Mary Cummins, Real Estate Appraiser, Real Estate Appraisal, Los Angeles, California, Mary Cummins.

Mary Cummins is a real estate appraiser in Los Angeles, California with 38+ years of experience. Cummins provides real estate appraisals for banks, lenders, mortgage brokers, Appraisal Management Companies (AMCs), lawyers, Courts, factors and private parties for lending, lawsuits, probate, estate planning, divorce and all types of litigation. Cummins provides 1004, 1073, 1025 and other form reports, narrative reports and historical appraisals besides real estate research and appraisal advice.

Showing posts with label realtor. Show all posts

Wednesday, October 2, 2024

Chicago Urban League, Chicago Association of Realtors, Preparing for An Appraisal, Comments by Mary Cummins, Real Estate Appraiser

I attended Chicago Urban League, Chicago Association of Realtors Zoom webinar today on Preparing for an Appraisal. Good questions and answers. Below is the summary. My notes, comments below that. I'll post link to video if, when they release it.

"Preparing for An Appraisal.On October 2nd from 7:00-9:00 PM, join the Chicago Urban League's House and Wealth Committee for part one of a three-part virtual series. During the event, you will gain valuable insights into the appraisal process and learn how to advocate for fair valuations.

Learn from top experts in the real estate field on how to prepare for an appraisal and advocate for your property’s value. Whether you’re a Realtor, Realist, or a homeowner, this virtual event is packed with valuable insights.

Moderated by the Chicago Association of Realtors President Elect and Chair of the Chicago Urban League’s Housing and Wealth Committee, Lutalo McGee, our esteemed panelists include,

President Sanina Jones of the Dearborn Realtist Board (DRB),

President Erika Villegas of the Chicago Association of Realtors (CAR) and

Tiffany Jimenez of the National Association of Hispanic Real Estate Professionals (NAHREP) Chicago

Tom Schurer of Real Valuation Services

This 3 part series represents a joint effort of the CUL, CAR, DRB, NAHREP, NHS, RAINBOW PUSH AND NAACP- South Side to empower real estate professionals and consumers about the appraisal process and how best to advocate for home buyers and sellers to ensure they receive a fair valuation based on industry best practices."

Mary Cummins notes and comments on the meeting.

Question: Can I advocate for my value, for what I think it's worth?

Answer: Panelists said yes. Some said you can offer comps, contract. Appraiser said "Nobody knows a home better than the homeowner. It's a matter of pride."

Question: Why do consumers think they can't talk to the appraiser?

The panelists said you can and should talk to the appraiser about your value and what you think it's worth.

I sent in this comment: "Borrower can give comps, contract, list of improvements ....but can't try to influence the value. "1090.5. (a) 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."

My comment: It's a crime and you will be denied your loan if the appraiser feels you tried to influence their value. Don't say "I need $xxx,000 to get the loan," "the house is easily worth $xxx,000." Feel free to give list of similar homes of the same size, condition which have recently sold in the same area. Don't state a dollar value for fear appraiser may think you are trying to influence.

Question: Can I ask appraiser if they know the area, are competent?

Answer: Yes, but be nice and polite.

Question: Should I communicate with the appraiser in writing or on the phone?

Answer: Put things in writing so it will be included in the work file. Send it to them before the inspection. (My comment. Be polite and factual. Don't try to influence the dollar value).

Roberto Interiano, Lender, then read my comment and others agreed.

Question: Can I order my own appraisal if it doesn't have to do with a loan?

Yes, if you just want to know the value. The bank has to order their own appraiser for their appraisal for a loan.

Question: What should I have ready for the appraisal?

If you are selling, make sure your house is in show ready condition. Have any documents ready for inspection such as the survey, list of improvements.

Question: Should I remove photos from my home?

Answer: Erika Villegas: Yes, remove religious and political items. Remove personal photos because the listing photos could end up on the internet. Remove photos of people because there have been media articles which show some didn't get the "proper value" because of photos of some people.

My comment: All real estate agents tell all sellers to remove personal items, clutter and make sure home is clean and presentable. This is especially important for listing photos, showings. There are a lot of media articles out there about people white/black washing their homes to remove any trace that the owner may be black, Latino... Some articles say the value went up because of, after white/black washing. That is probably not the cause of the value change. It's a false narrative caused by the media, politicians and others.

Lutalo McGee: What about removing personal photos?

Sanina Ellisa Jones: An appraisal is subjective. It's problematic and why appraisals come in lower in our (POC) economy, community. It's because of racism, redlining, discrimination from early 1900's. The maps said risk is equal to blacks. African Americans were marked red, hazardous. It's no longer legal but still subjectivity exists from that practice. Take down religious, political items. I shouldn't have to remove my face because the value could be lower. Homes are devalued based on who lives there. We shouldn't have to do it but we should do it for the value. Values shouldn't be based on photos.

My comment: Appraisers value the home and not the occupants. Home appraisal is a math formula. AVMs use the same formula but appraisers have all the data needed to ascertain value. We generally don't even know race, color of owner, borrower or of the comp homes that sold, are listed. It's a false narrative. That said I agree that you should remove personal items, photos, religious, political items for the listing photos, showings. Buyers want to imagine themselves in the home and not you. They want a blank slate. Homes look bigger without clutter. There are many articles about this online. Appraisers blur all photos that include people, religious items, political items, things such as gun collections, "personal" items... Even if you don't remove your photos, items, we will blur them.

Her definition of redlining is also incorrect. 70% property in HOLC map area D or red were owned by white people. While blacks, Latinos ... lived there whites owned most of the property. Whites were the main ones who had to pay higher interest rates to get the loans. Race wasn't included in all maps. Race was one of many, many factors included in the maps. We use all those same factors today except race. The factors i.e. property age, condition, value, predicted depreciation, income of residents, location near hazardous sites, freeways...are still used today. If you removed race from those maps, they were still just as accurate for risk. Race had NOTHING TO DO with the value or risk. 1935 HOLC program brought lots of money to those areas. Before this there were no loans or they were small and super expensive. Most areas in D zones are now totally refurbished and many are affluent areas. The HOLC program money actually helped. There is a lot of research which proves this but everyone likes to repeat the false stories. I remember when I first heard about redlining around 1983. I also believed that false shit until I did some research and educated myself. Here's an article I wrote about redlining citing the research.
https://mary--cummins.blogspot.com/2021/05/redlining-in-home-loan-financing-mary.html

Lutalo: Should people put an appraisal pkg together?

Sanina: The listing agent advocates for the home value. Have a CMA, floor plan, survey, size, neighborhood details, upgrades, remodel, energy features to show appraiser how listing agent determined the list price.

My comment: The listing agent should already have a property package. Appraisers are open to receiving data. A list of similar sold, listed comparables is good. List of improvements, floor plan if available, survey, energy features... A list of maintenance items is fine but appraisers assume properties are maintained. Maintaining your property doesn't give you extra value.

Appraiser Tom Schurer: Tell the appraiser if there are multiple offers. Let the appraiser know what's happening in the community, developments.

Lutalo McGee: What about new rehabs in area where there aren't any new rehabs sold.

Schurer: You make time adjustments on closed sales, use pending sales.

Lutalo: What do appraisers look at when determining value? What should homeowners do to their homes to prepare?

Schurer: Paint it. It gives a good clean feel. Kitchen, baths drive home values, school district, neighborhood. Nice curb appeal.

My comment: If your home desperately needs a paint job, do it. Just don't expect 100% return on investment. Appraisers look mainly at location, size, bed/bath count, kitchen/bath condition in that order. Don't add a new kitchen/bath for an appraisal. You won't get 100% return on investment in terms of value. It's good to do it anyway if most homes have renovated kitchens, baths and you can enjoy it while you live there.

Question: What if appraiser asks for Tidewater?

Answer: Schurer: It means the appraiser needs help. They can't get value needed. They ask agent for help. Reconsideration Of Value ROV process. The new program looks good. Should be done by end of October and we can talk about it.

My comment: Tidewater: If the VA appraiser believes that the actual home value will be lower than the listing price, they will invoke tidewater. This is simply a heads up that gives the listing agent 48 hours to support the listing price. The agent will then provide similar sold comparables which support the list or contract price. I've found most of the time someone enlists Tidewater, contract/list price was over market value.

Question: How do we navigate AI.

Answer: Schurer: AI will change our world and real estate. RE is a people business. We laughed at early AVM like Zillow. It's real good these days. My future will be reconciling data sets, not giving opinion of value. I will just say why a dataset is wrong for the value of a home (how would he know if he didn't appraise it?) We will still need our smart human brains. Play along. Don't be afraid.

My comment: AI, AVMs are only as good as the data they have. GIGO, Garbage In Garbage Out. AVMs only work with newer, median size, median priced homes in average to good C3 condition. They don't work on older custom homes in fair/vastly improved condition with no view/views on irregular lots... We will still need appraisers for those types of homes.

CEO Urban League Karen Freeman Wilson: We need to know historical context, how the past affects the present. We need to know how to eliminate barriers to home ownership.

My comment: Totally agree.

The next webinar in the series will be with appraiser Chris Posey. Posey will teach us how to read an appraisal report and spot red flags. My coment: Chris Posey is very experienced and knowledgeable. He'll be giving great advice.

Wednesday, March 20, 2024

NAR Sitzer-Burnett Settlement FAQ, National Association of Realtors, by Mary Cummins real estate appraiser

nar,national association of realtors,mary cummins, real estate appraiser, real estate appraisal, los angeles, california, realtor, settlement, commission, buyer,seller

Notice I just received from NAR on the National Association of Realtors Sitzer-Burnett settlement. Key points: It takes effect mid July 2024. Sellers can't offer buyer commission in MLS offerings. They can still offer buyer concessions in MLS but buyer commissions must be negotiated off MLS. Put it in the contract. Buyers must have agreements with buyer agents before showing properties.

My comment. Don't expect total price or total commission amount to go down. They've always been negotiable. Sellers can pay a one time fee of $500 just for an agent to list the home in MLS. They can pay to stage a home, professional photos, sign, flyers, CMA, BPO... separately. Or they can pay a commission which was generally 5-6% of home sales price split 50/50 buyer/seller agents. With full commission sellers agents show the home, do open houses, speak with buyers, present offers, take photos, make flyers... and help negotiate the best price and terms. If the listing expires, agent eats their invested costs. Most sellers paid 5% offering 2.5% to buyer's agent. There may be some buyers agents who will write, present, negotiate an offer, order escrow, check documents, help with inspections...for a fee but most want 2.5%. The seller will be keeping price the same. They won't be getting an extra 2.5-3% to keep. It will end up on the buyer side in one way or another as a cost. Buyers most likely won't be paying the buyer's agent commission along with down payment. That would be stupid and expensive as it's already incorporated into the price. Buyers will just add it to the offer, contract, escrow in price then loan funds it. We'll see how this shakes out after a year but I think it's just an MLS technicality for now.

#NAR #NARsettlement #marycummins #realestateappraiser #realestatecommission #realestate #commission https://forms.themls.com/forms/NAR-Settlement-FAQ.pdf

"NAR Settlement FAQ
Understanding Broker Commission Changes

Q1: What is the NAR agreement regarding home seller class action lawsuits? A1: The NAR has reached a proposed settlement agreement to resolve litigation related to claims brought on behalf of home sellers regarding broker commissions. This agreement aims to end disputes against NAR, over one million NAR members, state and local REALTOR® associations, association-owned Multiple Listing Services (MLSs), and certain qualifying brokerages.

Q2: What prompted the need for this agreement? A2: The Sitzer-Burnett verdict and subsequent similar cases raised concerns about real estate practices and consumer compensation in the industry. NAR has been working to address these concerns and provide a resolution for its members and the broader industry.

Q3: What are the main goals of this proposed settlement? A3: The settlement aims to secure a release of liability for as many NAR members, associations, and MLSs as possible, and to maintain consumer choice regarding real estate services and compensation.

Q4: What are the significant changes proposed by this settlement? A4: In the proposed settlement, NAR agreed to put in place several practice changes, including: ● Prohibiting offers of compensation on the MLS. Offers of compensation could continue to be an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals. This rule will not prevent sellers from offering buyer concessions on an MLS (for example – concessions for buyer closing costs). ● Additionally, NAR has agreed to require MLS participants working with buyers to enter into written representation agreements with their buyers before touring a home.

Q5: What is the timeline for implementing these changes? A5: The new rules regarding offers of compensation and written agreements are set to go into effect in mid-July 2024.

Q6: What are the next steps in the settlement process? A6: The settlement is subject to court approval, which is expected to take several months or more. Interested parties may raise objections during this process. NAR will provide updates as the settlement process unfolds.

Q7: How does NAR justify settling these claims? A7: While NAR continues to deny any wrongdoing, settling the lawsuits aims to provide closure for over one million NAR members and other parties involved. Exploring other legal options like appeals or reorganization could have prolonged uncertainty for members and consumers.

Q8: What is the MLS's role in the real estate market moving forward? A8: Despite these changes, the MLS will remain a vital resource, providing accurate and timely information for professionals and consumers alike. It will continue to serve as the foundation upon which housing decisions are made, offering clarity and insight into the market.

Q9: What is the outlook for the MLS and its members amidst these changes? A9: While NAR’s announcement marks the beginning of a period of change, we are prepared to respond and adapt. The MLS will remain a cornerstone of the real estate market, facilitating transactions and ensuring its continued functionality. The MLS will uphold its mission to make the real estate market work. It will continue to provide essential information and support transactions, fostering transparency and competitiveness in the housing market.

Additional Resources: See NAR’s full announcement March 15, 2024 NAR Provides FAQs and Resources Regarding Settlement March 19, 2024

DISCLAIMER: https://mary--cummins.blogspot.com/p/disclaimer-privacy-policy-for-blogs-by.html

Mary Cummins

Thursday, March 3, 2022

What is an Automated Valuation Model AVM? The Good, the Bad and the Ugly, by Mary Cummins Real Estate Appraiser

automated valuation method, avm, appraisal, mary cummins, los angeles, california, real estate appraisal, appraiser, zillow, redfn, trulia, realtor, realist, realavm, fha, corelogic

automated valuation model, automated valuation method, robot appraisal, algorithm, math formula, avm, appraisal, mary cummins, los angeles, california, real estate appraisal, appraiser, zillow, redfn, trulia, realtor, realist, realavm, fha, corelogic

Automated valuation models (AVMs) are statistically based computer programs that use real estate information such as comparable sales, property characteristics, and price trends to provide a current estimate of market value for a specific property.

Most people are familiar with Zillow and Zillow's Zestimate of home value. Zillow themselves have stated the Zestimates are not an appraisal. Below is their main disclaimer.

"The Zestimate® home valuation model is Zillow’s estimate of a home’s market value. A Zestimate incorporates public, MLS and user-submitted data into Zillow’s proprietary formula, also taking into account home facts, location and market trends. It is not an appraisal and can’t be used in place of an appraisal."

Real estate appraisers have always said "the 'a' in 'Zillow' is for 'accuracy.'" In light of Zillow's recent ibuyer program failure everyone now realizes they are not accurate. So what is the problem with AVMs?

The main issue with AVMs is the quality of the data. We all know Garbage In, Garbage Out or GIGO. Zillow and other AVMs such as Trulia, RedFn, RealAVM, Realtor, CoreLogic use a proprietary formula and public data to make their estimates. They also allow the public to edit their data and use false MLS data from real estate agents. They do not actually look at the home. They don't know the condition. Is it a full high quality remodel or ready to be demolished. They assume average condition. They don't know the amenities, upgrades, view (ocean, lake, freeway, back of an industrial building), additions, neighborhood boundaries (Bel Air proper or the flats of Los Angeles), exact location/neighborhood (on the ocean, a lake, in a gated community, built on an old landfill, next to the freeway and industrial properties)...and many other very important factors. They assume all properties in area have the same view and specific location. They don't even know if the home actually exists or burned down last year.

This of course makes their estimates vary widely and results in an inaccurate and biased valuation. Zillow's own research has shown that their accuracy is not as good in areas with little public data. Not all Tax Assessors, Building and Safety, MLS list data or more important recent accurate data online publicly. Some states don't report sales prices publicly. This goes back to GIGO.

I have found and Zillow has admitted publicly that their accuracy is lower in the extremes. Homes which fall on the lower and higher end of the price ranges for areas tend to have less accurate estimates. Zillow also admitted that they are less accurate in areas with older homes. There is no way for a computer program to tell if a home has been fully remodeled or needs to be demolished. This makes it less accurate in areas which are revitalizing. Some call revitalization "gentrification."

Inaccurate valuations are bad for everyone. If you're a homeowner and the bank offers to waive the appraisal in exchange for using an AVMs, this can cause problems. If you upgraded your property, you probably won't be getting added value for all your upgrades especially if most homes in the area aren't upgraded. If your home has one of the best views in the area or the largest lot, the AVM won't see that value either. You will get a lower valuation. The rate you pay for the loan is based on the loan to value LTV ratio. The higher the appraised value, the lower the LTV and the less risk for the bank. The less risk, the lower the cost of the loan, the lower the rate, the less likely you are to have to pay mortgage insurance. If you're looking to get some cash out, you would get less cash out of the deal with a lower valuation. Using the AVM just puts $350-$500 more money into the hands of the lender. It doesn't save YOU any money no matter what they say.

Now if you have the worst house in the neighborhood in bad condition, an AVM would be to your benefit. They will most likely over value it. If you are buying said home, you might incorrectly over pay for the home assuming it's worth more. This is why investors should never rely on AVMs. An appraisal by a licensed appraiser is like $350 insurance. You will get an unbiased independent full valuation of the property. $350 is a lot better than paying $100,000 more than what it's really worth.

I'll quickly go into how appraisers valuate homes so you can understand the basic AVM algorithm a little. This is a basic simplified search. We generally search for sales and listings as similar to the subject as possible. We use the computer to search for sales, listings within a 1/2 mile radius from the subject that have sold within the last 90 days which are +/- 15% difference in gross living area. We then choose the best comps based on location, size, bed/bath count, view, condition, amenities... Sometimes there are no recent sold comps so we have to go back a year or so and adjust for appreciation/depreciation over time.

This is where having someone who has inspected and actually viewed the subject property is so important. This is also why it's so important to have an appraiser with years of experience who knows the area very well. A math formula can't see the condition, view, real bed/bath count, upgrades, amenities, specific location in a neighborhood... They generally only see tax roll and MLS size, bed/bath count, number of garages, pool. Those are very rarely accurate. Tax roll is generally the original size. Real estate agents lie in MLS ads about everything. You won't know the real full bedroom and full bathroom count of the subject or comps without an appraiser.

The appraiser also views the sold and listed comparables. Are they tear downs selling for land value or totally remodeled with new additions that don't yet show up on the tax roll? Does the subject have an ocean view but sold comparables face a loud ugly freeway? Is it a full bedroom with it's own door or a walk through bedroom or just a den? Is it a half bath, full bath or just a toilet in the basement? These are very important factors which can make the value differ by up to 100%. The AVM will never know all of those things about a property. This is why they are not accurate.

Recently I saw a property with AVMs that varied from $750K to $1.9M. Zillow, Trulia, RedFn came in way too high at about the same price. Realtor, CoreLogic RealAVM came in at market based on my own valuation after looking at the property. I realized the problem with the values when I saw the comps that Zillow, Trulia, RedFn showed for the subject. They were using comps from 1.5 miles away in a neighborhood that sells for twice as much as subject's neighborhood. That neighborhood sells for so much more because the homes are very high quality, they have the best school system in the state, lots of local shopping and a low crime rate. This was a Beverly Hills versus Watts comparison. Clearly Zillow, Trulia, RedFn algorithms are wrong. They cannot define a comparable neighborhood.

The issue had to do with the size of the subject and recent sales. It was larger than most homes that had sold recently. The homes directly around subject were all the same size built at the same time but they hadn't sold recently. Instead of going back in time to find an older sale of a similar size and time adjusting for appreciation, Zillow kept widening the search until it found comps of a similar size that had sold recently. That was a huge mistake. An appraiser would never base their value on homes from a totally different neighborhood which generally sells for twice as much. Remember, the three main indicators of value are location, location, location. This is why AVMs are so inaccurate and should not be used for valuations.

AVMs are just an algorithm based on a math formula. Some of the math formulas like Zillow are deeply flawed. They don't know neighborhood boundaries or the true characteristics of the properties. A math formula is only as good as the data used in the calculations. Because the AVM is not a live experienced licensed appraiser who has actually inspected the property and neighborhood the resulting value will never be accurate.

Please, do not rely on AVM valuations for real property values. If you are refinancing your home and your home is upgraded or has superior features than most homes in your area, you will be better off requesting a full appraisal. The lender will be paying for the appraisal so it costs you nothing. The lender just wants to save a few dollars for themselves by going with the free AVM. If your home is almost a tear down, use the AVM ;-)

References

List of different AVMs

Freddie Mac: Home Value Explorer® (HVE®)
Zillow: Zestimate
Realtor.com: Collateral Analytics, CoreLogic Total Home Value for Marketing, Quantarium
Redfn: Redfin Estimate
Trulia: Trulia Estimates
RealAVM™ is a CoreLogic® product
Fannie Mae: AVM 1 (data assessment/ integrity checks, comparable selection, comparable adjustment, and reconciliation), AVM 2

CoreLogic actually has a few patents related to their AVMs as does Zillow. Here is the patent for their main AVM model. The description is very interesting. It deals with the issues of geographical neighborhoods and number of sales during set time periods, i.e. spatial and temporal distinctions. This is why they're more accurate than Zillow and had the correct AVM for the Marin, California property noted above. They have a better spatiotemporal understanding of the nature of real estate. They even stated that a "property value given by an appraiser can vary, sometimes erratically, depending on the comparable properties chosen in performing the appraisal." They stated sometimes there are no sales during the short range of time used by appraisers. This is why it's better to go back in time and time adjust if there are no sales rather than widen the geographical search area. The location factor carries a lot more value weight.

https://patents.justia.com/patent/20130144798

Here's one Zillow patent which goes into their algorithm, math formula. They're clearly mainly relying on median and average calculations.

https://patents.justia.com/patent/8676680

Great article on the issues and problems with AVMs. They're not standardized especially their reported confidence scores, Forecast Standard Deviation FSD and error rates.

https://vegaeconomics.com/webfiles/Principles%20for%20Calculating%20AVM%20Performance%20Metrics.pdf