Matrix Blog

Social, Tech, Gadgets, Software

[Interview] Dan Green, Loan Officer, Waterstone Mortgage, The Mortgage Reports Blog, BringTheBlog.com

August 26, 2009 | 3:00 pm | Podcasts |

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Your Doorman Twitters? Be Afraid. Be Very Afraid.

July 31, 2009 | 7:20 pm |

About a week ago, doormaninNYcity started to follow me on twitter and I found the tweets quite fascinating. This anonymous feed of information reminds me of the old days (4 years ago) when Property Grunt and Brownstoner burst on the blogosphere scene – they were anonymously written sites that gave readers fantastic insights (still are).

A few days ago doormaninNYcity wrote this tweet:

An appraiser came for a resident when I buzzed the resident asked if he can wait 5 min he wasn’t ready, the appraiser said no & left.

Think about that for a second – for the appraiser to leave because he couldn’t wait 5 minutes must have meant he budgeted five minutes for the inspection and would be late for the next one. Depending on the size of the property, 30 minutes should be the bare minimum time spent in the property.

5 minutes?

This has got to be one of those appraisal management company appraisers who have the real estate industry up in arms about the poor quality appraisals.


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[Interview] Noah Rosenblatt, UrbanDigs.com, Real Estate Broker, Day Trader

June 25, 2009 | 10:00 pm | Podcasts |

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[The Housing Helix Ranked #82] Need Help = You’ll Feel Better as a Person, Guaranteed

May 17, 2009 | 11:56 pm | Podcasts |

Ok, not really.

I don’t normally do this (I actually do but not as a post and I am trying to promote some empathy for my efforts so cut me some slack) but I would love to get my Matrix and The Housing Helix readers help get the word out about The Housing Helix podcast.

The Housing Helix is now ranked #82 under the category “Investing” in iTunes and I’m actually beating some podcasts offered by Businessweek, Morningstar and MarketWatch – but that’s not good enough.

My podcast is also listed as “New and Notable” in the iTunes store on both the PC and iPhone versions – but that’s not good enough.

All I ask is (gotta a pen?):

  • Rate the podcast (5 seconds)
  • Write a review (60 seconds)
  • ReTweet on Twitter after each weekly release (1 second)
  • Link out to it on your blog if the topic interests you (take as long as you want)



Thanks!

I’ll bet you’re feeling better already.



[Interview] Lockhart Steele, Curbed Network

May 11, 2009 | 3:51 am | | Podcasts |

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[The Housing Helix Podcast] Interview with Lockhart Steele, Curbed Network

May 11, 2009 | 12:45 am | | Podcasts |


With 10 podcasts under my belt, it was time to start doing interviews on The Housing Helix Podcast.

Who better than Lockhart Steele, the mad genius sans snark behind the Curbed Network.

Check out this week’s podcast.

You can subscribe on iTunes or simply listen to the podcast on my other blog The Housing Helix.


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[iTrulia] Getting Mobile With Luke Skywalker, Etc.

August 25, 2008 | 10:37 pm | |

Since the new iPhone and it’s 2.0.2 software came out, I have been lovin’ the new apps that have entered the fray. The power of GPS allows blending data and location into a nice neat package. And endless array of possibilities.

One of my favorites of the just released: the Trulia iPhone app (disclosure: I have been on Trulia’s Industry Advisory Board since its inception). But it’s not just for the iPhone.

I got a demo of the beta when I was at Inman Connect SF last month. I have to say, unequivocally, that the app is even better than “more cowbell.” Actually it’s incredibly easy to use, allowing me to see what is for sale in the immediate area, drilling down to property details and what open houses are available (inside joke: thanks so much for not calling them “open homes”). It also enables viewing the Trulia voices feed specific to the location.

Keep it simple, make it powerful.

In fact, I’ve really been iPhone App happy lately. I was turned on to two other apps by my friend Andrew, that I find myself using everyday (aside from “iSaber“) called Jott and Evernote. Awesome.

Proud father moment: My teenage son was out with a bunch of his friends and one of them pulls out an iPhone, exclaiming, “hey guys, check this out!” and began brandishing iSaber with it’s Star Wars sound and light effects. My son looks at the kid and deadpans, “yeah, my Dad uses that one.”



Blog Tour USA Takes Matrix To Work

July 15, 2007 | 4:04 pm |

Here’s a clip of the Connecticut to New York leg of Rudy and Joe’s Sellsius powered Blog Tour USA on July 2nd.

Its a clever way to spend the summer in an RV, driving across America. I remain insanely jealous of their adventure. As my kids would say, its pretty random which is a big part of why its so cool. Not only that, but they have the opportunity to speak at length to their colleagues at each stop – all of which represent the best real estate bloggers out there. However, I’d love to get a report from Joe and Rudy to get an understanding on whether or not they are at each other’s throats being in such close quarters together all month. Somehow I remain optomistic that all is well.

Here’s the map of their adventure.



[Chip Shots] Accurately Calculating Gross Living Area

July 5, 2007 | 6:47 am |

[Alvin “Chip” Wagner III, SRA, IFA, SCRP is third generation appraiser from Chicagoland who is a public figure and well respected within the appraisal industry. Along with his business partner, Bob Headrick, they run the firm Headrick-Wagner Appraisal Group, which has been providing appraisal, consulting and research services throughout the Chicagoland market for more than 35 years. I met both Chip and Bob through RAC (Relocation Appraisers & Consultants). When I met Chip in the late 1990’s we both spoke together at a national conference about our appraisal web sites, both among the first in the country. I have learned a lot from Chip and I am thrilled to use his firm’s market stats on my Matrix blog and post his Chip Shots column on Soapbox. Like me, he has an enthusiasm for market analysis.

In this week’s Chip Shots column, Chip shows his annoyance with the “dumbed-down” check box appraisal culture and elaborates on one of critical measures of being good appraiser: having the ability to accurately measure the property he or she is appraising.
…Jonathan Miller

All appraisers have been taught how to calculate Gross Living Area. Often times mistaken with the term “square footage,” Gross Living Area it a very important component in real estate appraising, but is often overlooked and rarely challenged for accuracy.

As defined by the Appraisal Institute’s Dictionary of Real Estate 4th Edition: “Gross Living Area (GLA) – The total area of finished, above-grade residential space excluding unheated areas such as porches and balconies; the standard measure for determining the amount of space in residential properties.”

What has been bothering me in recent weeks? Today it is the appraiser who cannot measure. I have been challenged 5 times in the past week on my measuring ability. I have been right on every appraisal, and I’m getting tired of this trend. This is high school geometry, not physics or engineering. Please understand, I admit to making mistakes and am far from perfect.

I was brought up in this business during a time where we didn’t have APEX, Win-Sketch and the sketching programs out there. I had the graph paper and architectural rulers and drew floorplans and manually calculated my Gross Living Area.

If you are doing residential appraisals only for lenders, you are likely never challenged on how accurate you can measure a home. You go about your business with your tape measure, Roto-wheel, or laser device, while others just may be lazy and use the survey or blueprints and don’t measure anything. Not even a spot-check against that survey.

I specialize in corporate relocation appraisals. This is a niche in the residential appraisal profession when a corporation or the government transfers one of its home-owning employees. Two “relocation” appraisals are averaged together to form a buyout offer to purchase the home of a corporate transferee.

When doing this type of work, the two appraisals have to be within 100 square feet of each other. This is a reasonable request, given one appraiser might round up or down a couple of inches, or measure an open two story foyer differently by a couple of inches.

But more and more often, I am hearing: “you and the other appraiser both measured the subject property, yet you are 250 square feet apart.” (Not on a 5,000 square foot home, but on a 1,900 square foot home, mind you). So, you politely tell the reviewer that you will be happy to take another look at your measurements, and would also like to review the other appraiser’s sketch. This is common-practice, and I get to review a lot of sketches of my peers some good, some bad. A good reviewer will look at both sketches, find where the differences are and try to get to the bottom of it. A lazy or untrained reviewer will simply allow the appraisers to hash it out.

But the other appraiser sketches I have seen recently makes me really embarrassed for my profession. Pulling a tape measure isn’t a requirement for your appraisal license, it is just expected for you to pass high school math!

Some sketches are hand-drawn and have simple multiplication errors. Okay, it happens if you are living in the 1980’s. Use your appraisal software with the sketching programs. If you are using a computer but still hand drawing your sketches and scanning them into your reports, take a few minutes to learn how to use these programs the are great and once you learn to use them, they are accurate 100% of the time.

Other discrepancies might be the other appraiser misses an “overhang” or a cantilever. Although I strive for perfection, I have been known to miss that one from time to time. Nobody is perfect all of the time.

One of the more common problems I see is measuring open areas of two story foyers. Did you know that the first stair tread is considered part of the second floor? Stupid as it sounds, that is one of the most common mistakes an appraiser makes. Approximately half of the appraisers measure by removing the entire open foyer space, the other half measures correctly around the stair treads. Assuming that an average stair width is 3.5′ and 10′ long, this can change the sketch by 35 square feet. Not a big deal? It is when the two appraisers GLA’s are different by 125 square feet. Measuring the foyer properly will bring the difference to less than 100 square feet, and no calls and exchange of sketches will be needed.

Another common problem I see is the other appraiser rounds up or down to the nearest half-foot, or even the nearest foot. Again, the guidelines for calculating Gross Living Area requires the appraiser to measure to the nearest inch or 1/10 of a foot.

How about dormered areas on second floors ever heard of the 5′ rule? At least half of the appraisers competing with me for relocation appraisal work apparently have not. Gosh, I’ve even seen some appraisers swear that a cape cod without dormers is measuring the first floor and multiplying by 1.5; and if there are dormers, you multiply by 1.6; and if there is a shed dormer, you multiply by 1.7.

Then, there are renderings that don’t even look remotely like the house. I can recite many sketches where one appraiser calls a wall a 50′ straight wall on the rear, yet there are clearly bay windows, 3′ extensions, and enlarged and extended rooms. Hey, if you are using that survey, it probably only gives the dimension at the foundation, not any siding that goes over the foundation.

And by the way, never trust the blueprints or the survey I see errors all the time. Blueprints often change during construction. They are a great guide, but spot-check them on at least 50% of the dimensions. And the survey? I have a collection of inaccurate surveys as well. I suspect most are typographical errors in this case, but surely don’t rely upon someone else’s calculations. Again, spot check that survey before you leave the property.

You don’t believe me? What are these “guidelines” I am referring to? Yes, there is a guideline for calculating the Gross Living Area. Check out the ANSI guidelines (American National Standards Institute and purchase the “Method for Calculating Square Footage” guideline ANSI Z765-2003. The original standard was developed in 1996 and adopted by dozens of organizations including appraisal associations, builder associations, National Association of Realtors, Fannie Mae, Freddie Mac, and ERC to name a few. Updated recently in 2003, the standard describes the procedures to be followed in measuring and calculating square footage of detached and attached single-family homes. It is the purpose of this standard to describe a method of measurement that will make it possible to obtain accurate and reproducible measurements of square footage in single-family homes. The ERC Relocation Appraisal Guide, the book describing how to complete a relocation appraisal, has instructions following these guidelines.

Our profession continues to be “dumbed-down” by box-checking forms, and accurately measuring a property is quickly becoming a lost art. In the Sales Comparison Approach, the GLA is obviously an item of comparison. The Cost Approach seems to not be relevant to anybody anymore (another Blog topic), but if you don’t measure the home accurately, your Cost Approach to Value will be flawed. And although the Income Approach is seldom considered appropriate in residential appraisals, if it is relevant, you better accurately measure the home to apply to the Gross Rent Multiplier.

A final thought, not only will mis-measuring a home lead to a flawed value through any of the three approaches to value, it could lead to a lawsuit down the road for the appraiser. Take a few extra moments to make certain you are doing the job right.

Chip Wagner’s field measuring tools include: Leica Disto Classic 5A laser measuring device, 3′ tape measure on a keyring attached to the Disto, Laser Shades (for the bright sunny days), “Rite-in-the-Rain” paper (for those rainy days), 7-inch pocket size angle tool (for homes that are not square), legal-size clipboard with one-inch hash marks carved into the underside (old-school trick I learned from my father), Lufkin 100′ fiberglass open-reel tape measure (collecting dust) and a Rhino heavy-duty six-foot flexible fiberglass folding engineer’s ruler (my retired appraiser-father’s tool of choice, not used in 2+ years).

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[Straight From MacCrate] Wall Street Has Not Learn The Lessons That Created FIRREA And The Debacle of the Seventies In Real Estate Lending and Investing!

June 24, 2007 | 1:54 pm |

Jim MacCrate, MAI, CRE, ASA, has worn many hats in his career. He taught a number of the appraisal classes I have taken through the Appraisal Institute and I think he is one of the few people who actually understands the “J-Factor.” His wife Judy is an SRA and is an accomplished appraiser in her own right, having managed an appraisal panel for a large lending institution throughout its various mergers for a number of years. I can only imagine the riveting conversations at dinnertime. Jim scratches his head as to why Wall Street and accounting firms often don’t see it coming in regard to real estate problems.

It is amazing that the Wall Street firms, such as Bear Stearns and Goldman Sachs, are having problems with their real estate loan portfolios and may be creating a time bomb that may create major problems in the economy. They appear to be repeating the same problems that the banking industry had in the late 1980’s and early 1990’s. I guess the accounting industry has also forgotten what happened because they should have an experienced professional real estate staff assisting the auditors in reviewing the loan packages, real estate appraisals and the like. Clearly, the auditors, such as PricewaterhouseCoopers, Deloitte & Touche, and KPMG, should be right on top of this situation with experienced real estate professional appraisers on their staffs. Investors may suffer losses because these firms may not have instituted proper safeguards, similar to FIRREA and other banking regulations to protect the investors from any losses.

Similar problems will probably occur in the commercial real estate market shortly (in a year or so). The rating agencies, such as Moody’s and Standard and Poor’s, should be right on top of this situation, along with the designated real estate appraisal professionals working at the major accounting firms.

The Federal Institutions Reform, Recovery and Enforcement Act of 1989(FIRREA) was passed to provide standards for real estate-related lending and associated activities by national banks to minimize losses from unsafe and unscrupulous lending practices. Maybe a similar law is required to regulate the Wall Street firms to protect investors from potential losses. Wall Street has an obligation to protect investors from losses due to the complex nature of many investment products and the underlying assets. The SEC and other investors, such as the state retirement systems that invest heavily in real estate, should review their current oversight procedures to insure that safeguards are in place to prevent a repeat of the debacle that occurred approximately seventeen years ago.

FIRREA is suppose to provide protection for federal financial and public policy interests in real estate-related transactions by requiring real estate appraisals performed by a State certified or licensed appraiser for all real estate-related financial transactions with few exceptions. (In fact, shouldn’t all real property appraisals for any purpose be performed by a State certified or licensed appraiser such as divorce, estate tax purposes and the like? That is not mandatory in every state, but it should be to protect the general public).

FIRREA further stated that the appraisal reports conform to generally accepted appraisal standards as evidenced by the Uniform Standards of Professional Appraisal Practice (USPAP) as promulgated by the Appraisal Standards Board of the Appraisal Foundation. Some these standards have been modified in the last several years increasing the risks to investors. The reports must written and contain sufficient information and analysis to support the institution’s decision to engage in the transaction. Appropriate deductions and discounts for proposed construction or renovation, partially leased buildings, non-market lease terms, and tract developments with unsold units must be analyzed and reported.

FIRREA further stated “if an appraisal is prepared by a staff appraiser, that appraiser must be independent of the lending, investment, and collection functions and not involved, except as an appraiser, in the federally related transaction, and have no direct or indirect interest, financial or otherwise, in the property. If the only qualified persons available to perform an appraisal are involved in the lending, investment, or collection functions of the regulated institution, the regulated institution shall take appropriate steps to ensure that the appraisers exercise independent judgment. Such steps include, but are not limited to, prohibiting an individual from performing an appraisal in connection with federally related transactions in which the appraiser is otherwise involved and prohibiting directors and officers from participating in any vote or approval involving assets on which they performed an appraisal.” Wall Street firms should have a similar procedure to insure that the real estate professionals are independent and not pressured to provide unrealistic indications of value just to make a loan package look good for resale to investors.

FIRREA specifically states that real estate loans should reflect “all relevant credit factors, including:

  • The capacity of the borrower, or income from the underlying property, to adequately service the debt.
  • The value of the mortgaged property.
  • The overall creditworthiness of the borrower.
  • The level of equity invested in the property.
  • Any secondary sources of repayment.
  • Any additional collateral or credit enhancements (such as guarantees, mortgage insurance or takeout commitments).”

Real estate markets should be monitored based on a thorough analysis of the real estate cycle, such as Glenn Mueller’s analysis from Dividend Capital so that investors can react quickly to changes in market conditions that are relevant to making investment decisions. Reappraisals may be required. Many factors that should be monitored and considered at a minimum include:

  • Deteriorating economic conditions.
  • Changes in the borrower’s financial capacity.
  • Major change in project design or configuration.
  • Construction delays resulting from cost overruns which may require renegotiation of loan terms.
  • Project target market change.
  • Demographic indicators, including population and employment trends.
  • Zoning requirements.
  • Current and projected vacancy, construction, and absorption rates.
  • Current and projected lease terms, rental rates, and sales prices, including concessions are changing.
  • Rent concessions or more discounts resulting in cash flow below the level projected in the original appraisal.
  • Current and projected operating expenses for different types of projects.
  • Economic indicators, including trends and diversification of the lending area.
  • Valuation trends, including discount and direct capitalization rates.
  • Slow leasing or lack of sustained sales activity.
  • Discovery or change in the environmental integrity of the site and surroundings.
  • The exclusion of excess land.
  • Loan renewals or extension requested.

The loan portfolios require testing to insure that the original appraisals have been prepared correctly and if it is determined to be inadequate or otherwise unacceptable, a new appraisal should be ordered. The real property interests should be reappraised annually until the risk rating improves for that particular loan. Random sample reappraisals should be conducted periodically to identify patterns of over or undervaluation by appraisers and/or firms, property type, location or market segment. These reappraisals should not be performed by the original appraiser.

These firms could improve on FIRREA by requiring a range in value reflecting the best case, most likely case and the worst case performance scenarios. Real estate appraisal is not science, but it is an unbiased, objective opinion of value based on logical reasoning supported by market information. Generally, a range in value is more meaningful because it shows the extremes that might occur and can be developed through a sensitivity analysis of the projected cash flows and valuation conclusions, possibly utilizing Crystal Ball Software. In the current environment a number of forces impact the process of determining the value of real property interests and marking assets and liabilities to market. Maybe Wall Street and their advisors should consider implementing the guidance provided by FIRREA and the banking regulators to reduce the risk exposure for investors.


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[Sounding Bored] Digitizing The Appraiser

June 5, 2007 | 3:29 am | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. This week, I touch on the FNC federal class-action lawsuit and the right of appraisers to their intellectual property.

In Kenneth R. Harney’s article in the Washington Post this weekend Reprisals on Appraisals he discusses the issue of reliability of appraisers and their digital alternative.

FNC is the subject of a federal class-action suit over the idea that the data collected by the appraiser can be leveraged for further use.

I do not take the view that all data in an appraisal is simply raw objective information that can be regurgitated for other purposes. As an appraiser, I have enhanced that data in my reports through my work and expertise. I made that effort for the preparation of the report. Of course some of the information is simply transposed from another source, but much of it is my intellectual property.

I have no problem with my data being used is if I am asked and decide not to opt out. However, I was never asked in advance to allow my data to be farmed for additional funds.

An appraiser’s expertise should be compensated if their work is used for an additional purpose not disclosed in the original appraisal request. That additional use would have been built into my fee from the outset.

Based on my experience and industry feedback with people who use them, the automated valuation models (AVM’s) are pretty much worthless as a reliable indicator of market value but they do appease the regulators as a document in the file and have potential in the distant future as a credible tool.

I am struck by the irony that the appraisers, who are supposedly a weak link in the mortgage chain, stimulating the need for AVM’s, are needed to provide reliable content to the very AVM’s that were built to replace them.


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Strong As A Sequoia: Trulia Secures Additional Funding

May 24, 2007 | 9:15 am | |

Sequoia Capital provided $10M in financing which will allow Trulia to go to the next level of their vision of becoming the “go to” place for real estate listing searches.

By partnering with the real estate industry, Trulia helps consumers find information on homes for sale using custom search criteria such as price and number of bedrooms to market trends and neighborhood data at the hyper-local level.

This is already well underway with 1.5 million monthly visitors to Trulia.com and a growing suite of tools for consumers to use. They have remained steadfast in their focus on the quality of the data coming in to enrich the consumer’s experience on the site. They will be able to expand staffing for technology, sales and marketing to further their efforts in a big way.

Incidentally, Sequoia Captial, as an associated brand, says a lot about their belief in Trulia’s success. A who’s who of Silicon Valley success stories come from Sequoia. From the press release:

Sequoia Capital provides startup venture capital for very smart people who want to turn ideas into companies. As the “Entrepreneurs Behind the Entrepreneurs”, Sequoia Capital’s Partners have worked with innovators such as Steve Jobs of Apple Computer, Larry Ellison of Oracle, Bob Swanson of Linear Technology, Sandy Lerner and Len Bozack of Cisco Systems, Dan Warmenhoven of Network Appliance, Jerry Yang and David Filo of Yahoo!, Jen-Hsun Huang of nVIDIA, Michael Marks of Flextronics, Larry Page and Sergey Brin of Google, Chad Hurley and Steve Chen of YouTube, Steve Goldman and Sujal Patel of Isilon Systems and Dominic Orr and Keerti Melkote of Aruba Wireless Networks.

Pete Flint and Sami Inkinen, co-founders of Trulia, invited me to join their industry advisory board in 2006 when the endeavor was less than a year old. It was an easy decision because I was a big fan before they approached me. I remain in awe of Trulia’s rapid growth and continue to be impressed with the clarity of their vision, their reliance on teamwork (yes, “Internet” provides the “I” in teamwork) and the talent of the people that work for them.

Here is the official Trulia announcement in their blog.

More fun to come.