I have two things on my mind today. Yesterday I had a conversation about appraisal waivers and “hybrid” appraisals, so I wanted to share my take. Then I have some new graphs to help tell the story of the foreclosure crisis.
APPRAISAL WAIVERS & “HYBRID” APPRAISALS:
Here’s a Q&A with with Scott Short on appraisal waivers and “hybrid” appraisals. I get things changing for appraisers in light of big data, but diminishing the role appraisers play seems like a bad idea for the housing market. Watch here. If you want to just hear the “hybrid” part, it’s at 7:12.
By the way, a local appraiser named Barry Cleverdon had an accident a few weeks ago and is currently in a coma. Here is Barry’s GoFundMe.
THE FORECLOSURE CRISIS:
1) Healing: The foreclosure rate in the United States is way down. I would guess most markets have essentially healed. In Sacramento County ten years ago 84% of sales were distressed and now that number is less than 2% when considering both short sales and bank-owned sales (REOs).
2) Not the same in every neighborhood: When it comes to distressed sales, some areas and price ranges did better than others as you can see below. This reminds us the market doesn’t experience the same exact trend everywhere.
3) The power of equity: Areas with more equity and higher prices tended to fare better with the number of distressed sales. I know that’s what we’d expect to see, but it’s interesting to actually see it. It’s amazing how equity (and probably better jobs) can create opportunity and even help people weather a storm.
4) The promise of a new wave: Many have promised a new wave of foreclosures, but we just haven’t seen it. I hear things like, “Dude, there are so many Notice of Defaults right now.” That may be true, but not all of these NODs end up hitting the market. Or if they do go into foreclosure they may likely be sold on the court steps before MLS.
Two weeks ago I asked friends on LinkedIn which areas they wanted to see, and that’s how this post was born. I didn’t get to everywhere, but I got to most areas.
MAKE GRAPHS LIKE THIS: If you want to know how to make a graph like this, here’s a tutorial for how to put a few different layers of data on one graph.
BLOG BASH: Just a reminder my wife and I are hosting a party at Yolo Brewing on Saturday March 2nd. It’s an excuse to get together and you’re invited. It’s okay if we’ve never met too. I’ll be buying the first 100 beers. Details here.
Questions: What do you think of appraisal waivers and “hybrid” appraisals? What stands out to you most in the images above?
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Ryan, Clear Capitol is hiring real estate agents to do the measuring of homes for appraisers (you discussed this on the video). I considered it but chose not to be a part of this. I can’t remember what the pay was, around $100 and there was a training (unpaid) to go through. They told me there was a program to use on our phone that once trained, it would take less than an hour to complete each assigned home. Just thought you’d like to know.
Thank you for the inside scoop. I really appreciate it. I’m not surprised at all to hear this. One of the things we have to remember about the push for hybrids is there are big data firms poised to make big money here. Thus the idea is that consumers are going to save big money, but let’s be real about companies who are going to make big money too.
I’m curious if they happened to discuss liability. What would happen to the person who measures if there was an error?
For any onlookers, it is possible to learn how to measure square footage, but it can be very complicated at times. Consider the skill it takes as well as the professional judgment calls you’re going to have to make as to whether something should or should not be counted. Some homes of course are very easy to measure and would take a minor amount of time, but otherwise take multiple hours because of the weird angles or sheer size.
Great idea! Love seeing the differences in seller distress in various markets and the dramatic shift away.
Thanks Joe. I thought this might be a cool way to see the market.
Great post Ryan. There is so much context in all those graphs as it relates distressed sales and different market segments. Thank you.
Thanks Gary. I appreciate it. I’m so fascinated to see the market this way. It’s always fun to imagine something and then to graph it. I can think of a few other ways to look at this too…
Hey Ryan! I agree with you that there is a place of hybrid appraisals and appraisal waivers. My concern is that lenders seem to be moving towards using these products for loans that are purchases, which become comparable sales. It doesn’t take many inflated home purchase prices to begin to create a bubble. It’s something to watch. I believe that if not careful, history will repeat itself with regards to another large recession if lending institutions are not careful.
Good point. This is a valid concern. I recall when appraisal “waivers” came out that everyone was saying, “Trust us. No biggie. These are only for refinances and probably only 10% of them…” But they’re being used for purchases now. I think we’ll see the same thing here with hybrid products. There seems to be a massive collective push (agenda) to usher in an era of “evaluations”. My video was off-the-cuff after a meeting. I wish I would’ve mentioned the notion that real estate agents will also be invited into the equation to the inspection part. I appreciate the confirmation above too from Julia on that note.
Great post! The charts showing the REOs in the different market segments are great. They really do tell the story visually and which markets were hit harder than the others.
Thanks so much Shannon. I appreciate it. It’s incredible to see the story of value over time. I’m always fascinated to see the market in different ways.
The real queston is, why don’t they want the appraiser inside the homes?
It can’t be speed because that is a function of the scope of work. Change the scope of work and incease speed. Same with cost. Bring back an updated version of the old 2055(Rev1996) and problem solved. So if its not really cost or speed why don’t they want the appraiser in the homes? And finally, if the appraiser does not go to the home or neighborhood over time the appraisers geographic competence will diminish or be erased altogether.
Thanks James. I really appreciate your take. You do bring up a really important point about competence. Part of developing an opinion of value too is seeing the neighborhood. At times we get clues into value just by driving through the area. Sure, it’s possible to know what is going on by looking online, but just yesterday I appraised something and I see down the street there are permits pulled for a new development. I might not have caught that without being physical present in the neighborhood.