appraisals

Working with appraisers during a pandemic

March 26, 2020 By Ryan Lundquist 24 Comments

Are appraisers still working? This is probably the question I’ve had most over the past week, so I wanted to unpack some thoughts.

1) Yes & No: Most appraisers are working and it seems like the bulk of appraisers working for lenders are still walking through the interior. There are definitely some appraisers who are not inspecting the interior though (myself included). Some sources say appraisers are deemed an “essential” service during the pandemic, though not everyone agrees.

2) Exterior focus announced: Fannie Mae and various banks have announced a temporary emphasis on exterior-only and desktop appraisals. When hearing this it’s easy to think every future appraisal is going to be a “drive-by”, but that’s not the case. In fact, traditional appraisals are still going to be in play for various types of loans and my guess is they’ll be the product of choice as long as they’re available. There is lots of conversation too about appraisers technically focusing on the outside but also getting information about the inside of the home through photos and video. Here is a table Fannie Mae published on Monday show what is possible, but we’ll have to wait and see how it all unfolds in the local market.

Keep in mind the lender sets the tone here and it’s not up to the appraiser to decide whether to do an exterior-only appraisal or not. However, an appraiser needs to believe a credible value can happen with a more limited scope of work, so appraisers won’t blindly say YES to an exterior-only appraisal if there’s not enough information. Lastly, just because a lender or AMC asks an appraiser to do something doesn’t mean the appraiser has to say yes.

3) Time: It’s going to take some time to see how this all shakes out. We’ll know much more in coming weeks. For instance, we haven’t heard from FHA yet.

4) Practical tips for real estate agents: It might help to take extra photos or video of a home before you list just in case it comes in handy for the appraiser. You might also consider being ready to talk with the appraiser about things such as layout, interior charm, age of improvements, quality of finish work, or anything you might understand more fully by actually walking through a home. If an appraiser is doing a desktop appraisal, I’m not certain the appraiser will call you or not, so you may want to include extra details in your MLS descriptions. This of course isn’t anything new because sharing property details is useful in any market. Please consider using my Appraiser Info Sheet to help tell the story of the property.

5) Private appraisals: If you are looking for a private appraisal, I can’t recommend enough being willing to color outside the lines. Would it be ideal to have the appraiser observe the interior in person? Yes. But during this pandemic it’s important to work with what we have and keep everyone safe. I have private clients who are working with me to use FaceTime to walk through a property (or the Google Duo app for an Android). I also have clients who have sent me 50+ photos of the interior and a very detailed written or verbal description of the property. Of course some appraisals for complex properties or geared toward court might need to wait.

6) Questions for appraisers: I’m not trying to ruffle feathers, but I think we’re at a place where it’s critical for appraisers to strongly consider whether they should be going into occupied homes. I have the utmost respect for peers, and that’s why I want to bring this up. So I ask, where is the line for us? At what point would you personally begin to pull back? How bad would it have to get? When is it deemed too risky for you and others? If you aren’t visiting your friends and family right now out of precaution, is it okay to go into homes of other people’s friends and family? I realize these questions are direct and there is also a cost to saying NO, but we have a serious situation going on right now. I have definitely lost business lately in light of saying NO to private clients, but that’s okay for this season. I don’t mention this to be combative and I hope to not be fielding angry emails all day. I love my peers and I’m concerned that we’re being asked to go inside homes right now. My strong opinion is we need to stop inspecting the interior of occupied homes. But put more lightly I’d say I think we’re at a place where appraisers need to show resistance to lenders for the sake of public health. Lastly, I realize not all areas of the country are the same in terms of COVID-19 cases (just in case you were ready to destroy me).

A few closing things.

Zoom session: If you want some background noise while quarantining, here’s a Zoom session I did yesterday hosted by KW Elk Grove. We talked about market stats, trends, and then fielded questions. It seemed like most questions were about how to see the current market and choosing comps. This is 100% off the cuff. Enjoy if you wish. Watch below or here.

New market update video: Here is a new market update video from two days ago. This is 20 minutes. Watch below or here.

Fresh daily visuals: During this pandemic I’ve upped my stats game and I’m finding new ways to visualize how the market is moving. Here are four images I’m updating every single day. If you have ideas for images too, I’m open ears. Remember, it’s tempting to focus on prices, but we see change happen first in the listings and pendings.

I hope this was interesting or helpful. Thanks for being here.

Questions: If you work in real estate, what types of appraisals are you seeing happen? If you are an appraiser, what’s your take on interior inspections?

If you liked this post, subscribe by email (or RSS). Thanks for being here.

Not everything is getting multiple offers

October 2, 2019 By Ryan Lundquist 14 Comments

Everything is getting multiple offers, right? Many sellers feel that way, but it’s just not true. Today let’s dive deeply into what is actually happening with multiple offers. I’m excited about this and I hope you like it too.

Non-locals: If you’re not local, would understanding more about multiple offers help you? Could you ask your MLS about including a “multiple offers” field? This is how I’ve been able to extract data like this for my market.

FIVE THINGS ABOUT MULTIPLE OFFERS

1) A rhythm of multiple offers: There is a rhythm to seeing multiple offers in the Sacramento region. There are more multiple offers in the spring and less as summer and fall unfold. This isn’t a huge surprise, but it’s cool to see on paper. If you wanted to know, 42% of sales last month had more than one offer (which is what I mean by “multiple offers”).

2) The market isn’t always hot: It’s tempting to talk about real estate like it’s always “hot”, but it’s not. Every year the market heats up and cools as you can see in the images below. But on top of a normal seasonal up and down dynamic we’re seeing price growth slow too. In other words, prices just haven’t been rising as fast as they used to. When it comes to multiple offers, we’re seeing fewer these days compared to the past couple years. This is such a good point for sellers to understand. The market isn’t what it used to be. It’s still very competitive if you’re priced right, but it’s not like it was in the heyday of 2013.

3) Sellers, you might just get one offer: It’s easy to think everything is getting multiple offers, but it’s not true. When looking at thousands of current pendings, 59% of homes have only one offer while 20% have two offers. Thus 79% of properties in contract right now have two offers or fewer. My advice? Price realistically for today and you might get a couple offers. But you might only get one. Oh, and if you overprice you likely won’t get any offers at all.

4) It’s more aggressive at lower prices: This won’t come as a shock, but we’re seeing more multiple offers at lower price points. Here’s a look at multiple offers among current pendings as well as recent sales. Keep in mind there aren’t many sales and pendings above $700,000, so I wouldn’t put too much weight on these categories showing a higher percentage.

5) Many layers to the onion: Looking at multiple offers is just one way to see what the market is doing. The truth is there are many layers of the onion when it comes to real estate data, which is why I advise looking to many different metrics to understand the market. In other words, it’s not just about multiple offers to me (but this is cool to see).

QUESTIONS:

How did I get this data? A few years ago our MLS started including fields for “multiple offers” and “number of offers”. I’ve been watching these metrics and reporting on them for the past year or so, but today I’ve taken it to the next level.

Is this data reliable? I’ve had a few people question whether this data is reliable. Of course data is only good as the input by real estate agents and hopefully the truth is being told. Do some people fudge the numbers? Probably. But keep in mind we’re looking at thousands of sales and pendings, so a few outliers won’t sway the trend. Moreover, the bulk of pendings actually show just one offer, which helps support the notion of agent honesty.

I hope this was interesting or helpful.

RECESSION PRESENTATION: I keep getting asked about home prices and a looming recession, so I put together a quick presentation to download.

BEER & HOUSING CONVERSATION: Do you want to hang out at Yolo Brewing? On Saturday October 5th from 2-5pm I’m co-hosting a get-together. Hope to see you there. Details here.

Questions: What stands out to you most about the images above? What are you seeing with multiple offers these days? I’d love to hear your take.

If you liked this post, subscribe by email (or RSS). Thanks for being here.

A massive garage & paying too much attention to prices

August 13, 2019 By Ryan Lundquist 16 Comments

I saw a massive garage while on vacation that I just have to share. I also have some quick thoughts on focusing too much on prices. Those are the two things on my mind. Then for those interested let’s dive deep into the market.

I took almost two weeks off and part of my vacation was to drive to Boise to visit family. Of course my real estate mind doesn’t shut off when out of town, so I was blown away to see a brand new neighborhood with nearly every other house having a massive RV space in the garage. This one actually has two separate RV spaces. I’ve never seen two spaces like this in my market. Have you?

I’ll admit the neighborhood looked a little odd from the street because of the amount of space dedicated to garage doors. It didn’t look bad per se, but it was definitely different. And for the record, I would use both spaces for a massive woodworking shop. Forget the RVs.

Migration garage marketing plan: This is actually brilliant marketing because the builder is clearly appealing to the retiree crowd. In fact, when talking with a few neighborhood residents, they tell me there are lots of ex-Californians as well as people from Texas and North Carolina. This reminds us of the reality of migration. Who is coming to the market? And who is leaving? Those are two vital questions to ask to know a market.

And a quick thought on prices…

Focusing too much on price? Price is THE obsession in real estate, but focusing too much on price can actually cause us to miss the real story of the market. It’s common to hear stuff like, “Prices are up, so the market is doing great.” I get that, but what if we had a market where there are fewer buyers, but those who are buying are still paying higher prices? This is where fixating too much on prices would cause us to miss what’s really happening. After all, if sales volume is sliding, it could be a sign of buyers stepping away from the market, which is a much bigger issue (that will eventually show up in prices if the trend continues). My advice? Pay attention to prices, but give equal or more focus to what is happening with current listings and sales volume. Are buyers absorbing the listings? What are they saying about the market? How is volume changing? Is the number of sales normal or not right now? These are some of the questions to keep asking.

Any thoughts?

—–——– Big local monthly market update (long on purpose) —–——–

Now for those interested, let’s talk about Sacramento trends. Prices have been a bit flat, but the bigger story here is the sales volume slump streak of fourteen months has ended. If I had to pick a few phrases to describe the market it would be competitive if priced right, modest price growth, lower volume, and fairly normal stats for the spring / summer so far.

DOWNLOAD 70+ visuals: Please download all graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

THE SHORT VERSION:

Prices feel a bit flat
The volume slump streak ended
July looks fairly normal stat-wise
Pendings are strong right now
Sales volume is still down this year
The market is slowing for the season
Mortgage rates are like a steroid
Inventory is sparse (but not in El Dorado County).

THE LONGER VERSION:

Here are some of the bigger topics right now:

The volume slump streak has ended: We had a fourteen month streak going, but it’s now done. For fourteen months in a row we’ve seen sales volume down compared to the same month last year until this month where sales volume was up about 4% in the region. It was a strong month for most local counties, though El Dorado County was down 15% from last year.

Modest price growth: Price metrics in the region are up about 2-5% or so this year compared to last year depending on which price metric we’re looking at. In short, this is pretty modest price growth overall, which has been the narrative all year (did you hear that sellers?).

Not surprised by slowing: At this time of year we tend to see prices begin to cool and it takes longer to sell. This is exactly what the stats are showing us below too. This comes as a shock to some, but if you follow real estate closely there’s a rhythm to the market, which means we can expect this slowing EVERY. SINGLE. YEAR. In short, in a normal seasonal slowing we tend to see most of these things below happening to greater degrees as we inch closer to the holidays. This is a good reminder that low mortgage rates and sparse inventory aren’t a trump card to buck a traditional seasonal slowing. And if you want proof, it took three days longer to sell last month in the region compared to the previous month.

Rent control: The City of Sacramento approved a rent control measure today. This is huge news and it’s absolutely something to watch. I’ll be talking lots about this in coming time as the trend unfolds. I actually ran a Twitter poll the other day about rent control.

Inventory is down overall (mostly): In the region we have less than two months of housing supply. This is actually down from last year. In short, inventory is sparse on one hand, though on the other hand the new normal is low inventory. It’s tempting to say stuff like, “It’s normal to have a 5-month supply of homes for sale,” but that’s simply not true for today. Maybe it used to be the norm, but for now our new normal looks to be somewhere between 2 to 2.5 months of housing supply.

Multiple offers: When I talk about the market slowing it can sound confusing because the market feels really competitive when properties are priced right. In fact, you’ll probably get a few offers if you price it correctly. But if you overprice you can very easily get zero offers (really). Here’s a stat I’ve been tracking each month. As you can see nearly half of all sales had more than one offer last month. But then again, nearly half of sales didn’t too.

Inventory is GROWING in El Dorado County: Inventory has been shrinking in the market, but not in El Dorado County. This is a new graph I made and I hope you like it. I know it’s busy, but can you see recently how inventory has been shrinking everywhere besides El Dorado County? I may unpack this in a deeper blog post at some point, but this is definitely something to watch. Part of it could be due to the struggle of obtaining affordable fire insurance also.

Just kidding about rates never going below 4% again: It’s unreal to hear about mortgage rates at 3.5%. Remember just a couple years ago when everyone and their Mom were saying, “Rates have bottomed out.” Just kidding. They didn’t. On a serious note, low rates can act as a steroid to help get buyers off the fence and play the market. It helps buyers also artificially afford higher prices too, which isn’t the healthiest sounding thing in the world.

Property tax appeal season: If you didn’t know, it’s now property tax appeal season in the region. Most counties allow residents to dispute their property taxes between July and late November or early December (Placer County is mid-September). Here’s how the process works. Not many people honestly pay attention to their property taxes in an up market. It’s just true. But I advise for all property owners to stay in tune to be sure they are paying a fair share and no more.

I could write more, but let’s get visual instead.

FOUR BIG ISSUES TO WATCH:

1) SLOWER GROWTH: The market continues to show price growth, but the rate of change is slowing. This almost sounds offensive to some because the narrative in real estate is often that the market is always blazing hot. But let’s remember “slow” is not a dirty word in real estate. Moreover, do you know what sellers need more than anything right now? They need to price for the real market today rather than the ultra “hot” market of yesteryear.

2) A QUICK RECAP: All year prices have shown a modest uptick. What I mean is prices are up from last year, but not by much. Keep in mind the lowest price ranges are likely the “hottest” market in town too.

3) VOLUME SLUMP: Up until this past month the number of sales slumped in the region for 14 months in a row (and 13 months in Sacramento County). Sales volume was strong in July though and actually up. This year volume is still down about 9% in the region though. Overall despite a lower year of volume, it’s still not outside of normal low ranges (see 2014 and 2015).

4) PRICES SOFTENED IN JULY: The market generally slowed in July in terms of price growth. This is why I’m saying prices feel a bit flat. This is fairly normal for the time of year, and sometimes we see prices bounce up and down as summer comes to a close. Stay tuned. Let’s keep watching.

NOTE: Take El Dorado County data with a grain of salt. Stats change significantly month by month.

Thanks for respecting my content: Please don’t copy my post verbatim or alter the images in any way. I will always show respect for your original work and give you full credit, so I ask for that same courtesy. Here are 5 ways to share my content.

Please enjoy more images now.

SACRAMENTO REGION (more graphs here):

SACRAMENTO COUNTY (more graphs here):

PLACER COUNTY (more graphs here):

EL DORADO COUNTY (more graphs here):

DOWNLOAD 70+ visuals: Please download all graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

Questions: What are you seeing out there? What do you think prices are doing? What are you hearing from buyers and sellers lately?

If you liked this post, subscribe by email (or RSS). Thanks for being here.

Appraisers don’t use race when valuing homes

June 22, 2019 By Ryan Lundquist 59 Comments

Last week in a congressional hearing on the future of the appraisal profession, some research was used to suggest appraisers are showing racial bias and essentially undervaluing black neighborhoods. I was not expecting the conversation to go that way during the hearing and I’ll admit I’m deeply concerned about the emerging narrative of appraisers being racists.

I know race is a polarizing topic, but I wanted to approach this today with humility to clarify a few things. Please join me in respectful conversation.

THREE THINGS:

1) Appraisers don’t use race: Appraisers cannot and do not use race as a factor when coming up with a value. This is 100% off limits – not to mention highly unethical and immoral. Race has absolutely nothing to do with value. Comps are never selected based on race or racial boundaries of any kind. Let me say that again. Race is NEVER considered during a valuation.

2) Have appraisers “devalued” neighborhoods by $48,000? In the congressional hearing a panelist talked about a study that shows black neighborhoods are devalued by $48,000 compared to otherwise similar white neighborhoods. That’s alarming and society needs to have some serious discussion about this, but this study has NOTHING to do with appraisers actually devaluing properties (read it here). When we hear the word “devaluation” it sounds like we’re talking about something appraisers are doing, but the $48,000 price disparity comes from the author studying price trends from Zillow rather than analyzing the actions of appraisers. In other words, appraisers are NOT devaluing homes by $48,000. Yet when congress members heard “devaluation” and the speaker saying appraisers are part of the problem, the impression is that appraisers are clearly showing bias by devaluing properties based on race. This impression has certainly been passed on via social media too. You can watch the hearing here.

3) Appraisers reflect the market: One of my takeaways from the hearing is there’s a deep misunderstanding of what appraisers actually do, which is why it’s easy to place blame for this $48,000 price disparity on appraisers.

a) Not magicians: Appraisers aren’t magicians able to cause value to rise or fall. We certainly don’t have the power to make prices $48,000 higher or lower in one neighborhood compared to another.

b) The only role: An appraiser’s only role is to ensure the value of a home is measured accurately without bias. What would buyers reasonably pay for a specific home in a specific location? That’s always the question, and the best reflection of value is likely going to come from competitive sales in the neighborhood itself.

c) Locations aren’t the same: The market isn’t doing the same thing everywhere and buyers are not willing to pay the same prices everywhere either. This is why the appraised value can vary so widely – even if homes are identical in different neighborhoods. The speaker’s $48,000 price disparity between black and white neighborhoods is truly shocking, but frankly that’s not an appraisal issue. The appraiser’s job isn’t to ensure values are the same everywhere. Appraisers use neighborhood sales data to come up with value and it would be unethical to borrow “comps” from a higher-priced area to jack up prices in a lower-priced community (or vice versa).

d) Helping is not an option: Even if appraisers wanted to see certain areas emerge in glory after the ugly reality of redlining, it’s still not an appraiser’s professional role to make that happen. This might sound callous, but appraisers don’t make markets move. They only measure the market rather than act as a gas pedal or brake pedal for prices. This is exactly why the $48,000 example is so flawed. This price difference isn’t caused by appraisers doing their job. There are much bigger issues at the root.

As an appraiser I will NOT:

– Show bias against race
– Value a property any differently because of race
– Discuss race in any appraisal report
– Work with people who are known racists
– Treat any clients differently due to race
– Base any opinions in my appraisal on race
– Tolerate racism in real estate if I’m aware of it
– Use subjective language to say one neighborhood is better or worse

As an appraiser I will:

– Strive to be professional and kind to everyone
– Be unbiased in my approach to value
– Respect owners and renters of all backgrounds
– Let market data tell the story of value
– Have friendships with diverse members in the real estate community
– Say yes to speaking engagements with diverse groups
– Listen when people talk about racism in real estate
– Be open to findings in studies on racial bias in valuation
– Speak up when narratives like this emerge
– Clarify the role of appraisers

Why I wrote this: After watching the hearing last week I was deeply concerned that the neutral role appraisers play is being sorely misunderstood. I’m dismayed too that colleagues are being perceived as racists.

In Closing: We have a systemic problem of racial discrimination in our country and there is an ugly history of racism in real estate too. In fact, here’s a sobering presentation talking about redlining in Sacramento. This is exactly why we need to have conversation about the study showing price differences between black and white neighborhoods. This is real. But before running with the headline that appraisers are “devaluing” neighborhoods by race, let’s hit the pause button. The study quoted doesn’t support this claim. Is racism real though? Of course.

Want to comment? Please know I will not approve any inflammatory or racial comments, so I ask that you choose your words accordingly. Likewise, if you don’t want to work with me because I won’t tolerate racism in my life and business, don’t let the door hit you on the way out.

Questions: What is your reaction to the information above? What did I leave out? What are your concerns about racism in real estate? Let’s chat.

If you liked this post, subscribe by email (or RSS). Thanks for being here.

appraisals

Share:

Share:

Share:

Share: