Mary Cummins, Real Estate Appraiser, Animal Advocates, Los Angeles, California

Mary Cummins, Real Estate Appraiser, Animal Advocates, Los Angeles, California
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Saturday, July 30, 2022

2022 State of Real Estate from Greater Los Angeles Realtors by Mary Cummins Real Estate Appraiser

mary cummins, real estate appraiser, los angeles, california, 2022 state of real estate, otto catrina, steven thomas, california association of realtors, great los angeles realtors, reports on housing
mary cummins, real estate appraiser, los angeles, california, 2022 state of real estate, otto catrina, steven thomas, california association of realtors, great los angeles realtors, reports on housing

Really good webinar on 2022 State of Real Estate from Greater Los Angeles Realtors ( https://www.facebook.com/GreaterLARealtors @GLA_Realtors). The speakers were Otto Catrina from the California Association of Realtors ( https://www.facebook.com/CAREALTORS @CARealtors) and Steven Thomas of Reports on Housing ( http://www.facebook.com/reportsonhousing @housereports). If you're a member of GLAR, a video of the webinar will be here along with the slides. https://www.greaterlarealtors.com/members/new-updates If you're not a member my summary is below along with most of the slides. 

The biggest issue of course was the Fed interest rate increase of .75%. This has really slowed the housing market which was the intent of the rate increase. The Fed and others expect a target Fed rate of 2.5 to 2.75% in 2023. This rate affects generally shorter term interest rates such as credit card rates, car loans and equity lines. It does affect long term home loan rates but not as directly or quite as much. 

Europe also has inflation but they don't have the Fed controls that the US has. Steven Thomas is not calling a recession right now even though we had two quarters of decline in GDP. He will call a recession if the GDP declines for a longer period. The job market is still strong as is real estate. He uses six factors in determining a recession.

Steven Thomas coined the term the "pandession" which is a combination of the pandemic and recession. It's not a recession. The current market today is affected by the pandemic and lack of balanced supply and demand of homes. Last year was a supply catastrophe. It's still a seller's market but as rates rise, demand slows and supply starts to rise. People don't want to sell because they love their current mortgage rate. If they don't buy a new home after selling, they'd have to deal with high related rent. 

Thomas stated this is not a bubble. There will be no housing crash. People have lots of equity. Home values are still doing well. Most homeowners today have good credit as opposed to 2007/2008 when they gave loans to everyone even people with bad credit. Our issue today is lack of supply though it's changing. 

We have a headwind right now which is slowing things. It will continue to the end of the year but home values won't plunge. Luxury has really slowed. "Luxury market got a cold because of what has happened recently on Wall Street." We may have a recession next quarter but it won't affect housing that much. Not all recessions affect housing. All these comments go along with his slides, charts, research and numbers. 

Below are the slides from first Otto Catalina of CAR then Steven Thomas of Housing Market in chronological order. I missed a few. The slides are larger after the first 20 when I expanded my view. Click to see images larger. If you're in real estate sales or appraising, Thomas' newsletter subscription looks pretty good and it's affordable. I may subscribe as he really has his finger on the pulse of the market. He runs a lot of numbers and makes some great charts and graphs besides giving his experienced common sense commentary. If you're in real estate in Los Angeles, makes sense to join GLAR. If you're in real estate in California, join CAR at least for the forms. 

mary cummins, real estate appraiser, los angeles, california, 2022 state of real estate, otto catrina, steven thomas, california association of realtors, great los angeles realtors, reports on housing
mary cummins, real estate appraiser, los angeles, california, 2022 state of real estate, otto catrina, steven thomas, california association of realtors, great los angeles realtors, reports on housing

mary cummins, real estate appraiser, los angeles, california, 2022 state of real estate, otto catrina, steven thomas, california association of realtors, great los angeles realtors, reports on housing
mary cummins, real estate appraiser, los angeles, california, 2022 state of real estate, otto catrina, steven thomas, california association of realtors, great los angeles realtors, reports on housing














































Mary Cummins of Cummins Real Estate is a certified residential licensed appraiser in Los Angeles, California. Mary Cummins is licensed by the California Bureau of Real Estate appraisers and has over 35 years of experience.


Mary Cummins, Mary K. Cummins, Mary Katherine Cummins, Mary, Cummins, #marycummins #animaladvocates #losangeles #california #wildlife #wildliferehabilitation #wildliferehabilitator #realestate #realestateappraiser #realestateappraisal #lawsuit real estate, appraiser, appraisal, instructor, teacher, Los Angeles, Santa Monica, Beverly Hills, Pasadena, Brentwood, Bel Air, California, licensed, permitted, certified, single family, condo, condominium, pud, hud, fannie mae, freddie mac, fha, uspap, certified, residential, certified resident, apartment building, multi-family, commercial, industrial, expert witness, civil, criminal, orea, dre, brea insurance, bonded, experienced, bilingual, spanish, english, form, 1004, 2055, 1073, land, raw, acreage, vacant, insurance, cost, income approach, market analysis, comparative, theory, appraisal theory, cost approach, sales, matched pairs, plot, plat, map, diagram, photo, photographs, photography, rear, front, street, subject, comparable, sold, listed, active, pending, expired, cancelled, listing, mls, multiple listing service, claw, themls, historical appraisal, facebook, linkedin DISCLAIMER: https://mary--cummins.blogspot.com/p/disclaimer-privacy-policy-for-blogs-by.html

Tuesday, July 12, 2022

Los Angeles Sixth Street Bridge and Texas Seventh Street Bridge Similarities - Mary Cummins real estate appraiser

After I posted about the new Los Angeles Sixth Street Bridge and viaduct a Texas friend told me it looked like the Fort Worth, Texas Seventh Street Bridge and viaduct. They look very similar. Some facts about both. 

The Los Angeles, California Sixth Street Bridge and Viaduct built 2022 is 3,500 ft long with 20 arches and four traffic lanes. It took six years at a cost of $588,000,000. It replaced the 1930 Sixth Street Bridge and Viaduct.





https://www.sixthstreetviaduct.org/

The Forth Worth, Texas Seventh Street Bridge and Viaduct built 2013 is 1,000 ft long with 12 arches and four traffic lanes. It took four months to build at a cost of $25,000,000. It replaced the 1919, 1954 Van Zandt Viaduct.


https://www.fortwortharchitecture.com/7thstbridge.htm

Arches are actually a common bridge element. Early bridges back before Roman times were arched for structural integrity. Here's an article on only arched bridges.

https://structurae.net/en/structures/bridges/arch-bridges

The original Sixth Street Bridge built in 1930 below had arches but only two. The LA bridge has arches that go below the bridge driving surface whereas the Texas one does not. Still, they are very, very similar bridges. I think at the very least the LA bridge was inspired by the Texas bridge.



Mary Cummins of Cummins Real Estate is a certified residential licensed appraiser in Los Angeles, California. Mary Cummins is licensed by the California Bureau of Real Estate appraisers and has over 35 years of experience.


Mary Cummins, Mary K. Cummins, Mary Katherine Cummins, Mary, Cummins, #marycummins #animaladvocates #losangeles #california #wildlife #wildliferehabilitation #wildliferehabilitator #realestate #realestateappraiser #realestateappraisal #lawsuit real estate, appraiser, appraisal, instructor, teacher, Los Angeles, Santa Monica, Beverly Hills, Pasadena, Brentwood, Bel Air, California, licensed, permitted, certified, single family, condo, condominium, pud, hud, fannie mae, freddie mac, fha, uspap, certified, residential, certified resident, apartment building, multi-family, commercial, industrial, expert witness, civil, criminal, orea, dre, brea insurance, bonded, experienced, bilingual, spanish, english, form, 1004, 2055, 1073, land, raw, acreage, vacant, insurance, cost, income approach, market analysis, comparative, theory, appraisal theory, cost approach, sales, matched pairs, plot, plat, map, diagram, photo, photographs, photography, rear, front, street, subject, comparable, sold, listed, active, pending, expired, cancelled, listing, mls, multiple listing service, claw, themls, historical appraisal, facebook, linkedin DISCLAIMER: https://mary--cummins.blogspot.com/p/disclaimer-privacy-policy-for-blogs-by.html

Monday, July 11, 2022

Diminution of Value in Real Estate Appraisal and Valuation by Mary Cummins Real Estate Appraier Expert Witness

diminution of value, diminution in value, value, real estate appraisal, mary cummins, real estate appraiser, valuation, calculation, los angeles, california, expert witness, black's law library, property value, expert witness, litigation

Diminution of value in real estate appraisal refers to the reduction in the market worth or perceived value of a property due to various factors. Black's Law Dictionary definition: Rule of damages which provides the difference between “before” and “after” values of property, which has been damaged or taken. These factors can be external (outside the property) or internal (related directly to the property itself). Here are some common examples:

External Factors:

Neighborhood Decline: If the neighborhood experiences an increase in crime rates, deterioration of infrastructure, or a decline in nearby amenities like schools or parks, the property's value may decrease.

Environmental Changes: Events such as the construction of a landfill nearby, contamination of groundwater, or the installation of high-voltage power lines can negatively impact property values.

Economic Conditions: Economic downturns can affect property values, leading to diminished demand or lower prices in the area.

Changes in Zoning: If zoning regulations change, affecting how nearby properties can be used (e.g., from residential to commercial), it can impact the value of neighboring properties.

Local development: A new large scale development may be built affecting traffic and access. A new freeway may be contemplated affection pollution, noise, traffic...

Internal Factors:

Structural Issues: Problems such as foundation cracks, roof leaks, or termite damage can decrease a property's value unless repaired.

Outdated Features: Homes with outdated kitchens, bathrooms, or obsolete heating systems may be less attractive to buyers, reducing their market value.

Poor Maintenance: Lack of upkeep, such as overgrown landscaping, peeling paint, or broken fixtures, can make a property less appealing and lower its value.

Loss of portion of property or loss of use of portion of property: A neighbor's wall or building could be trespassing upon the subject property limiting access, use and enjoyment of the subject property.

Legal and Market Factors:

Legal Encumbrances: Easements, restrictions, or pending legal issues (like ongoing litigation involving the property) can decrease its value.

Market Perception: Negative perceptions about a property (e.g., a notorious event occurring there) can reduce its value beyond physical characteristics alone.

Example Scenario:

Consider a house located near a new freeway under construction. The noise, increased traffic, and potential pollution from the freeway may decrease the property's desirability and, consequently, its market value. This is an example of external diminution of value.

Alternatively, a property with an outdated kitchen and bathroom, which hasn't been renovated in decades, may not attract as many buyers as similar homes in the neighborhood with modern amenities. This represents an internal diminution of value.

In real estate appraisal, identifying and quantifying diminution of value involves evaluating these and other factors to determine the fair market value of the property under current conditions.

The DIV can sometimes be calculated by valuing the property as if whole then valuing the property as affected by the condition then calculating the difference or loss in value. 



Mary Cummins of Cummins Real Estate is a certified residential licensed appraiser in Los Angeles, California. Mary Cummins is licensed by the California Bureau of Real Estate appraisers and has over 35 years of experience.


Mary Cummins, Mary K. Cummins, Mary Katherine Cummins, Mary, Cummins, #marycummins #animaladvocates #losangeles #california #wildlife #wildliferehabilitation #wildliferehabilitator #realestate #realestateappraiser #realestateappraisal #lawsuit real estate, appraiser, appraisal, instructor, teacher, Los Angeles, Santa Monica, Beverly Hills, Pasadena, Brentwood, Bel Air, California, licensed, permitted, certified, single family, condo, condominium, pud, hud, fannie mae, freddie mac, fha, uspap, certified, residential, certified resident, apartment building, multi-family, commercial, industrial, expert witness, civil, criminal, orea, dre, brea insurance, bonded, experienced, bilingual, spanish, english, form, 1004, 2055, 1073, land, raw, acreage, vacant, insurance, cost, income approach, market analysis, comparative, theory, appraisal theory, cost approach, sales, matched pairs, plot, plat, map, diagram, photo, photographs, photography, rear, front, street, subject, comparable, sold, listed, active, pending, expired, cancelled, listing, mls, multiple listing service, claw, themls, historical appraisal, facebook, linkedin

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Thursday, June 30, 2022

The False and Misleading "Greedy Landlord" Narrative by Mary Cummins Real Estate Appraiser


I've sold and appraised homes and apartment buildings of all sizes in Los Angeles, California for over 35 years. My grandmother owned apartment buildings many years ago. I've been a renter in the past. I know the issue from both sides. I've seen the leases, expense sheets and profit and loss statements. 

Let me first state that there are indeed some greedy law breaking landlords in this world. That does not mean all rental property owners are "greedy slumlords." I'm writing this article in hopes that people will understand the industry and rental property owners so they stop promoting the false narrative that ALL landlords are "greedy slumlords."

Rental housing is a business like any other business. You work to get paid and so do rental property owners. They worked hard and saved their money to buy real estate to rent to secure their financial future. They could rent cars, tuxedos but instead they rent homes.

A rental property owner needs a certain return on their investment in order to pay for the upkeep of the property and themselves. They are entitled to market rent and an income just like you are entitled to fair market wages or payment for your goods and services. The reason rents are so comparatively high today is the lack of affordable housing. The current lack of affordable housing is caused by two main problems neither of which have anything to do with the rental property owner. 

One, there are not enough homes or apartments available. Supply and demand is out of balance causing home prices and corresponding rents to rise. There are not enough homes, apartments being built to keep up with demand because of building red tape, zoning limitations, high cost of land and construction costs. This causes buyers, renters to drive up the prices. Rents directly correlate to home prices. Land prices have risen so much that building new apartments only makes sense if they're expensive luxury units. We need affordable housing but there aren't any new ones being built because builders would lose money. Would you go to work if your pay check was less than zero, if you had to pay to work for someone else? Of course not. Neither would developers. There's no affordable housing because building supply, construction has not kept up with demand for 50 years. That is the cause of your higher rent not the landlord. 

Two, most wages haven't kept up with inflation or the cost of real estate. Today's tenants are paying over 35% of their wages in rent. They shouldn't pay over 30%. In Los Angeles it's easily over 50-60% of their wages. You can't rent a one bedroom apartment in Los Angeles with a full time Los Angeles, California minimum wage job of $15/hr. Wages have been basically stagnant while the cost of living has doubled or more. We need to increase wages to match the increased cost of living. Landlords don't control your wages. They wish people made more money so paying rent would be easier.

First some basics on rental housing. A person who owns a home or apartment building which they rent must cover their expenses. The biggest one is generally the mortgage. They don't pay cash for apartment buildings just like people don't buy homes for all cash. They also have to pay property taxes, insurance, utilities for common areas or units depending on age of building (water, power, trash, oil), gardening, repairs and maintenance, management fees, salaries and benefits, business tax, income tax, permits, rent control fees, state fees, county fees, city fees, vacancy loss, rental loss, bad debt, legal fees, eviction costs and more. They also need to keep a fund for renovating units and replacement for major building components, i.e. roof, plumbing system, electrical system, furnace, air conditioning, appliances, seismic retrofit and more. They need to cover the expense of their own work hours on the property. Most rental property owners are small mom and pops with only one or two small buildings where they also live. If tenants don't pay rent, they can't pay the mortgage and could be foreclosed upon. They'd lose the building and probably also their place to live.

If someone just bought the building, the rental income does not cover all of these expenses and the mortgage. They are losing money for the first 5-10 years especially in Los Angeles, California. If the building is in older rent control, they're losing money even longer because they can't raise the rent to market until the tenant vacates. People rarely leave a rent control apartment because of the low rent. They generally stay for life even if they could afford market rent. 95% of people who live in rent control apartments don't need rent assistance in Los Angeles. They just take advantage of it because they can. I've seen rent control renters buy real estate with their savings in rent. They have luxury cars and take great vacations while some landlords are scraping by. Other renters don't bother trying to earn more money because they aren't forced to. The property owners' expenses go up but the rents don't go up accordingly. I know many property owners who refuse to own rent control units for this reason and I don't blame them.

If someone is renting out a house or small units such as 2-4, the income to expense ratio is even lower. The only time the rental income will cover expenses and produce a profit is after the owner has owned the building for many years, all the rents increase to market and the mortgage amount decreases to zero. Even if the building is free and clear, that equity belongs to the property owner. They could refinance the property if they have a large expense and add a new mortgage. They may need money for building renovation, personal medical bills or personal emergencies.

One important thing which most renters don't realize is that rent directly positively correlates to the value of the property. As property values rise so do rents. We've recently (Los Angeles, California June 2022) had a huge appreciation in real estate values in the last two years. Real estate values went up 15% per year and more in lower valued revitalizing areas. Some went up 30% per year. That would mean market rent also went up by that same amount. As property values rise so do property taxes, insurance and other expenses which are tied to the value. Interest rates just increased. If the mortgage has a variable rate, their mortgage costs just shot up as well. Lumber prices went up making renovations and repairs more expensive. All the other costs and fees continue to rise every year. If you're in a rent control building and maximum rent increase is 3% a year, the rental property owner's expenses are increasing at a greater rate. 

I remember 1978 rent control in Los Angeles, Beverly Hills, Santa Monica and West Hollywood. The elderly mom and pop rental property owners who kept rents lower before rent control were forced to sell their properties when they later couldn't break even. Some were mortgage free and still couldn't break even. Some owners lived in their buildings. They lost their homes. These are the people you called "greedy landlords." 

More sophisticated entities bought those properties and increased the rent as soon as legally possible to the maximum allowable amount every year. They evicted tenants any legal chance they got. They passed through capital improvements to the tenants. They converted some buildings to condos. They moved their children into the units. Rent control forced property owners to do this to try to break even so they wouldn't lose their buildings in foreclosure. It was legal and the right thing to do. Again, would you work for less than minimum wage? Of course not.

Some say that housing should be a right. Okay. I just don't believe the government should force private citizens to give away their assets and services for free. If the government wants to buy housing for market rate and let people live in it for free or low cost and lose money, fine. Otherwise it's a violation of the Constitution to take property owners' assets except by eminent domain. In eminent domain they are paid market value for the property. Property owners would be sort of okay with that even though they bought property to hold long term. They'd go into another business such as commercial property or maybe they'd sell cars. 

The problem with this idea is that the government tried this and failed. They couldn't properly maintain the properties because they weren't bringing in enough income and government expenses were high. The government became a slumlord. Remember the "projects?" It also costs the government at least 15% more in administrative costs to run a business than a private entity. The government has to add a minimum of 15% onto each project for this reason. 15% goes right out the window wasted on bureaucracy. The government lost a ton of money trying to provide cheap housing to poor people. This is why they no longer do this. Instead they try to incentivize rental property investors with tax breaks, low interest loans, grants, free or cheap land, density bumps, zoning variances and exemptions from some Building and Safety, environmental and other regulations. This has helped.

If you're a tenant, some suggestions. Work hard, don't take vacations, never buy anything you don't need, save your money, live as cheaply as possible and buy real estate. You can live in it or rent all or part of it out. You've solved your "greedy landlord" problem. YOU are now the "greedy landlord." If you want to rent your units out for $1 a month to people with very little money, go right ahead. It's your property. You just have to pay for the loss. Obviously the main benefit is that real estate appreciates over time, you control your home and you will make money over the long term. 

If you don't want to do that or can't because you're living in poverty, here's more advice. If your landlord is breaking the law by not properly repairing things or is charging over the legal rent allowed, take action. Research the law for your city, county and state. If your landlord is not doing these illegal things, please, be nice to them for your own good. There may come a time when you are between jobs, sick...and need a month or so of grace period on your rent. My grandmother always gave breaks to her nice tenants. Some went months without paying rent during trying times. If you act like a jerk because you've falsely believed the greedy landlord narrative, don't expect a break. Would you do favors for someone who treats you like shit? Of course not. 

If you're a landlord, some suggestions. Obviously if you're a slumlord breaking the law, you won't read this article or the one below. All rental property owners should follow the law or you will be sued and tenant won't have to pay you rent. You will lose money and deserve that. If you're a good legal rental property owner, here's a nice article about how to avoid being stereotyped with the false narrative of the "greedy slumlord." 

https://www.baymgmtgroup.com/blog/how-to-avoid-negative-landlord-stereotypes/

Mary Cummins of Cummins Real Estate is a certified residential licensed appraiser in Los Angeles, California. Mary Cummins is licensed by the California Bureau of Real Estate appraisers and has over 35 years of experience.


Mary Cummins, Mary K. Cummins, Mary Katherine Cummins, Mary, Cummins, #marycummins #animaladvocates #losangeles #california #wildlife #wildliferehabilitation #wildliferehabilitator #realestate #realestateappraiser #realestateappraisal #lawsuit real estate, appraiser, appraisal, instructor, teacher, Los Angeles, Santa Monica, Beverly Hills, Pasadena, Brentwood, Bel Air, California, licensed, permitted, certified, single family, condo, condominium, pud, hud, fannie mae, freddie mac, fha, uspap, certified, residential, certified resident, apartment building, multi-family, commercial, industrial, expert witness, civil, criminal, orea, dre, brea insurance, bonded, experienced, bilingual, spanish, english, form, 1004, 2055, 1073, land, raw, acreage, vacant, insurance, cost, income approach, market analysis, comparative, theory, appraisal theory, cost approach, sales, matched pairs, plot, plat, map, diagram, photo, photographs, photography, rear, front, street, subject, comparable, sold, listed, active, pending, expired, cancelled, listing, mls, multiple listing service, claw, themls, historical appraisal, facebook, linkedin DISCLAIMER: https://mary--cummins.blogspot.com/p/disclaimer-privacy-policy-for-blogs-by.html

Tuesday, June 28, 2022

Staying Relevant in the Appraisal Industry, by Mary Cummins, Real Estate Appraiser in Los Angeles, California

Staying Relevant in the Appraisal Industry, webinar, class valuation, appraisal buzz, mckissock learning, mary cummins, real estate appraiser, appraisal, mel black, matt simmons, jared preisler, lamar ellis,
Staying Relevant in the Appraisal Industry, webinar, class valuation, appraisal buzz, mckissock learning, mary cummins, real estate appraiser, appraisal, los angeles, california, mel black, matt simmons, jared preisler, lamar ellis, datamaster, mai, sra, 

June 28, 2022 webinar "Staying Relevant in the Appraisal Industry." It was about continuing to get work during this slow market caused by the increase in interest rates. They suggest contacting real estate agents, developers, lawyers, accountants and others to get work doing appraisals for pre-listings, probate, litigation, property tax appeals and more. This is something all appraisers should be doing anyway. You want to balance out your work so you're not reliant on one market. They also suggested getting a drone license and drone to do drone work or add drone work to existing appraisal work. 

https://appraisalbuzz.com/staying-relevant-in-the-appraisal-industry/

http://www.mhsappraisal.com 

http://www.datamasterusa.com

http://www.appraisalbuzz.com 

http://www.mckissock.com


Mary Cummins of Cummins Real Estate is a certified residential licensed appraiser in Los Angeles, California. Mary Cummins is licensed by the California Bureau of Real Estate appraisers and has over 35 years of experience.


Mary Cummins, Mary K. Cummins, Mary Katherine Cummins, Mary, Cummins, #marycummins #animaladvocates #losangeles #california #wildlife #wildliferehabilitation #wildliferehabilitator #realestate #realestateappraiser #realestateappraisal #lawsuit real estate, appraiser, appraisal, instructor, teacher, Los Angeles, Santa Monica, Beverly Hills, Pasadena, Brentwood, Bel Air, California, licensed, permitted, certified, single family, condo, condominium, pud, hud, fannie mae, freddie mac, fha, uspap, certified, residential, certified resident, apartment building, multi-family, commercial, industrial, expert witness, civil, criminal, orea, dre, brea insurance, bonded, experienced, bilingual, spanish, english, form, 1004, 2055, 1073, land, raw, acreage, vacant, insurance, cost, income approach, market analysis, comparative, theory, appraisal theory, cost approach, sales, matched pairs, plot, plat, map, diagram, photo, photographs, photography, rear, front, street, subject, comparable, sold, listed, active, pending, expired, cancelled, listing, mls, multiple listing service, claw, themls, historical appraisal, facebook, linkedin DISCLAIMER: https://mary--cummins.blogspot.com/p/disclaimer-privacy-policy-for-blogs-by.html

Sunday, June 26, 2022

Wealth gap, income gap, home value gap, race, gender, marital status and Roe v Wade by Mary Cummins

Research has unequivocally shown there is an income and wealth gap between whites and blacks, Latinos. This is why homes owned by white people are worth more than homes owned by blacks, Latinos. People buy the homes they can afford and whites can afford to buy more expensive homes. Appraisers aren't appraising them differently. 

We also know there is a wealth, income gap among men and women, married verses single and especially single mothers with children under 18. Research has also shown that poor, black, Latino women were more likely to get abortions than white women. https://abc7.com/abortion-cdc-data-women/11815941/ 

The reversal of Roe v Wade forcing poor women especially of color to have babies is just going to make the wealth, income gap that much worse. It's also going to cost the states money in welfare, Section 8 housing, Medicare, EBT.... I don't think the GOP really thought about the repercussions of banning abortions. White Supremacists who tow the GOP line including anti-abortion will only have themselves to blame when POC actually do replace them via a higher birth rate. That's already happening but banning abortions will make it happen faster. 

Here's a great article to share with lots of pictures for those who don't care to read.

https://www.vox.com/the-highlight/23182150/abortion-rights-economic-justice

Mary Cummins of Cummins Real Estate is a certified residential licensed appraiser in Los Angeles, California. Mary Cummins is licensed by the California Bureau of Real Estate appraisers and has over 35 years of experience.


Mary Cummins, Mary K. Cummins, Mary Katherine Cummins, Mary, Cummins, #marycummins #animaladvocates #losangeles #california #wildlife #wildliferehabilitation #wildliferehabilitator #realestate #realestateappraiser #realestateappraisal #lawsuit real estate, appraiser, appraisal, instructor, teacher, Los Angeles, Santa Monica, Beverly Hills, Pasadena, Brentwood, Bel Air, California, licensed, permitted, certified, single family, condo, condominium, pud, hud, fannie mae, freddie mac, fha, uspap, certified, residential, certified resident, apartment building, multi-family, commercial, industrial, expert witness, civil, criminal, orea, dre, brea insurance, bonded, experienced, bilingual, spanish, english, form, 1004, 2055, 1073, land, raw, acreage, vacant, insurance, cost, income approach, market analysis, comparative, theory, appraisal theory, cost approach, sales, matched pairs, plot, plat, map, diagram, photo, photographs, photography, rear, front, street, subject, comparable, sold, listed, active, pending, expired, cancelled, listing, mls, multiple listing service, claw, themls, historical appraisal, facebook, linkedin DISCLAIMER: https://mary--cummins.blogspot.com/p/disclaimer-privacy-policy-for-blogs-by.html

Thursday, June 23, 2022

Alleged Appraisal Overvaluation in Sales Comparison Approach review by Mary Cummins Appraiser


This paper came out in 2017 but is making the rounds again today. The authors believe they found evidence of appraisal overvaluation in the sales comparison approach in appraisals in 2015 and 2016. I read the article and replied below. Directly below is their summary. 

"Abstract Home appraisal came under scrutiny for contributing to the home-price bubble and enabling the origination of risky mortgages that led to the post-2006 foreclosure crisis. Subsequent regulations tried to minimize or eliminate conflicts of interest and improve valuations. Nonetheless, our study of appraisals completed in 2015 and 2016 find that appraisal bias still occurred. Our analysis delves into the underlying appraisal development to identify causes of appraisal bias. Contributing factors are that comps are generally higher valued than the subject property, and appraisers are more likely to comparatively adjust upward lower priced comps but less likely to adjust downward higher priced comps. KEYWORDS housing price determination, residential appraisal"

"Using a large sample of appraisals ordered to underwrite purchase-money loan applications in 2015 and 2016, we find that about 69% of comps were represented by transactions valued at more than the subject property. After controlling for the availability of market transactions and a variety of loan and property characteristics, we continue to find a greater likelihood of selecting more expensive comps."

https://millersamuel.com/files/2022/06/AppraiserOvervaluation.pdf

My reply: The first issue to consider is 2015 and 2016 markets were increasing in value. It makes sense there would be more higher than lower priced comps available. In a decreasing market you would probably see the opposite. 

The second issue is lenders, AMC, underwriters demand that the subject size, bed/bath count and main amenities are bracketed with comps currently listed, pending or sold within three months of the appraisal. Three sold, one pending and one listed comps are mandatory. If you intentionally select properties which are larger and have more bed, baths than subject, they will most likely have sold for a higher price than subject. Sometimes you can bracket size with one comp but need another to bracket bed/bath count. This means you have potentially two out of the three or 66% sold comps which will be, must be superior to subject by design. You still need a comp or comps that bracket the lower end of size, bed/bath count... 

The third issue is supply and demand. How many months of housing supply were available at the time? Was it similar to 2020/2021 where there weren't enough homes available for sale so most properties sold instantly over market? There's no box in the grid to adjust for that. 

The fourth issue is there were many developer flips during this time. The properties were bought low, improved with new kitchen, baths, paint, landscaping...then sold higher. Of course they could be in better condition all around than subject if the subject wasn't also a speculator flip. 

The fifth issue is home attributes which affect value that are not covered by the adjusted factors in the grid or cannot be exactly measured. Those attributes could be curb appeal, staging, marketing, landscaping, superior architect, superior design/remodel, superior layout, custom lot shape, specific superior view, upgraded non line item features... We can only include adjustments which we make using matched pair statistical analysis using math. It's not always possible to extract a value for staging, marketing, landscaping, upgraded non line item features, three tone paint, superior layout, distinct view... 

The writers' conclusion below,

"Our evidence of calibration bias, although helpful to understand appraisal overvaluation, cannot answer the question of how it occurs without further research into the development of calibrated values. To that end, a hedonic pricing model can be a helpful tool to assess the accuracy of a price adjustment associated with a given property attribute or amenity while also ensuring consistency and accuracy in the aggregate. Incorporating hedonic pricing techniques into appraisal development is limited. Given the amount of detailed property information and modeling technology that are available today, the appraisal practice could benefit from employing data-driven analytics to help assess appraisal accuracy in an efficient and quantifiable manner. Future research in this direction can develop a better understanding of the underlying appraisal valuation process."

I'm glad they admitted they don't know how the alleged "over valuation" occurred. Maybe there was no overvaluation. Maybe it was the result of what I stated above or maybe it was something else. Would have been nice to do the same in a decreasing market for comparison. While data-driven analysis is always good you will still need a human to appraise real estate, homes for now because humans are the ones buying, paying for and owning them. The contract price is based on the human's level of desire for the property.

There are some things a human can see, find valuable that an AVM robot or statistics cannot. For example a Mercedes is worth more than another similar car because it has a superior design and is more appealing to the eye and market. So is a Louis Vuitton, Gucci, Chanel purse for the same reasons. Kelly Blue Book values and company sales records are the proof of this. The items are generally made out of the same amount of similar materials yet one is worth more than the other. Design, appeal, every factor in market reaction can't be easily calculated in a form appraisal.  

Citation: Mayer YG, Nothaft FE. Appraisal overvaluation: Evidence of price adjustment bias in sales comparisons. Real Estate Economics. 2022;50:;862–881. https://doi.org/10.1111/1540-6229.12351

Mary Cummins of Cummins Real Estate is a certified residential licensed appraiser in Los Angeles, California. Mary Cummins is licensed by the California Bureau of Real Estate appraisers and has over 35 years of experience.


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