laws on a technicality that USPAP is overseen by a private organization.

The following documents are available in public record and are worth reading:

McNamara v Grewel et als Docket Report 20190118

Doc 1 McNamara v Grewel et als Complaint 20190107

Doc 2 McNamara v Grewel et als Plaintiff Verifications 20190107

Doc 3 McNamara v Grewel et als Summons 20190107

Doc 4 McNamara v Grewel et als Amended Exhibits to Complaint 20190107

Doc 5 McNamara v Grewel et als Notice Rule 5_1_a 20190107

Regulators Misrepresent Appraisers’ Role In Mortgage Process

Peter Gallo shared the North Carolina Real Estate Appraisers Association [NCREAA] comment to the proposed threshold change proposed by federal regulators. You can and SHOULD provide your own comments as well. You can do that here. The regulators describe the rule change like this:

The OCC, Board, and FDIC (collectively, the agencies) are inviting comment on a proposed rule to amend the agencies’ regulations requiring appraisals for certain real estate-related transactions. The proposed rule would increase the threshold level at or below which appraisals would not be required for residential real estate-related transactions from $250,000 to $400,000. Consistent with the requirement for other transactions that fall below applicable thresholds, regulated institutions would be required to obtain an evaluation of the real property collateral that is consistent with safe and sound banking practices. The proposed rule would make conforming changes to add transactions secured by residential property in rural areas that have been exempted from the agencies’ appraisal requirement pursuant to the Economic Growth, Regulatory Relief and Consumer Protection Act to the list of exempt transactions. The proposed rule would require evaluations for these exempt transactions. Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the proposed rule would amend the agencies’ appraisal regulations to require regulated institutions to subject appraisals for federally related transactions to appropriate review for compliance with the Uniform Standards of Professional Appraisal Practice.

Unfortunately, they use the phrase “safe and sound banking practices” but in the weeds, all they care about is eliminating appraisers all together to save the consumer a few hundred dollars. Its lip service since the discussion only concerns the cost and timing of appraisals. Get ready taxpayers. With the rising probability of a recession by 2020, it is a great time to reduce neutral oversight by appraisers and shift to relying on automation. I’m already being told that underwriting systems are already being tweaked to reduce loan kickbacks.

NCREAA Threshold Letter

Only 275 Comments So Far? Please Submit Your Comments to the Threshold Rule!

From the Central Texas AI Chapter:

The Federal bank regulatory agencies have proposed to increase the residential appraisal threshold level from $250,000 to $400,000, exempting nearly three-quarters of residential real estate-related financial transactions from appraisal requirements.

In 2017, the exact same proposal was evaluated and answered as part of the federally mandated EGRPRA (regulatory relief) process – a process that encompassed four different notice and comment periods and six public hearings. From that process, the same agencies decided it “would not be appropriate” to increase the threshold from $250,000 based on safety and soundness and consumer protection considerations.

Now, in an apparent attempt to pacify rural community banks, the agencies will increase the threshold unless they hear convincing comments and evidence from stakeholders, including consumers and appraisers. Standing unified in opposition to the proposal, a coalition of nationally recognized professional appraisal organizations will be submitting comments on the proposal. These organizations encourage all appraisers to do the same by the February 5th comment deadline.

To comment, click here.

The Digital Transformation of the Appraisal Industry

By Jeff Bradford, Bradford Technologies

Jeff’s PR team reached out to see what appraisers think of bifurcation of appraisals.

Hello Jonathan,

On behalf of Bradford Technologies, I’m speaking to appraisers to gauge the response and thoughts towards Hybrid appraisals. It appears that going forward a ‘team’ approach to developing and delivering appraisals will continue to grow.

Our CEO, Mr. Bradford, has written an article addressing the anticipated approach. I’d love to hear your thoughts.

If you’d like to take a closer look at ClickFORMS we’d love to guide you through a 15 day evaluation.

Kind Regards,

Darlene Conners 800/622- 8272 ext. 209 Corporate

Here is Jeff’s essay. Admittedly I view hybrids as more expensive and less reliable for lending purposes and frankly are incredibly idiotic. However, many software vendors are caught in the middle trying to figure out the zeitgeist so they can survive. Here is what Jeff wrote:

For over 30 years, I have been serving appraisers and during that time I have seen many changes in the appraisal industry. Mostly these changes have been due to advancements in technology, but not all were due to technology innovations. Some were due to changes in compliance and regulations, such as the Home Valuation Code of Conduct (HVCC) and Dodd-Frank, or due to the changes in requirements to become a Certified appraiser.
There were changes caused by advancements in technology, such as dot matrix printers to laser, film cameras to digital, fax to email (if you do not remember these changes, you are very young). Remember when everyone would FedEx the report; then PDF became acceptable, and today we live in a connected world where information is just a click away. All of these changes had an impact on the appraisal profession, but producing an appraisal report is still a legacy business. We all do it the old fashioned way–manually collecting data, pictures, working the sales grid and then writing the report. It’s definitely easier and faster than it was 30 years ago, but we still follow the same steps.

Change is Coming

Well, as you might have guessed, more changes are coming and it’s technological for sure, but it’s not driven by an invention, such as when the digital camera was invented. Today it is demographics that is driving the change. The millennials are forcing businesses to change. It is estimated that at their peak, there will be 75 million of them. They are expected to be a larger force than the baby boomers. The millennials have never seen a fax or dot matrix printer. They only know mobile. They live in a digital world connected by their mobile phones, and they expect everyone they deal with to be digital as well. That includes the mortgage industry.

This group has given rise to the FinTech industry–startups that are out to disrupt the financial industry. Their aim is to make it easy to get a loan, make payments and do anything financial using their smart phone, and they don’t understand why an appraisal takes seven days. They certainly don’t understand why last year there were areas of the country where it took four to six weeks to get an appraisal.

This pressure has caused the GSEs to take notice and to begin to take action. As many of you know, the GSEs are on a three-year mission to remake appraisals into a much more efficient process. Last August, Fannie Mae CEO Timothy Mayopoulous stated, “Appraisers should be at their desks,” not in the field with a measuring tape or making phone calls to track down homeowners. This has led to pilot programs to test the validity of using third party inspectors paired with appraisers at their desks to study if appraisals can be produced quicker without a loss in quality. Many are saying the pilot programs are working well. Additionally, based on the changes the GSEs made to the 1003 (loan application form), the new 1004 will be pared down considerably, with fewer data points, creating a new slimmed down UAD dataset based on the new MISMO 3.3. (The current UAD is based on MISMO 2.6.)
If the move toward bifurcation of the appraisal succeeds, this could open up some great opportunities for appraisers and the industry in general. Let me explain. Eight years ago, we introduced a product to the market that used a third party inspector. Our reasoning was that teams can do more than individuals. That product was not widely accepted. Why? It was less than successful because the inspector and the appraiser were not teammates. They were just individuals doing a job without regard to each other’s issues or concerns. We had missed the concept of teammates and the need for close collaboration between the two. It did not help that trainees and licensed appraisers were essentially banned from working together on the appraisal for fear that the appraisal would be rejected by a lender.

Fast forward to today. If lenders accept third party inspections, they will also have to accept appraisals completed by teams managed by appraisers. This change will open the door for appraisers to create their own teams consisting of assistants and trainees that produce the appraisal, opening the door for trainees to once again be part of the appraisal process.

The key to high performing teams is tight collaboration. It’s the elimination of the distance and time factors between the stakeholders and team members. If the appraisal process is going to become more efficient and accepted by millennials, there needs to be better collaboration between all stakeholders in the valuation (lenders, AMCs, appraisers, inspectors, assistants, reviewers, and anyone else involved with the valuation).
In the past, we collaborated by phone, then email, and today we can collaborate instantly by taking advantage of the digital workspaces that are being developed in the cloud. For example, Google already has 1.4 billion users collaborating using apps on G-Suite. There is Slack, Microsoft Teams, Dropbox, Box and Apple iWork just to name a few others. There is now even a new term to describe people who work primarily in the cloud—Cloud Worker. They log in, do their work and log out. They work from anywhere, anytime on any device. Companies that want to remain relevant are moving to the cloud. They are becoming digital businesses with an emphasis on allowing their employees to collaborate seamlessly and on delivering their services as quickly as possible with full transparency of the process (think Amazon).

From Legacy to Digital

An example of a company that made the transition from legacy to digital is Domino’s Pizza. In 2008, its stock was at $3 and they were hurting. Today it’s at $277 and they are thriving. They did two things: 1) made improvements to the quality of their product, and 2) realized they were also in the pizza delivery business. They started thinking of themselves as an e-commerce company that happens to sell pizzas. This revelation led to a commitment to innovate the pizza delivery experience. Today, they have a Chief Officer of Delivery Technology who makes sure you can order a Domino’s pizza from the web, by email, by texting, or by asking Alexa to order you a pizza. They are a digital business catering to the anytime, anywhere, on-any-device millennial crowd. Domino’s is currently experimenting with delivery by drones and self-driving cars. Little Caesars pizza has followed suit with their own Pizza Portal and mobile app for ordering, scheduling and pre-paying for a pizza. The point is that moving from a legacy business to a digital business is not only good for business, it may be the only way to stay relevant in the age of millennials (think Sears).

As I write this article, JPMorgan Chase just announced that they are building a “FinTech campus” in Silicon Valley where it expects to have 1,000 employees focused on building its digital banking business. Chase understands what is at stake.

Appraising is a legacy business and if it’s to remain relevant and not marginalized by appraisal waivers, it must transform itself into a digital business. The GSEs are going to make some structural changes to the process. They will probably simplify the form, remove some fields and reduce the amount of data that needs to be collected. This change will make it quicker to create a report, but it does not transform appraising. It does not transform a legacy business into a digital business. Appraisers are the ones who need to make this transition.
Appraising is at an inflection point. Just like Domino’s, it needs to improve quality (no more silly mistakes, unsupported comps and arbitrary adjustments) and it needs to realize that it’s in the appraisal delivery business. The industry needs to start collaborating to improve efficiency, quality, transparency and delivery speed. The one size (1004) fits all approach is no longer an option. This is primarily why you see so many different alternative valuation products springing up.

What does it mean to be a digital business? It means that you are doing most, if not all your work in the cloud, in a digital workspace. It means that you are connected to cloud resources (data, imagery) simply by plugging them into your workspace. It means that you are working as a team, collaborating via your digital workspace. All the time and distance factors that would normally slow your appraisal process down no longer exist because all files automatically sync with every team member.

Collaboration is the key and it starts at home. Appraisers should start thinking about how to incorporate team concepts into their workflows and processes and by thinking of everyone as a teammate–not a partner or an assistant–a teammate. If you have one teammate assisting you, think of using Dropbox as your digital workspace for sharing files. It’s good for storage and backup as well. If you want to expand, consider online form processing and the use of a mobile inspection app linked into your digital workspace. At this point, you are starting to empower teammates to work from anywhere, anytime on any device. At Bradford Technologies we’ve developed a Team Appraising platform to provide that digital workspace for you. It’s a little ahead of its time (like many things we do), but when bifurcation of appraising is accepted by the lenders, appraisers will want to control and manage their own teams to defend their business and outperform the competition.
Like Domino’s, appraisers need to realize they do more than just produce a product, they are also in the appraisal delivery business. AMCs, likewise must realize they do more than manage an appraisal order; they are also in the appraisal delivery business. For the industry to fully transform to a digital business, appraisers need to extend the concept of a team beyond their office to include AMCs. Both need to work more cooperatively, as teammates to produce and deliver a product for their mutual client, the lender. If both do this in a collaborative fashion, working in a digital workspace with all the time and distance factors removed, the appraisal industry will be transformed and secure its position as a valuable, highly relevant component of the financial community.

About Bradford Technologies

For over 31 years, Bradford Technologies has been providing appraisers innovative software solutions such as ClickFORMS, the most intuitive appraisal report processor and Redstone, the leader in valuation support analytics. Today, the company is focused on its new cutting-edge solution for residential appraisers – Team Appraising. Utilizing “team” concepts and providing connected mobile, desktop and online solutions for inspection, report processing and communications, residential appraisers can create an efficient digital business that excels in the all-digital world of tomorrow.

About the Author

Jeff Bradford is the founder and CEO of Bradford Technologies. Mr. Bradford has been recognized as a Valuation Visionary by the Collateral Risk Network and a Tech All Star by Mortgage Bankers of Association for his continual innovations in the appraisal field and support for residential appraisers.

Voice of Appraisal E216 Will Bifurcation lead to Market Blindness?!?!

Yes it definitely will.

A Day In The Life

h/t Lori Noble

OFT (One Final Thought)

Since I’ve been obsessed about housing price records as of late, here’s a great read on the surfing wave height record. Things that go viral aren’t always what they appear to be.

Brilliant Idea #1

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Jonathan J. Miller, CRP, CRE, Member of RAC
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog

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