Flopping The Housing Market
While I like watching Premier League soccer on occasion (Go Tottenham Hot Spurs!), I am not a rabid enthusiast like one of my sons and many of my peers. Over the past week, the pubs on our city block were overflowing with people at 8 am cheering and drinking. People are walking down the streets of Manhattan running live feeds on their phones and periodically screaming and cheering. It’s fun to see so many get excited, but I still can’t get past all the flopping.
I’m a little light on general news this week after writing the biggest Appraiserville section below in the history of these weekly Housing Notes (I am an appraiser after all) and perhaps the history of the entire world.
But I digress…
What happens to their real estate when countries go to war?
I remember reading a story a long time ago how:
No two countries that both have a McDonald’s have ever fought a war against each other.
In 2015 that Golden Arches doctrine was broken when Russia invaded Ukraine.
I thought about the doctrine when I read this Curbed story: Abandoned Park Avenue duplex owned by the former Yugoslavia sold for $12M
When Yugoslavia imploded into war 26 years or so ago and eventually broke up into five countries, Yugoslavia’s UN envoys who occupied it left and the apartment was abandoned since 1992. It sat on the market for a long time and was just sold to an adjacent neighbor to combine with their apartment. Based only on the information provided in the Curbed and NY Post articles, it appears to have sold well above competing apartments because it was purchased by the adjacent apartment owner. This co-op building has summer work rules (renovations only allowed between Memorial Day and Labor Day) so a gut and combination of the two apartments that would normally take about a year will therefore take 3-4 summers before it could be occupied.
This Week in Aspirational Pricing: Madoff
Can you believe it has been a decade since the Madoff scandal? “Time flies when he’s in prison” apparently. There was a great WSJ read A Decade on, the Fate of Madoff’s Mansions on the state of his real estate after they were sold off to repay his victims. This article sat on the WSJ homepage all day, likely giving many time to pause and wonder what had changed in the securities industry since then.
Like celebrity names associated with listings, the notoriety of his deeds did not garner a premium:
…the Madoff name was good for publicity but also worked against the seller, because some prospective buyers found the connection off-putting. They couldn’t imagine hosting friends in the former home of the swindler who had possibly lost their friends’ money, he said.
Real Estate Blockchain, Not To Be Confused With Cryptocurrency
Here’s a terrific visualization of blockchain from Reuters:
Extra: Frank Abagnale: “Catch Me If You Can” | Talks at Google
This is the most compelling talk I have heard in years. UNREAL.
Thoughts On This Week’s OCAP Meeting Part 1 (Getting There)
This past Tuesday, I was a keynote speaker at the Ohio Coalition of Appraisal Professionals (OCAP). I’ve always seen this organization as one of the stronger state coalitions in the context of getting things done at the legislative level. I had been looking forward to attending the Columbus conference for several months. Here is how I got there from New York to make my 10 am Tuesday speech.
– Drove an hour to the airport
– Because of massive airport construction, took a shuttle bus to the terminal from available parking lot
– Arrived at 12:30 pm for my 2 PM flight
– Flight delayed every half hour or so because of software problems filing flight plans to midwest routes
– Engaged with the airline on Twitter including direct messaging
– Airline staff was courteous but not fully informed and missing from the gate for half the period we sat there
– No other flights to Columbus were available during the day
– At 8 pm I reserved a 5:55 am flight the next morning
– After seven hours of delays, my 2 pm original flight was canceled at 9 pm
– No working bathrooms in the terminal after a water main broke
– No food left in the terminal due to all the delayed flights and airline didn’t follow their policy of providing food after the 4th hour of delays
– Walked back through security and went to ticket counter to wait in line for 45 minutes until 10 pm confirm 5:55 am morning flight and received the ticket
– Took the shuttle bus to my car
– Drove for an hour to arrive home at 11:30 pm and went to bed
– Got up at 3 am and drove to the airport to arrive by 4:30 PM
– Took the shuttle bus to the terminal
– A massive line at security due to all the people that had re-booked morning flights after previous evening’s software glitch
– TSA told me I would never make my flight because the line was over 90 minutes long so I needed to go to the adjacent concourse to go through security and take a bus on the tarmac back to the concourse and catch my flight
– The precheck line moved one third the speed as the general line in the other concourse
– Went to the gate to take the bus with 15 minutes before my flight left
– Arrived at the correct concourse and ran to the gate and handed my ticket to the gate agent
– The gate agent said they had issued me a ticket last evening for the prior day. – The gate agent had already logged out of the system and was about to close the plane door
– Explained what happened and urged them to get me on the plane
– One agent ran down the walkway to the plane and stopped them from closing the door
– The other 2 figured out how to register me for the flight and told me to run with the new ticket to the plane and sit in the one remaining seat
– I slipped into the plane and they closed the door behind me
– Arrived in Columbus and spoke at the OCAP conference
– Arrived at Columbus airport at 6 pm for my 8 pm flight
– Massive thunderstorm delayed my flight until 9 pm
– Arrived back in New York and sat on the tarmac for a half an hour until the disabled plane was moved from our gate
– Took shuttle bus to my car
– Drove for an hour and was only two exits from my town and massive traffic foul-up turned into an additional hour to get home
– Arrived home at 2 am
But hey, it was worth it!
Thoughts On This Week’s OCAP Meeting Part 2 (States That Allow Appraisers To Switch off USPAP)
Spoiler Alert: NONE
After I made my presentation, I listened to the next speaker from the Appraisal Institute. I was startled because the speaker said there were about 5 states that currently allow certified appraisers to turn off their USPAP compliance and about 5 more that were to follow them soon including Virginia. I texted and emailed a number of my coalition and regulatory appraiser colleagues and spoke with several OCAP board members. No one was aware of any of this.
Now if any of you know my good friend and appraiser Pat Turner of VACAP, you know that we would all have known this by now. The Virginia law that Scott DiBiasio of the Appraisal Institute sneaked in at the last second to sidestep VACAP got passed against the wishes of nearly all residential appraisers in Virginia. But it was immediately neutered as explained in the following summary.
I reached out to The Appraisal Foundation (TAF) and was given this summary of all state activity on this issue. In other words, NO STATE has effectively agreed to this.
Here is the information I received from TAF as a direct quote:
The Appraisal Foundation is aware of AI-promoted activities regarding evaluations in the following states during 2017 and 2018:
Florida: After two years of failed attempts before the Florida Real Estate Appraiser Board to change regulations to allow alternative standards and evaluations without complying with USPAP, AI was successful in getting state law changed to allow appraisers to follow the Interagency Guidelines “and other standards as prescribed by the Appraisal Board.” (See Florida 475.612(7)) In April, by a 7-1 vote, the Board decided to proceed with developing a rule that requires Florida appraisers to follow USPAP regardless of assignment. At the Florida Board’s June meeting, AI raised a procedural issue and demanded reconsideration, so a workshop on the issue is scheduled in August.
California: The bills before the CA legislature have gone through several iterations of carving up USPAP. The original version during this legislative session gave appraisers six exemptions to compliance with USPAP. The current version (See SB 70), that has not passed but is likely to in the coming weeks, is whittled down to a single issue. It allows CA appraisers to not comply with USPAP’s requirements regarding intended users of Restricted Appraisal Reports. The section of this new law has a sunset date of Jan 1, 2020 (to coincide with the effective date of USPAP 2020-21). AI leadership has stated that if the ASB’s current exposure draft concept of an appraisal report is adopted, the CA law will be moot (as will all their efforts regarding evaluations).
Kansas: After failing in 2017, AI once again attempted a legislative effort this year that would have allowed evaluations to be performed in conformance with USPAP or the AI standards. Opposition included the Kansas Appraiser Board and the Kansas Chapter of AI. The bill died in committee on May 4, 2018. (See KS HB2414)
North Carolina: After a failed attempt in 2017 by AI in the state legislature regarding exemptions to following USPAP for evaluations and certain other transactions (See North Carolina S576 and H431), AI requested that the state appraiser board take up the issue. The legal staff of the board subsequently ruled that the board did not have the authority to enact such regulation.
Virginia: Legislation passed in 2017 that would allow appraisers to perform evaluations without adhering to USPAP. But subsequent legal analysis by the Virginia appraiser board determined that the definitions of appraisal and evaluations were too similar so the board determined that appraisers must still comply with USPAP regardless of assignment type. (See Virginia Real Estate Appraiser Board Guidance Document issued 5/16/17). New legislation was then introduced to clarify the definition of evaluation (See Virginia HB 1453) It passed and becomes effective on July 1, 2018.
Texas: The Texas Board has proposed a rule for public comment (See 22 TAC §155.3) that they promote “to implement federal law raising the threshold under which an appraisal is not required in a commercial real estate transaction.” The proposed rule would allow Texas appraisers to prepare evaluations in commercial real estate transactions with a transaction value of $500,000 or less without complying with USPAP as long as they include a specific disclaimer as spelled out in the rule. The staff’s request for emergency adoption was unanimously denied by the Board; the rule has not been adopted; the public comment period is open (see the 4/23/2018 TACLB Meeting Record/Video, Items 20 and 22).
These are the only states we know of with legislative activities during 2017 and 2018 regarding evaluations. The Appraisal Foundation has no government relations staff, so we acknowledge there may be others about which we are not aware. We appreciate the appraisers and regulators who brought these activities to our attention as they sought help fighting what they described as senseless acts that are harmful to the profession. We also recognize that there are some states whose appraiser laws and regulations only apply to federally-related transactions (FRTs) as defined by the federal financial institution regulatory agencies, but their statutes have been in place for years. Evaluations do not come under the definition of FRTs.
We have also been in public settings where AI has referenced Georgia and Tennessee when speaking about evaluations.
Georgia: Georgia has a rule adopted in February, 2013 regarding evaluation reporting formats: Ga. r. 539-3-.04: If the Evaluation Appraisal is prepared for a nonfederal financial institution and said institution is not regulated by a federal financial institutions regulatory agency, and if USPAP compliance is not required by said institution for the appraisal reporting format, then the Evaluation Appraisal may be prepared in any reporting format, such as, but not limited to a self-contained appraisal report, a summary appraisal report, and a restricted use appraisal report if the reporting format meets the requirements of the nonfederal financial institution.
Tennessee: Tennessee appraiser laws last updated in 1994 do not apply to evaluations but also do not prohibit appraisers from doing an evaluation as long as it is marked on its face, “this is not an appraisal.” (See Tenn. Code Ann. § 62-39-104). At a recent Tennessee Board meeting (see January 2018 meeting video recording starting around 1:06 through 1:20), the members and audience participant discussed evaluations and lamented that the Board has no jurisdiction over those who do them – nor does any other body – so it is bad for public trust.
How AMCs Will Work Around Non-Disclosure States To Get Sales Data
AMCs are starting to require sales lists from appraisers. On the surface, it looks like they are merely trying to see what other sales there are, but this isn’t a reasonable intention since they can get the data easily elsewhere…except in a non-disclosure state. It sure looks like they are using you to get sales that are not publicly shared. That seems to be worth a massive extra fee for your reports, no? And then I wonder, is this legal in the spirit of our engagement and the laws of the non-disclosure state itself? Seems largely deceptive to me.
Appraisal Institute Sends Scott Robinson to Singapore Because, Well, I’m Not Sure
AKA, Where in the world is
Carmen San DiegoScott Robinson?
On Monday the former AI President is speaking about “Fundamentals of Separating Real Property, Personal Property, and Intangible Business Assets” at the INAUGURAL IVSC-WAVO GLOBAL VALUATION CONFERENCE 2018 in Singapore.
I have a few questions:
- How does this help falling AI National membership?
- How does this stop the declining state of the appraisal industry in crisis?
- At what point will feedback from this conference be shared with members or adapted for pragmatic use?
- How does this feedback help the AI Membership in any way whatsoever?
- AI National has abdicated their leadership position in the U.S. in recent years so how can they influence valuation worldwide?
- Did Scott fly first class halfway around the world and bring a friend or spouse on AI membership’s dime?
- How many of these conferences do AI presidents and past presidents attend and then how many of those trips are done with first class accommodations for travel, meals, and lodging?
- How much do these activities cost and where is the specific line item in their budget?
- Why aren’t AI members kept in the loop about all paid trips by their executive committee?
Lack of accountability corrupts. And I hope its members wonder about this when they get the bill for next year’s dues.
And shouldn’t we all wonder why AI National keeps pushing for evaluations when its residential members are overwhelmingly against them (except those who have sights on future trips to Singapore)?
One more thing: It has been 10 months since CEO Grubbe left unannounced in the middle of the night. How is the executive search for a replacement of this ±$400,000 position going?
Coester Chronicles: A True Hack
I’m no lawyer but the following excerpt from public record (Pacer Monitor) reads like Coester’s counsel admitted his client Coester (an AMC we’ve been covering here for a while) hacked an appraiser’s email (Skapinetz).
Don’t confuse Fannie Mae’s appraisal waivers with banks request to the ASC for APPRAISER certification waivers
From my friend and appraiser Ernie Durbin clears up the confusion.
In the case of the ASC, requests were made in Tennessee and Oklahoma by banks that indicated they were in markets that were underserved by appraisers. These banks requested the ASC to temporarily eliminate the requirement for a certified or licensed appraiser to complete valuations. The efforts failed, but had they succeeded, the banks would still be required to value the properties in those valuations would have to comply with USPAP. The “waiver” requested of the ASC was not to eliminate appraisals but the requirement that these appraisals are completed by state licensed or certified appraisers. It really makes no sense… If you have to comply with USPAP, why not use a certified or licensed appraiser? Thankfully, the bank in Tennessee lost in their request and the bank in Oklahoma back out.
In Fannie Mae’s case, they are applying a full appraisal waiver. What used to be called a property inspection waiver they are now referring to as an appraisal waiver. They utilize data inside of CU and from other sources to determine the value of the property and then apply other credit risk analysis to determine which properties qualify for the waiver. That is why Fannie Mae will only apply appraisal waivers in densely populated areas where previous appraisal data and other property information is abundant. Urban and suburban areas, where properties are very similar and have had a number of recent appraisals in the marketplace, are more likely to be eligible for their appraisal waiver.
On another note, at the recent TAF meetings, Julie did indicate that Fannie Mae appraisal waivers represented approximately 10% year to date, down from the 12% she reported at our Real Property Forum. While this may seem like a decrease, remember that the 12% was on an annualized basis in the 10% from this year did not capture the most robust season of the year, late spring and summer. My guess is they will be at or above 12% when all of 2018 is considered.
So in summary, the difference is waivers before the ASC applied to LICENSED OR CERTIFIED APPRAISERS and Fannie Mae waivers APPRAISALS themselves.
Brilliant Idea #1
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Brilliant Idea #2
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See you next week.
Reads, Listens and Visuals I Enjoyed
- Silvershorted! How A Tenant Shamed One of NY's Worst Landlords Into Returning His Security Deposit [BKLYNER]
- Redirecting Default Risk Away From Taxpayers [DS News]
- The Nation's Housing: No dire results yet from 2017 tax cut [Columbus Dispatch]
- The Treasury Yield Curve Blues [Macro Market Musings]
- Celebrities and $77 million estates: What it takes to buy into America's most infamous holiday destination [Domain]
- Taxpayers in the Hamptons Among the Most Exposed to Rising Seas [Bloomberg]
- The Average Asking Price in the Seaport Is Now More Than $2,000 per Square Foot [Boston Magazine/NeighborhoodX]
- Business Leaders Survey [NY Fed]
- The Fed just made life even worse for home buyers [Washington Post]
- One in ten dollars of US housing were anonymous [FT Alphaville]
- The rent is too damn high, according to a new Pew report | [Marketplace]
- Racing Heiress Petra Ecclestone Relists Los Angeles Mega-Mansion for $175 Million [Wall Street Journal]
- Angelo Mozilo Is Unrepentant. But There’s No Second Act for the Head of Defunct Lender. [Wall Street Journal]
- How to Make a Killing in Virtual Real Estate [Bloomberg]
- Inside the American Copper Buildings, Kips Bay’s transformative new rental [Curbed NY]
- For the biggest group of American workers, wages aren’t just flat. They’re falling. [Washington Post]
- Bob Hope's Toluca Lake Estate Finally Sells—to Billionaire Ron Burkle [Realtor.com]
- Can tech outsmart the housing shortage? [Curbed]
- You Should Be Able to Live on a Dead Golf Course [City Lab]
My New Content, Research and Mentions
- Alphabet City maintains some of its edginess, despite creeping development [Brick Underground]
- A Decade on, the Fate of Madoff’s Mansions [Wall Street Journal]
- Is Manhattan's rental market finally cooling off? [CNN Money]
- A $24 million tear down on Nantucket? Home prices on the island breaking records this summer [CNBC]
Real Estate Blockchain Reads
Appraisal Related Reads
- Exceedingly Rapid Turn Times Can Be Hazardous to Appraisers [Appraisersblogs]
- Bank Appraisals vs. Private Appraisals…What Makes the Most Cents? [Cleveland Appraisal Blog]
- 9 Home Measurement FAQ's For Agents [Birmingham Appraisal Blog]
- Changing markets [Ann Arbor Appraisal]
- DO NOT REMOVE TAG! – Attention Manufactured Home Owners [DW Slater Co. Blog]
- The Art of Appraising [Advantage Appraisals]
- The emerging trend of storage container homes (Q&A) [Sacramento Appraisal Blog]
Extra Curricular Reads
- The end of the Golden Arches doctrine [FT]
- BeefTalk: How Many Cattle Should Go in the Pasture? [Drovers]
- Here Are the 14 Habits of Highly Miserable People [Alternet]
- Freelancers are precarious. When should they push back? [CJR]
- West Village locals agree with Andy Cohen’s trash rants [Page Six]
- This Man Left a Normal Life Behind to Find Adventure [Bicycling]
- Was the TRS‑80 affectionately known as the Trash-80? [TRS-80]
- Frank Abagnale: "Catch Me If You Can" | Talks at Google [Youtube]