This quarterly market report is provided by Chip Wagner of A.L. Wagner Appraisal Group, Inc. I have had the pleasure of knowing Chip for a large part of my appraisal career. He’s just released market stats for 2Q 09. The reports are not up on his site yet, but here are some compelling charts listed below:
Tags: Chip Wagner
This quarterly market report is provided by Chip Wagner and Robert Headrick. I have had the pleasure of knowing them for a large part of my appraisal career. They are both very active in appraisal industry matters having held many leadership positions. Their respective firms have been covering the Chicagoland market since 1970 and as a result, they both have a wealth of insight. Their focus is on relocation, litigation and mortgage appraisals as well as slayers of appraisal myths. Chip and Bob author a series of market reports on the Chicagoland real estate market and Chip writes a column on our other blog, Soapbox called Chip Shots.
…Jonathan Miller
And their commentary…
What now?
In 32 of the 184 communities (about 17%), there was an increase in average sales price from second quarter 2007 to second quarter of 2008. Over 82% of the Chicagoland market has seen a decline in the average sales price.
An interesting observation shows that many of these areas that saw increases were higher priced communities. This is an interesting anomaly in the statistics. In every area, there has been a noted increase in the Months Supply of Inventory (increase in active listings, combined with a decrease in under contract and annual sales volume). What this tells us, in the higher priced communities where fewer homes are selling, and the mean (or average) sales price of these homes appear to be increasing because a few higher sales that are still occurring, influence the mean number as the sample size decreases.
Believe it or not, some significant asking price reductions on multi-million dollar homes are contributing to the appearance of increasing mean sales prices (i.e. a builder is asking $3,500,000 and after 2 years on the market will take $2,200,000). There are many deals out there – at all price points. Unfortunately, many of the deals are as a result of somebody’s misfortune.
Furthermore, in some communities where tear-down activity may be taking place in that market, the market has slowed significantly for these modestly priced homes, again, influencing the mean sales price in the area by removing the lower priced home sales making it appear that there is increasing average.
I would caution users of this report, that having done doing appraisals in these market areas, that there is evidence of declining values when analyzing Sale/Resale data, and the higher priced housing is especially volatile. This is true with every community. The change in mean sales price may or may not represent truly the community’s increase or decrease in values. Statistics are a great tool, but they can be interpreted and misinterpreted in different ways.
Again, real estate is local, so some areas are doing better than others as we caution these statistics are macroeconomic data. And indeed, there are some pockets and many instances where prices have increased in the past year, but this is few and far between, not the norm.
Tags: Chip Wagner
This market report is provided by Chip Wagner and Robert Headrick of the Headrick-Wagner Consulting Group in their monthly eNewsletter. I have had the pleasure of knowing Chip and Bob for a good part of my appraisal career. They are both very active in appraisal industry matters having held many leadership positions. They also each have their own firms: Chips’ firm is A. L. Wagner Appraisal Group, Inc. and Bob’s firm is Robert E. Headrick & Associates, Inc. and have been covering the Chicagoland market for many years. Their focus is on relocation, litigation and lending appraisals as well as slayers of appraisal myths. Chip writes a column on our other blog Soapbox called Chip Shots. …Jonathan Miller
LOOKS RIGHT AND PRICED RIGHT
…The oversupply of inventory makes it very difficult for homeowners to sell their home. Many agents are telling me there are more buyers active right now as we are enter our Spring market, yet it remains a challenge. The buyers have many residences to look at. Homes are still selling – but unfortunately the types of homes appear to fall into two major categories: Looks Right and Priced Right, everything else in between is sitting unsold.
The houses that Look Right are those that stand out above the competition. They have positive attributes that their competitors cannot match. This may include Location/Site features such as a cul-de-sac lot with reduced front yard traffic, or a view of the park or Forest Preserve. It could also include homes that have been remodeled that stand out above its competition; e.g., adding trendy features such as granite countertops and stainless steel appliances to the kitchen. Or it could be about the impeccable condition of the property with brand new carpeting, recently refinished flooring and a fresh coat of neutral paint. Good interior staging is going a long way to make the home show the best that it possibly can. The homes that look right are being purchased, those that have a couple of faults here and there, are being overlooked and sitting on the market. This is exactly what happens when there is an oversupply and it is a Buyers Market.
The houses that are Priced Right are also getting a lot of attention. These are the homes that are sometimes called ‘short sales,’ or ‘quick sales.’ They might be properties where a seller has to sell because of a job transfer or a job loss. They could be properties in pre-foreclosure where the owner is distressed to get out of the property before they must turn the keys over to the bank. It could be a corporate-owned home, either by a bank, or a corporation who moved their transferee. These are some of the most motivated sellers on the block.
Or, it could be the builder who is willing to ‘wheel and deal’ and give away the spec home at an unbelievably low price, just to keep their sub’s paid, and able to work on that next home. I recently met a transferee who could not sell his home which was priced under the market at $325,000 when all of the comparable homes were over $350,000. He told me the feedback received was that people are choosing new construction of more expensive homes – of homes originally priced $400,000 to $450,000 that builders were selling for $350,000 with the discounts and concessions. It remains a difficult resale market in areas where sellers are competing with builders…..
Here are the reports…
eNewsletter February 2008
Detached Property Inventory: February 2008
Attached Property Inventory: February 2008
Tags: Chip Wagner
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. He runs the firm A.L. Wagner Appraisal Group., which has been providing appraisal, consulting and research services throughout the Chicagoland market for more than 35 years. I met Chip through RAC (Relocation Appraisers & Consultants) and have learned a lot from him. Like me, he has an enthusiasm for market analysis. Its great to have him share his insight on Soapbox.
Chip breaks down active inventory into two categories: Tastes Great or Less Filling…
…Jonathan Miller
The oversupply of inventory makes it very difficult for homeowners to sell their home. Many agents are telling me there are more buyers active right now as we are enter our Spring market, yet it remains a challenge. The buyers have many properties to look at. Homes are still selling but unfortunately the types of homes appear to fall into two major categories: Looks Right and Priced Right, everything else in between is sitting unsold.
The houses that Look Right are those that stand out above the competition. They have positive attributes that their competitors cannot match. This may include Location/Site features such as a cul-de-sac lot with reduced front yard traffic, or a view of the park or Forest Preserve. It could also include homes that have been remodeled that stand out above its competition; e.g., adding trendy features such as granite countertops and stainless steel appliances to the kitchen. Or it could be about the impeccable condition of the property with brand new carpeting, recently refinished flooring and a fresh coat of neutral paint. Good interior staging is going a long way to make the home show the best that it possibly can. The homes that look right are being purchased, those that have a couple of faults here and there, major or minor, are being overlooked and sitting on the market unsold. This is exactly what happens when there is an oversupply and it is a Buyers Market.
The houses that are Priced Right are also getting a lot of attention. These are the homes that are sometimes called ‘short sales,’ or ‘quick sales.’ They might be properties where a seller has to sell because of a job transfer or a job loss. They could be properties in pre-foreclosure where the owner is distressed to get out of the property before they must turn the keys over to the bank. It could be a corporate-owned home, either by a bank, or a corporation who moved their transferee. These are some of the most motivated sellers on the block. Or, it could be the builder who is willing to ‘wheel and deal’ and give away the spec home at an unbelievably low price, just to keep their sub’s paid, and able to work on that next home.
I recently met an owner being transferred who could not sell his home which was priced under the market at $325,000 when all of the comparable homes would support a value of over $350,000. He told me the feedback received was that people are choosing new construction of more expensive homes of homes originally priced $400,000 to $450,000 that builders were selling for $350,000 with the discounts and concessions. It remains a difficult resale market in areas where sellers are competing with builders.
With residential mortgage rates at favorable rates, most lenders have tightened their lending practices, making it more difficult for even the most qualified buyers to purchase a home. It appears to be more difficult to get a loan right now than in the recent past.
Many of the “fence-sitters” continue to sit back and wait for the market to hit rock-bottom, or wait for that home that either Looks Right or is Priced Right.
Tags: Soapbox Blog, Chip Wagner
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. He runs the firm A.L. Wagner Appraisal Group., which has been providing appraisal, consulting and research services throughout the Chicagoland market for more than 35 years. I met Chip through RAC (Relocation Appraisers & Consultants) and have learned a lot from him. Like me, he has an enthusiasm for market analysis. Its great to have him share his insight on Soapbox.
This week, Chip talks about appraising in declining markets and the usefulness of understanding what competing properties are doing.
…Jonathan Miller
In this ever changing real estate market, I seem to be noticing new dynamics in the marketplace all the time. Almost daily, another little light goes on in my brain.
I have been doing this full time for 18 years, plus a few more years during high school and college while working in the family business, and I have never seen a market even close to this. A few of us have, but a majority of us have not.
I’ve appraised in a declining market, but most of the time, it was short-lived. Or it may have been a specific sub-market with unique influences leading to the decline (such as upper priced housing, or the influence of new construction in a marketplace).
But the most interesting “dynamic” I am noticing at the current time, is the lack of “good” comparables for use in my appraisals to estimate market value.
Unlike the Jonathan Miller’s Manhattan real estate market, the Chicago real estate market like most other areas of the country is in a period of decline. Fortunately, the Chicago area appears to be holding up better than some markets around the country. As a student of statistics, I am finding that macroeconomic statistics in most areas of Northeastern Illinois are showing declines. Sporadic sub-markets continue to hold up, but these areas are becoming fewer and fewer.
INVENTORY
The local and national media and real estate community continues to talk about the increasing inventory, focusing on the total number of listings that are competing for buyers in the market place. It is true that in the Chicago metropolitan area (which encompasses over 9 million people) that the number of detached home listings has nearly doubled in the past two years (from 30,991 on 10/1/05, to 60,668 on 10/1/07) and most reports are focusing on this upward trend.
But the interesting dynamic also contributing to the inventory levels is the decline in sales volume. The annualized sales volume (12-month period) as of 10/1/05 was 83,757 sales of detached homes, and as of 10/1/07 it had shrunk to 59,626 sales.
While this is only a 29% decline in sales volume, the active listings increased a whopping 96%. The continued downward trend in contracts pending continues to force the sales volume lower each month and quarter it is calculated.
As a result, the challenge of the appraiser is that nearly 1/3 of the comparable sales have been removed from the pool of sales data for consideration. And in the volatile market with increased number of foreclosures, there is a wider range of values for these sales, than we had in previous markets. This is because of the foreclosure, pre-foreclosure and some corporate relocation sales that are now infiltrating the sales data pool with “lower” sales prices.
As they say, the cream rises to the top. And in the housing market, the few homes that are selling are the “crème puffs” out there. These homes still seem to be getting top dollar as a buyer can be choosy and select that home in perfect condition with fewest physical, functional and external defects.
These two dynamics are stretching what would be a small range of values in a “tract” housing neighborhood just two years ago, to a very wide range of values in today’s marketplace.
USING RECENT SALES
Fannie Mae guidelines ask mortgage appraisers to utilize comparable sales within the past 6 months. In other appraisals, the appraiser selects the most comparable sales, regardless of how recently they sold. In relocation appraising, the appraiser is given the latitude to select the “best” comparables, without limitations on when the most recent occurred.
In the April 2001 article published in Worldwide ERC’s Mobility Magazine titled The Difference Between Relocation Appraisals and Other Types of Appraisals, the author (yours truly) wrote:
The relocation appraisal asks the appraiser to consider closed sales without limitation. Often, the best sale to compare the subject property to is a home that is the same model, located on the same street, that closed longer than 13 months ago, and that was personally inspected by the appraiser who is using the comparable.
The premise behind this statement at the time I wrote the article in 2001, was that one of the easiest adjustments for an appraiser to make and support is a market change/time adjustment.
After experiencing these declining market trends over the past two years, combining my training and experience with networking with my peer real estate professionals, I have now become a very big believer in utilizing the most recent data available.
Two years ago, I would have suggested that the appraiser utilize the comparable sale of the same model that occurred 10 months ago and that looking in the rear view mirror, it is easy to see the stable, increasing or decreasing market trend, leading to a market change adjustment.
But today, with the limited sales data in many markets (plenty of competing listings data by the way) and the wide range of values in that limited data pool, I strongly believe and urge real estate professionals to consider the most recent market data, and seek out that data in competing areas if the data does not exist or is extremely limited or dated in the immediate marketplace.
But how do we know where to go? This can be best explained as “profiling the buyer” a strength of real estate agents and brokers working in a specific marketplace. They realize a buyer comes into an area focusing on specific demographics and price ranges, not on the “XYZ” subdivision. The appraiser values the property based on what is going on in the XYZ subdivision, not what is going on based upon demographics and the price range.
The real estate professional needs to understand the dynamic of market change, and the importance of understanding what is happening with the most recent sales whether they exist in the immediate neighborhood, or if you must venture to nearby similar areas.
COMPETITION
A final thought, the savvy real estate appraiser understands the importance of the competing listings and their impact on the market value of a given property. Why would someone pay more for the subject property than what a competing property is priced at? Sound familiar? It should. This is our real estate Principle of Substitution1.
With twice as many homes on the market which is supply, combined with the declining demand (falling contract pending and sales volume) the extra pressure eventually leads to declining values.
Spend time to analyze the active listings and select the most comparable one. Then add that listing to the sales comparison grid as a fourth or fifth sale in your appraisals. You might be surprised when those listings are adjusting lower than your sales. Why? Your market is declining.
1 Principle of Substitution states: that when several similar or commensurate commodities, goods, or services are available, the one with the lowest price will attract the greatest demand and widest distribution. This is the primary principle upon which the sales comparison approach is based.
Tags: Soapbox Blog, Chip Wagner
[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 lays out the discipline of relocation appraising, and its within spread (inside joke).
…Jonathan Miller
Okay, my recent posts have been negative, my own personal gripes. This week I’m going to talk about relocation appraising, something I love. If you are a “good” appraiser, you should love this type of work too.
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 appraisals are averaged together to form a buyout offer to purchase the home of a corporate transferee. There is a different definition of value called “Anticipated Sales Price.” The appraiser is asked to provide a prospective value into the future, a reasonable period up to 120 days. The appraiser is asked to provide an as-is value and make market-driven adjustments based upon the decorating and appeal of the home. The appraiser is asked to analyze three competitive listings in addition to closed sales. Pending sales that can be confirmed are encouraged to be used. They are asked to analyze the supply and demand, inventory levels, as well as marketing time (days on market). The appraisal principle of substitution is a key concept especially in the competing listings. “Why would a buyer purchase the property you are appraising for more than its competition?” is a question that is often asked of a relocation appraiser.
In a nutshell, it is the epitome of all residential appraisals. These concepts are not found on the 1004. The main reasons are because of the low tolerance for inaccuracy and cycle times, the fact that a peer appraiser is involved on every assignment, and a specially trained reviewer scrutinizes every last word you write.
Transferring America’s employees has been around since the 1950’s, and is a billion dollar industry for Realtors, appraisers, home inspectors, moving companies, mortgage companies, attorneys, relocation management companies and the corporation’s human resources department.
It is difficult to find your way onto an approved list to do relocation appraisals. Once you find client(s) that entrust you to do relocation appraisals, you better perform and meet their cycle times if you wish for repeat business.
The industry is tight, and clients typically seek out the best of the best. They keep track of your appraised value and what the property eventually sells for, and accuracy is a must to remain on the list.
When accepting and completing a relocation appraisal, you agree to cooperate by answering questions a client may have about your report. Some examples might be: “The other appraiser says the subject has 2 fireplaces, and you only note 1 fireplace. Could you reconfirm?” That is an easy one.
Or another example might be: “Your appraisal and the other appraisal both have a shared comparable, and you state it has a remodeled kitchen and make an adjustment, yet the other appraiser does not mention it.” If you did your research properly, that should be an easy one as well.
Sometimes it is: “could you expound on your Forecasting and Market Change adjustments.” That gets a little bit trickier – especially if the other appraiser does not agree with you.
I like this niche because it is recession proof and keeps me busy throughout the year. When the real estate markets go south, the importance of accurate relocation appraisals goes up.
Many appraisers do not like this type of work because of the frequent communication with the client and mandatory cycle times. Others do not like being measured against a “peer” appraiser’s work (probably because they have quality issues). Others cannot accurately appraise the properly (we are graded on what the home eventually sells for). And others have told me “they take too long to do” (there is a learning curve with the new form and what is expected).
It is definitely more work, as the report has extensive sections for narrative writing, and every appraisal needs three competitive listings and three comparable sales gridded. Photos of every room are needed. An adequate description of the home’s interior condition and décor/appeal is required along with suggestions as to what the client may need to do to competitively market the home. The additional work approximately is double the time of accurately completing a URAR, and the fee you charge would also be approximately double.
The volume of this type of work is going to vary from region to region. The major metropolitan areas with corporate presence are likely to have a high volume of job transfers for home-owning employees. The smaller markets may have limited volume of this work.
Many appraisers often ask me how to get into relocation appraising. I was fortunate as I was born into it (literally, my father had been doing this type of work since the middle 1960’s).
My advice is to first join the Worldwide Employee Relocation Council (ERC is the trade association for the relocation industry); take classes if possible (the ERC has an on-line appraisal course); train with an experienced relocation appraiser if possible (most appraisers do not want to train their competition); and make it known that you are available to do this type of work. My biggest referral source is Realtors who are listing these properties often refer appraisers that they know that specialize in relocation appraising).
Getting involved with the ERC will let you know who the clients are that order these types of appraisals. Getting involved includes reading their monthly magazine called Mobility, attending their conferences (they have an annual Spring convention every May), and earning the Certified Relocation Professional (CRPTM) designation from the ERC.
For more information on relocation appraising, visit the website of the Worldwide Employee Relocation Council and the Relocation Appraisers and Consultants.
Tags: Pending Home Sale Index, Soapbox Blog, Chip Wagner, Appraisal Process, PHSI, Relocation, NAR, National Association of Realtors
[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).
Tags: Soapbox Blog, Chip Wagner, Appraisal Process, Home Inspection
[This quarterly market report is provided by Chip Wagner and Robert Headrick of the Headrick-Wagner Appraisal Group in their eNewsletter. I have had the pleasure of knowing them for a large part of my appraisal career. They are both very active in appraisal industry matters having held many leadership positions. Their firm has been covering the Chicagoland market since 1970 and as a result, they both have a wealth of insight. Their focus is on relocation, litigation and lending appraisals as well as slayers of appraisal myths. Chip and Bob author a series of market reports on the Chicagoland real estate market and Chip writes a new column on our sister blog, Soapbox called Chip Shots. …Jonathan Miller
…The first quarter statistics show that listings are climbing fast, contract pendings are not keeping pace with the prior year, and the sales volume (previous 12 month period) is declining. With all these forces taking place, the inventory level has increased 78.5% over the same period from last year. An interesting observation shows that the average list price has declined 5.6%. This shows that pricing may be in the process of becoming more realistic in the difficult marketplace, and the oversupply is placing pressure downward on home prices. The good news is the average sales price has increased a modest 3%. This is far from the 5% to 10% (or greater) annual increases that we were accustomed to the first half of this decade. But it is also contrary to some of the national housing reports suggesting some markets are declining in year over year sales prices….
For the remainder of the 1Q 2007 report as well as other statistics, go here. There’s a lot of good information.
Tags: Chip Wagner
[This monthly market report is provided by Chip Wagner and Robert Headrick of the Headrick-Wagner Appraisal Group in their monthly eNewsletter. I have had the pleasure of knowing them for a large part of my appraisal career. They are both very active in appraisal industry matters having held many leadership positions. Their firm has been covering the Chicagoland market since 1970 and as a result, they both have a wealth of insight. Their focus is on relocation, litigation and lending appraisals as well as slayers of appraisal myths. Chip and Bob author a series of market reports on the Chicagoland real estate market and Chip writes a new column on our sister blog, Soapbox called Chip Shots. …Jonathan Miller
…some areas seem to be improving, while other areas continue to suffer from extended marketing times and oversupplied inventory levels. It seems as though communities that have strong competition from new construction are the areas that continue to have a difficult time with competition. So the good news is contract pendings have heated up. This is expected at this time of the year. At the same time, actual inventory continues to grow as homes continue to enter the marketplace…
Here are the hard stats for the month in the following reports.
Headrick-Wagner Chicagoland March Report [pdf]
February Condo MarketPulse [pdf]
February Detached Housing MarketPulse [pdf]
Tags: Chip Wagner
[Chip Wagner 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, he expounds on the proverbial Verbal.
…Jonathan Miller
I can hear Jerry Seinfeld right now. “Did you ever wonder why the client calls us for ‘The Verbal?’ What is a verbal? Is a verbal a noun or an adjective?” Better yet, how can this guy write over 1,000 words complaining about “the verbal.” I digress.
This past Friday afternoon, a client called me at 4:45 p.m. looking for the appraisal report that I inspected the day before. When I told them my report would be completed within 5 business days from inspection, exactly as agreed on their order form, they said “how about ‘just’ a verbal” right now? JUST a verbal? Our clients obviously must think things are so slow right now that their assignment is our only assignment to work on. And they obviously do not know the steps that must be taken to produce a credible and competent appraisal report.
Does anybody else see the client instruction that states “we need your report in 7 days, but we need your verbal in 3 days?” Face it, that instruction should just be amended to “we need your report in 3 days.”
I cannot begin to tell you how many times I have told a client that by the time a verbal is ready, my complete report is just a spell check, a PDF and an e-mail away. They don’t get it. Never. I have explained this to the same client, the same processor, the same person dozens of times but they still always call to ask for “the verbal.”
Who is giving them these verbals anyways? To me, a verbal is the number (opinion of value) we give to our clients about 3 minutes before we e-mail our report to them. It certainly does not constitute a Verbal Appraisal according to USPAP, but we, as licensed appraisers, are held to that standard.
According to Wikipedia.com, Verbal may mean:
* Non-finite verb, a verb form that functions both as a verb and as another lexical category.
* A word or group of words that functions as a verb by serving as the head of a verb phrase. (In some languages, adjectives are verbals.)
* Pertaining to language in general or to speech in particular.
* A major character in the 1995 film The Usual Suspects.
* One part of the Japanese hip-hop duo m-flo.
Or, according to the on-line dictionary, Verbal may mean:
adj.
1. Of, relating to, or associated with words: a detailed verbal description.
2a. Concerned with words only rather than with content or ideas: a merely verbal distinction.
2b. Consisting of words alone without action: a verbal confrontation.
3. Expressed in spoken rather than written words; oral: a verbal contract.
4. Corresponding word for word; literal: a verbal translation.
5. Grammar
5a. Relating to, having the nature or function of, or derived from a verb.
5b. Used to form verbs: a verbal suffix.
6. Of or relating to proficiency in the use and understanding of words: a verbal aptitude test.
The definition really does not exist so what is a Verbal? It must be an appraisal-term that our forefathers in this profession made up many eons ago? We all know what is meant when our client looks for a verbal.
It seems like definition number 2a. is the closest “concerned of words rather than with content or ideas.” That is what is being provided to the client communicating the opinion of value.
But what can the client really do with a verbal anyways? They cannot make a loan on a verbal. They cannot offer a buyout to a transferee with a verbal. They will not settle on a legal dispute or eminent domain case with a verbal. They can do NOTHING with a verbal except perhaps find out the appraisal is or is not going to come in at a value that they are looking for – for one reason or another (appraisal independence that is an entirely different topic). Why get the news without any reasoning or support? And who out there has given a verbal before delivering the report to have the client say, “great, cancel the assignment, I cannot make the loan.”
I don’t know about how ALL of the other appraisers write, process and produce their reports, but pretty much every appraiser I know in 2007 is now automated and digital. To compete in the highly competitive residential appraisal marketplace, we must provide our appraisal quickly which usually also means electronically.
The verbal in appraisal-speak to me is an ancient term in the industry just like the IBM Selectric typewriter, the one-hour photo labs, the Polaroid instant camera, and the press on arrows.
When I started in this business, which was before the fax machine, appraisal orders arrived in the mail or on the telephone. The appraisers handwrote their reports and turned over the reports to a team of data-entry assistants and secretaries that lined up the form reports into the typewriter. The appraiser was 100% done with the report handwritten and turned the report over to the typists. Once typed, the reports were pieced together with exhibits such as the hand drawn sketch, the double stick taped on photos (or rubber cement in my office) and the copies of maps with press on arrows. Then, the report was copied in your old Photostat or Xerox machine to make a duplicate.
Then, it was packaged in a legal-sized envelope, weighed for correct postage and placed in the mail. The US Postal Service then delivered our report to our clients in 2 to 5 days after placing in the mail box. Remember all that work prior to the digital age?
What step did I miss? The ‘Verbal.’
Just about two decades ago, the verbal was a part of our vocabulary and a daily part of our service provided to our client. Once we handwrote our value into the report to be typed, we picked up the telephone and called in a verbal to our client. This was done because it was going to be mailed two days later (and not overnight-mailed that service was cost prohibitive) after it was typed and assembled and it was going to take 2 to 5 days to get to the client in the mail so almost a week later, they would get their report.
That is not how business is typically done today.
Am I naive to think that my appraisal competitors are providing verbals to my clients and then giving them their reports 4, 5 or 6 days later? I don’t think so. But the clients seem to think so. Is this an archaic instruction on appraisal orders that has lasted longer than USPAP has been around? Well, look on the bright side our appraisal fees are still about the same as they were back then. So, who checked out m-flo?
Tags: Soapbox Blog, Chip Wagner
[This monthly market report is provided by Chip Wagner and Robert Headrick of the Headrick-Wagner Appraisal Group in their monthly eNewsletter. I have had the pleasure of knowing them for a large part of my appraisal career. They are both very active in appraisal industry matters having held many leadership positions. Their firm has been covering the Chicagoland market since 1970 and as a result, they both have a wealth of insight. Their focus is on relocation, litigation and lending appraisals as well as slayers of appraisal myths. Chip and Bob author a series of market reports on the Chicagoland real estate market They tell me they are also working on a big revamp of their web site as well.] …Jonathan Miller
This month, after licking their wounds from a Chicago Bears (“Da Bears”) Super Bowl loss to the Indianapolis Colts, they did what any good appraiser would do, analyze the situation and correlate it to the real estate market. They did this in a recent post in Chip Wagner’s new Soapbox column “Chip Shots” called Superbowl Mythbusters: Confirmed, Plausible Or Busted?
Here are the hard stats for the month in the following reports. I’ll link them directly to their new web site when its finished:
Headrick-Wagner Chicagoland February Report [pdf]
January Condo MarketPulse [pdf]
December Detached Housing MarketPulse [pdf]
Tags: Chip Wagner
[Chip Wagner 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, among the first in the country. I have learned a lot from Chip and 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 his inaugural Soapbox post for his Chip Shots column, named for his passion for golf, Chip tries to find some sort of real estate silver lining in da Bears‘ Superbowl loss.]
…Jonathan Miller
Does our market really pick up after Super Bowl Sunday?
For years, our Snow-Belt market has always been known to be cyclical through the seasons more so than the Sun-Belt regions in the country. It has often been said and repeated, the slowest time of the year for residential real estate activity is between Thanksgiving and New Years Day, and it begins picking up in the new year, and even greater after Super Bowl Sunday. This year, our Chicago Bears were in the Super Bowl so there were probably very few showings on Sunday, February 4, 2007 in the Chicago area.
It is known that our “Spring” market is when a majority of homes are purchased so they can close and move into the new home by Summer, and before children start school in the Fall.
Super Bowl Sunday is that magic day. The old saying it picks up is because the ladies can get their men off the couch on Saturdays and Sundays to look at homes now that college and professional football season is over (or it could be vice-versa).
So, what is really happening??? What do the statistics say? What is market activity increase in listings or increase in contract pendings or both? With the inventory supply build-up from 2006, we certainly hope the pendings will outpace the listings.
In the spirit of the show Myth-Busters let’s find out did the market pick up after Super Bowl Sunday? Fact or Fiction.
In the first 10 days after the Super Bowl the market did pick up. There were 964 new listings of detached homes in the entire region up about 2.25%. At the same time, there was a net increase of 887 properties to go under contract up almost 12%. DuPage County had the biggest net increase at 21.59%.
For the attached homes, there were 706 new listings to enter the marketplace, which is a 2.51% increase. And there were almost 867 properties went under contract up about 9.18%.
It is important to also point out that during the same 10-day period, we continued to see declines in closed sales volume, which is a result of our slow fourth quarter activity that are now closing. This has kept the inventory levels increasing upward slightly.
The positive news is the market has picked up after Super Bowl Sunday. So, we have proved that it is a “FACT” that the real estate market does pick up after Super Bowl Sunday. Just 10 days after, we saw an increase of contract pendings from 9% on attached housing and 12% on detached housing.
Tags: Soapbox Blog, Chip Wagner
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Jonathan Miller is President and CEO of Miller Samuel Inc., a real estate appraisal and consulting firm he co-founded in 1986. He is a state-certified real estate appraiser in New York and Connecticut, performing court testimony as an expert witness in various local, state and federal courts. He holds the Counselors of Real Estate (CRE) and Certified Relocation Professional (CRP) designations. He is an Appraiser “A” Member of the Real Estate Board of New York and a member of Relocation Appraisers and Consultants, Inc.
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