Article in The Appraisal Journal Says Accessory Dwelling Units May Have Higher Values when Using Income Approach

Residential properties with accessory dwelling units — such as in-law apartments or coach houses — may have higher value potential if the properties are valued for investment income using the income capitalization approach, according to an article published this week in The Appraisal Journal.

multifamily-1The Appraisal Journal is the quarterly technical and academic publication of the Appraisal Institute, the nation’s largest professional association of real estate appraisers. The materials presented in the publication represent the opinions and views of the authors and not necessarily those of the Appraisal Institute.

In the study, the authors test an income-based approach to valuing properties with ADUs. For 14 properties with ADUs in Portland, Ore., an income capitalization approach produced valuations that were significantly higher than actual sale prices, by 7.2 percent or 9.8 percent on average, depending on the formula used. ADUs also contributed on average 25 percent or 34 percent of each property’s appraised value, depending on the formula used. [Read more…]

Appraisal Institute Continues Leadership on Separating Fees

capitolThe Appraisal Institute and the American Society of Farm Managers and Rural Appraisers reiterated their support of separating appraisal and appraisal management company fees on mortgage disclosure forms June 20 in Congressional testimony.

The organizations originally voiced support when drafts of the Consumer Financial Protection Bureau’s proposed Consumer Disclosure Form were released in February.

AI and ASFMRA again expressed their support in written testimony on “Mortgage Disclosures: How Do We Cut Red Tape for Consumers and Small Businesses” before the House Committee on Financial Services’ Subcommittee on Insurance, Housing and Community Opportunity.

[Read more…]

Appraisal Institute Makes History at May Board Meeting

blog_presidentheadersI’m proud to share that the Appraisal Institute Board of Directors’ May 7-8 meeting was historic.

Board Approves Review Designations

The AI Board of Directors has decided to confer the Appraisal Institute’s first new designations in more than 20 years.

In response to the growing and critically important role that appraisal review plays in risk management and mitigation for many clients and users of appraisal services, the Appraisal Institute Board of Directors voted May 8 at its meeting in Chicago to create a professional appraisal Review Designations program.

The program will become available once the necessary infrastructure is completed.

I’m also pleased to report that M. Lance Coyle, MAI, SRA, of Dallas was nominated for 2013 Appraisal Institute vice president by the AI National Nominating Committee at its May 6 meeting in Chicago.

National Nominating Committee Chair Joseph C. Magdziarz, MAI, SRA, announced the committee’s decision to the Board of Directors. Board members may file petitions for additional nominees until mid-June.

To learn about other action taken at the Board meeting, click here. [Read more…]

AVMs No Substitute for Real Estate Appraisals

With lenders facing myriad challenges and consumers seeking cost reductions, it might be tempting to take a shortcut with real estate valuation — but the negative impact could be significant and long lasting.

Some lenders utilize automated valuation models in certain cases. However, AVMs are not real estate appraisals; the two are not comparable. An actual appraisal typically requires the appraiser to visit the property and to perform a visual inspection. This enables the appraiser to accurately report property information, which they then verify. Appraisers use their experience, expertise and education to determine which comparable sales to use and what adjustments, if any, to make. A qualified, competent appraiser conducts thorough research and thoughtful analysis to develop a reliable, credible opinion of value.


AVMs, on the other hand, largely aggregate data from public records, which are often inaccurate, incomplete or outdated. AVMs are an unregulated method of obtaining opinions of value that undermines federally created appraisal standards. Lenders’ use of AVMs put both banks and consumers at risk of receiving unreliable valuations. [Read more…]

Appraiser Selection is a Key Decision for Lenders

Given the number of bad loans on their books due to foreclosures, it’s hard to blame lenders if they are more cautious in the current economic environment. Appraisers, however, are performing the same thorough research and thoughtful analysis they always have in order to help lenders make wise lending decisions.

In today’s challenging real estate market, choosing the right appraiser is vitally important for both the lender and the consumer, and working with a Designated member of the Appraisal Institute has many advantages. Appraisers need to provide credible, reliable opinions of value, and that requires education, ethics and experience.


Real estate appraisers know how challenging it can be to differentiate themselves from the competition. But appraisers who have received the MAI and/or SRA designation from the Appraisal Institute have found the best way to achieve that goal. [Read more…]

Appraisal Institute Honors February Volunteers of Distinction

vodsmallThe Appraisal Institute has announced its “Volunteer of Distinction” honorees for February: Hugh B. Bass Sr., MAI, of Region IX (Atlanta Area Chapter) and Karen Goforth, MAI, of Region X (Northwest Florida Chapter and West Coast Florida Chapter).

The Appraisal Institute’s member recognition program honors members for their volunteer service to the Appraisal Institute, to the real estate valuation profession and to their local communities. Each month, the Appraisal Institute recognizes one honoree in each region as a Volunteer of Distinction.

Region IX consists of Alabama, Arkansas, Georgia, Louisiana, Mississippi, South Carolina and Tennessee. Region X consists of Florida, Puerto Rico and the Virgin Islands. [Read more…]

Appraisal Institute Shares Tips for Consumers

Buying or selling a home in today’s housing market can be challenging, but the Appraisal Institute has offered helpful tips to let consumers know how to protect themselves and how to avoid frustration during the process.

Appraisals are a key component of real estate transactions, and consumers can help themselves by following these recommendations from the Appraisal Institute:


  • Understand the role of appraisals.
  • Make sure the lender hires a qualified appraiser (such as a Designated member of the Appraisal Institute).
  • Accompany the appraiser during the inspection of the property if possible.
  • Request a copy of the appraisal report from the lender.
  • Examine the appraisal report and ask questions.
  • Appeal the appraisal if appropriate.
  • Ask the lender to order a second appraisal by a qualified and designated appraiser.
  • File legitimate complaints with appropriate state board or professional appraisal organizations. [Read more…]

Appraisal and AMC Fees Separated on Revised Settlement Forms

The Consumer Financial Protection Bureau released the second proposed version of a new Consumer Disclosure Form Feb. 1 that includes clear disclosure of any fee paid to a “Local Appraisal Company” and to an “Appraisal Management Company.”

The Appraisal Institute reported last month that the CFPB is in the midst of developing a new form that would replace the existing HUD-1 settlement statement. In December 2011, Appraisal Institute representatives met with CFPB officials about the new form.

The CFPB has indicated that several versions of the proposed form will be developed and tested with consumers by focus groups, with a proposed rule to be released this summer. [Read more…]

Appraisal Institute Announces Support for New Solar Valuation Tool

The Appraisal Institute this week announced its support for a new tool that will assist appraisers and others seeking to establish the value of a property’s solar-powered features. The spreadsheet was developed by Solar Power Electric and Sandia National Laboratories.

Finding a way to value residential and commercial properties with photovoltaic (PV) installations is a growing challenge facing the nation’s real estate industry. As more homes and businesses turn to solar power, the need grows for ways to develop reliable and credible opinions of value of the installations and the power they generate.


PV Value works within a Microsoft Excel spreadsheet to determine the value of a PV system. This is done using an income capitalization approach whereby the energy value is calculated over the lifetime of the PV module warranty. Inputs to PV Value include the zip code of the location, local utility rate and characteristics of the PV system. An appraisal range of value estimate is returned as a function of a pre-determined risk spread. This tool can be used to value a PV system at any location in the U.S. through its interface with the National Renewable Energy Laboratory’s PVWatts simulator. [Read more…]

Appraisal Institute Continues Push on Customary and Reasonable Fees

The Consumer Financial Protection Bureau recently issued a new Interim Final Rule on the Truth-in-Lending Act’s provisions related to appraiser independence. This rule includes the previously issued rules relating to “customary and reasonable fees” that originally were issued by the Federal Reserve Board last year.

blog_image_1_26_12The CFPB Interim Final Rule was issued in order to restate all of the Federal Reserve’s Truth-in-Lending Act regulations as CFPB regulations, effective Dec. 31, 2011, as authorized by the Dodd-Frank Act. As part of this process, the CFPB adopted the Federal Reserve’s Interim Final Rule, and the agency stated its action does not constitute any new regulatory obligations.


The agencies are under statutory deadlines to complete three rulemakings; requirements for higher cost mortgages, appraisal management company registration & oversight requirements, and automated valuation model quality control standards by January 2013. No statutory deadline exists for customary and reasonable fees. [Read more…]