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AXIS Appraisal Presentation

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Legal Update …

Legal Update
-HVCC turns to AIR
-State Laws
-UAD & UCDP

Appraisal Update
-What listings tell us in the current market
-Unpermitted Space
-Concessions
-Reduce re-inspection fees
-Appeals process


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  • 1. Appraisal Update April 10, 2013
  • 2. Agenda  Data Update  Legal Update  HVCC turns to AIR  State Laws  UAD & UCDP  Appraisal Update  What listings tell us in the current market  Unpermitted Space  Concessions  Reduce re-inspection fees  Appeals process  Questions & Answers
  • 3. Listings & Seasonal Trends
  • 4. Listings & the Principle of Substitution • Non real estate example: o Yesterday I bought bread for $3.50. o Though I did not purchase it, today the store is selling bread for $3.25. o What is the cost of bread? • Listings create ceilings in declining or volatile markets • Principle of Substitution: a buyer will pay no more for a property than the cost of an equally desirable alternative property
  • 5. Seasonal Realities – Nation’s Capitol $300,000 $310,000 $320,000 $330,000 $340,000 $350,000 $360,000 $370,000 $380,000 $390,000 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 http://www.gbreb.com/uploadedFiles/GBAR/GBAR_News/SF%201st%2011.pdf
  • 6. Average Home Prices Contra Costa County 300000 350000 400000 450000 500000 550000 600000 650000 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 average sold average list
  • 7. Santa Clara County 600000 650000 700000 750000 800000 850000 900000 950000 1000000 1050000 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 (4/10) average sold average list
  • 8. Market Changes • Q2 2012 $151,000 • Q1 2012 $135,000 • Q1 2009 $200,000 • Q2 2006 $307,000
  • 9. GSEs want comps to come from the past 90 days DC Metro/Baltimore
  • 10. Not just a value issue, but a numbers issue. DC Metro/Baltimore
  • 11. Data Trends $700,000 $800,000 $900,000 $1,000,000 $1,100,000 $1,200,000 $1,300,000 Qtr1Qtr2Qtr3Qtr4Qtr1Qtr2Qtr3Qtr4Qtr1Qtr2Qtr3Qtr4Qtr1Qtr2Qtr3Qtr4Qtr1Qtr2Qtr3Qtr4Qtr1Qtr2Qtr3Qtr4Qtr1Qtr2Qtr3 2005 2006 2007 2008 2009 2010 2011 Average Selling Price - Coastal South
  • 12. Same data – taking out quarters
  • 13. Market Trends – Santa Clara County 600000 650000 700000 750000 800000 850000 900000 950000 1000000 1050000 1100000 average sold $ average list $
  • 14. Market Trends - Cupertino 1050000 1100000 1150000 1200000 1250000 1300000 1350000 1400000 1450000 Average sold $ Average list $
  • 15. Market Trends – Contra Costa County 200000 250000 300000 350000 400000 450000 500000 550000 600000 650000 700000 2007 Q1-2 2007 Q3-4 2008 Q1-2 2008 Q3-4 2009 Q1-2 2009 Q3-4 2010 Q1-2 2010 Q3-4 2011 Q1-2 2011 Q3-4 2012 Q1-2 2012 Q3-4 2013 Q1-4/9 median price median list
  • 16. Market Trends- San Ramon 600000 650000 700000 750000 800000 850000 2007 Q1-2 2007 Q3-4 2008 Q1-2 2008 Q3-4 2009 Q1-2 2009 Q3-4 2010 Q1-2 2010 Q3-4 2011 Q1-2 2011 Q3-4 2012 Q1-2 2012 Q3-4 2013 Q1-4/9 median price median list
  • 17. Bakersfield– 3 years
  • 18. Bakersfield– one year
  • 19. Home Affordability Trends Data for Fence Sitters o Payment as a percent of Income: • National Average was 21.7% in 2007 and is 15% in 2012 (NAR) o Home Affordability Index • Highest levels since 1970s o Housing Opportunity Index • Highest since its record keeping began in 1992 o Rates • Remaining low
  • 20. Legal Update
  • 21. Home Value Code of Conduct • Replaced by AIR o Appraiser Independence Regulations o Minor changes – Lenders still determine appraisal ordering process and must certify that no one in production had a role in selecting the appraiser or appraisal management company. There must be separation of a Seller’s sales or Mortgage production functions and appraisal functions. An employee of the Seller in the sales or Mortgage production function shall have no involvement in the operations of the appraisal function.
  • 22. State Laws No person with an interest in a real estate transaction involving an appraisal shall improperly influence or attempt to improperly influence, through coercion, extortion, or bribery, the development, reporting, result, or review of a real estate appraisal sought in connection with a mortgage loan. does not prohibit a person with an interest in a real estate transaction from asking an appraiser to do any of the following: (1) Consider additional, appropriate property information. (2) Provide further detail, substantiation, or explanation for the appraiser’s value conclusion. (3) Correct errors in the appraisal report.
  • 23. Uniform Appraisal Dataset • It’s about reporting & validating • Approves or denies an appraisal based upon computer submission and rules – limited in focus at this time. Uniform Collateral Data Portal • It’s about standardization • Quality & condition ratings are key
  • 24. Reasons for UAD • No common set of definitions among all stakeholders in the appraisal process
  • 25. Appraisal Update
  • 26. Unpermitted Space • Bad News o Additions in which there is no evidence of finaled permits can not be included in the GLA and will be given very little if any value on the grid. • Good News o Some lenders will lend on properties with unpermitted space if some or all of the following criteria are met • Done in a workman-like manner • No apparent health or safety issues • Typical for the area as evidenced by three-like comparables with similar unpermitted space. • Does not violate zoning ordinances • Minimal cost-to-cure to remove the space. • Bad News o MLS reporting field for unpermitted rooms???
  • 27. Last thoughts on additions • Anytime the home’s square footage varies from public records, the appraisal process slows down. • Consider researching and providing the appraiser with permits or explanation of the space on the front-end. • Non-contiguous space must also be counted separately.
  • 28. Sales Concessions • Example: o A model match comparable home sells for $200,000 with $10,000 credit back to buyer from seller. Does the $10,000 adjust off the grid so that the final adjusted value is $190,000? • Answer: o Maybe • Determining factors: o Typical for the market o Purpose of the concession o Amount and impact of the concession o MUST BE REPORTED
  • 29. Reduce Re-Inspection Fees
  • 30. Value Appeals Process • Best offense is a strong defense • Share information! • Understand lending constraints
  • 31. Q & A

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