The Appraisal Blog

December 1st, 2023 12:12 PM
25 years ago I charged $285 for my first full appraisal.  Last week I did one for $300.  Now, we are currently in a downturn in the real estate market in terms of volume, so there are some other market pressures, however, the AMC model has had a major impact on appraiser fees.  For those of you who don't know, after the 2008 crash, Congress signed Dodd-Frank into law which created the AMC model currently in place.  Essentially, an AMC is a middle man between the appraiser and the lender.  And for doing their service they charge anywhere between 50-100% of the appraisal fee.  That fee isn't charged to the lender/consumer... it is taken from the appraiser.

Posted in:Appraisal and tagged: #AppraiserFees
Posted by Robert Abbott on December 1st, 2023 12:12 PMLeave a Comment

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It has been my experience that there is a general misunderstanding of what an appraiser does, what their opinion of value is used for and how much power an appraiser has.  I've had discussion very recently, even among real estate agents, who think that appraisers create value in markets.  This could not be farther from the true.  We report value based on what we see in the market.  Furthermore, our opinions are private.  They are not available to ANY party outside of the transaction and therefore could NOT be used by 3rd party as a basis for a different party.

Take a look at this article for a more detailed breakdown.  Let me know if you have any comments or feedback!

Posted by Robert Abbott on November 29th, 2023 5:10 PMLeave a Comment

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October 25th, 2023 8:32 AM
Interstate 15 used to dead end in the San Diego City Heights neighborhood.  Nine blocks of houses and business had to be acquired by CALTRANS to connect the freeway.  What an eminent domain disaster?  But I am glad they got it done.  Check out the before and afters and listen to the podcast for some interesting information on freeway's in San Diego.

Posted in:Development and tagged: #Development#Downtown
Posted by Robert Abbott on October 25th, 2023 8:32 AMLeave a Comment

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October 18th, 2023 9:50 AM
Two policy issues are in direct opposition to each other.  Historical designations preserve architectural unique properties.  Changes to zoning increase density to increase the number of housing units in a community.  Who determines a "Streamline Moderne" style structure is historically significant?  Do we want another "Up" house surrounded by 20 story buildings?

These are unanswered questions.  What do you think?

Posted in:Development and tagged: #Development
Posted by Robert Abbott on October 18th, 2023 9:50 AMLeave a Comment

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October 3rd, 2023 1:01 PM
My previous post was regarding an article in Working RE Magazine titled Appraiser Countersues Black Plaintiffs Who Alleged Discrimination.  And, as I have mentioned before, this topic strikes a chord with me.  So I wrote a response ... and they published it in their most recent Issue 62.

I promise to discuss the details in a future post ... but read the reader response for a preview.

Posted in:Bias and tagged: #AppraisalBias
Posted by Robert Abbott on October 3rd, 2023 1:01 PMLeave a Comment

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September 26th, 2023 5:57 PM
This one is a no brainer.  The facts of the case will completely exonerate the appraisers and hopefully he will win his countersuite argument.

Basic Facts:
- Subject was appraised for $472,000 in June of 2021
- 7 months later it was appraised for $750,000 after "white washing"
 Subject is situated on a major roadway, Northern Parkway and suffers from negative external obsolesce.
- Property NEXT door to subject sold for $465,000 August of 2021 (2 months AFTER 1st appraisal) with superior kitchen improvements and a sunroom.
- Listing of property situated on same busy street, Northern Parkway, for $605,000.  It was on the market for 3 months, reduced to $550,000, and then to $510,000 before it went under contract.  The only reason seller's reduce their asking price is because the original asking price was TOO high!

The second appraisal at $750,000 was never provided to the attorneys... I wonder why?  But it does not appear to be in line with other sales with similar negative influence including the dwelling next door to the subject.

Posted in:Bias and tagged: #AppraisalBias
Posted by Robert Abbott on September 26th, 2023 5:57 PMLeave a Comment

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September 19th, 2023 4:18 PM
As the article states, AI (Artificial Intelligence) is all the buzz.  From creating writing reports to passing the bar exam, from realistic photos and deepfake videos.  It can write music and solve math problems ... is there anything it can't do?

I recently gave ChatGPT a shot. 

I started by asking it if it could help analyze the value of a specific piece of real estate:
A: (summary) It gave a very generic response on look at comps, consider location, evaluate condition, look at unique features... and of course ... consult a real estate professional.
So I told it I was already an appraiser and wanted more specifics:
A: Consider market conditions, zoning and land use environmental factors, historic significance, income potential, etc.
I wasn't getting what I wanted to I asked it if it could help me do my job better:
A: stay up to date on industry, develop skills, network, use tech, be objective, etc etc
I asked if I provided an address could it give me market data:
A: It said it did not have any real time data and I should consult with an agent, or on-line news sources,etc
So I decided to switch gears ... maybe it could describe a house to me.  So I sent it a picture of a house I recently appraised ...

It provided a mostly inaccurate response:
A: Based on the picture you shared, the house appears to have a modern design with clean lines and a minimalist aesthetic. The exterior of the house is predominantly white, with some darker accents on the roof and around the windows. The roof is flat, and there appears to be a small balcony or terrace on the upper level.

The house is two stories tall, with large windows on both levels that allow for plenty of natural light. The windows are rectangular and appear to be floor-to-ceiling, with black frames that contrast with the white exterior.

There is a small front yard with a neatly trimmed lawn, and a driveway leading up to the garage, which is located on the left side of the house. The garage door appears to be made of wood and has a simple, modern design that complements the rest of the house.

Overall, the house has a sleek and modern look that emphasizes simplicity and functionality.

I asked it to estimate the size:
A: Based on the picture, it's difficult to estimate the exact size of the house, as there is no point of reference to compare it to. However, I can make a rough estimate based on the size of the garage door and the number of windows.

Assuming that the garage door is a standard size, which is typically around 7 to 8 feet high and 8 to 9 feet wide, and assuming that the windows are roughly standard size as well, which is typically around 3 feet by 5 feet, I would estimate that the house is somewhere between 1,500 and 2,500 square feet.

Again, this is a very rough estimate based on limited information, and the actual size of the house may be different.
It is a ~10,000 sf. house
I got a similar result with a picture of a kitchen.
I went back to asking about the market ... this time for residential property in a specific zip code ...
A: As an AI language model, my knowledge is based on previously published data and my training data cutoff is September 2021. However, I can provide some general information about the residential real estate market in the 92128 zip code based on available data.
I didn't verify the median numbers it produced... that data was worthless to me occurring over 18 months ago.
I asked it if it could analyze sales data that I provided.  And sent is a csv of the Spark export I use for the 1004MC.  I even told it which was the Sales column for it to look at.  It came back with a number of $1.526M.  I told it was wrong and its numbers didn't make any sense based on the range of values ...
A: I apologize for the error in my previous response. Upon re-evaluating the data, it appears that I made a mistake in my calculations.

Based on the data in the CSV file you provided, the average closing price for the 170 sales recorded is approximately $884,329. The average price in 2021 was approximately $1,020,714, while the average price in January 2022 was approximately $811,111. It's worth noting that these averages are based on the data provided in the file, and may not be representative of the entire market in the neighborhood.

At least it admitted it was wrong!!
So ... based on my first impression.. this stuff is not going to affect the appraisal industry any time soon.  It can help solve math problems, summarize a piece of literature ... even help with coding I'm told.  But it can't describe pictures very well and has no current market data.
Anyone else play around with this?  What were your results?

Posted in:Technology and tagged: #AppraisalModernization
Posted by Robert Abbott on September 19th, 2023 4:18 PMLeave a Comment

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September 12th, 2023 7:36 PM
Will AI take the place of appraisers?  Probably not.  They may help with certain tasks in some areas ... but the existing AVM (Automated Valuation Models) probably aren't going to get significanlty better.

Here is one person take on what it can assist with.  I'll give a real world test run in my next post ...

Posted in:Technology and tagged: #AppraisalModernization
Posted by Robert Abbott on September 12th, 2023 7:36 PMLeave a Comment

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September 5th, 2023 10:00 PM
I just received a list of words from an AMC that I am not allowed to use in my reports anymore.  Truth be told I see only one or two words in this list that I occasionally use in my reports.  Desirable  ... in reference to the climate in San Diego, and Gentrification ... in reference to communities in which there is a trend towards remodeling and enlarging the homes in the community.  Oh ... and Indian ... as in the city of Indian Wells.

But the notion that we have become so sensitive to be offended by some of these words is disturbing.  

Posted in:Bias
Posted by Robert Abbott on September 5th, 2023 10:00 PMLeave a Comment

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August 30th, 2023 8:28 AM
The Appraiser Qualifications Board (AQB), which is one of the subcommittees of the Appraisal Foundation, and is responsible for establishing the minimum qualifications for real estate appraisers has approved the Practical Applications of Real Estate Appraisers (PAREA) program.  The program will be a departure from the standard Supervisor-Trainee model that has existed for decades and will allow another pathway for individuals to enter the profession.  The Appraisal Institute appears to be the first organization with an approved PAREA program.

I am all for modernization of the appraisal process and training, but think that this might not be necessary if the AMC model was retired.  I have trained many individuals to licensure over my career... but don't do so anymore.  The AMC's require the supervisor appraiser to inspect every property with their trainee and makes no financial sense.  It didn't used to be that way!

So we will see how this pans out ...

Posted in:Education and tagged: #AppraisalModernization
Posted by Robert Abbott on August 30th, 2023 8:28 AMLeave a Comment

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