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NAR Admits Significant Error in Sales Calculations for 5 Years

December 20th, 2011 by Bill Collins Leave a reply »

National Association of Realtors Admits to Double Counting Some Home Sales Resulting in Overstated Sales Figures for Five Years

In a statement to Reuters last week, NAR spokesman Walter Malony reportedly stated that: “All the sales and inventory data that has been reported since January 2007 is being downwardly revised.  Sales were weaker than people thought”. 

On December 14th, the NAR posted a video and “Q and A on Re-Benchmarking of Home Sales” in which they discussed the matter. The video and Q and A discussed the problem of “data drift” and how “…there could be double or triple counting of a single home sale transaction” due to a single property being listed and sold on several Multiple Listing Systems.  The NAR addressed some of the ways in which they would change their methods of collecting and processing information.  They also seemed to be saying that the errors were not that important because the “trend lines” were the same as before and that “Like weather, the only thing that truly matters for consumers are outlooks on data from their local market area.”

After what appears to be an attempt to downplay the significance of the errors, the Q and A noted that: “The national data is important for policymakers to measure the broad strength and weakness of the housing market as they impact the national economy.”

The over-statement of sales by the NAR was substantial and appears to have continued for approximately five years, supposedly ending in October of this year.  AppraiserNews.com is of the opinion that this is no time for the NAR to try to gloss over the extent of the problem, their credibility is truly at stake.  If their data is to remain “important for policymakers” they will have to seriously address their deficiencies and make their chief economist, Lawrence Yun, choose whether he really is an economist and not a cheerleader whose commentary is not credible.  In their video of December 14th, Mr. Yun starts to drift away into lala land with comments about “hopefully banks will start lending” and remarks about increased sales in 2012 along with a modest increase in values.  The Q and A states:
“NAR takes its role as a leading source for housing information very seriously, and toward that end, NAR research will announce results of a year-long re-benchmarking process for existing-home sales on Wednesday, December 21.”

We shall see.  A link to the NAR video and Q and A is found here: National Association of Realtors, Existing Home Sales Methodology, Benchmarking FAQ

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McKissock 2012-2013 USPAP Online Course Now Available in Approx. 40 States and DC

McKissock Education, the official provider of the Appraisal Foundation’s online 2012-2013 USPAP courses, is now available in most states. Earlier this year, the Appraisal Foundation and McKissock announced their partnership and the online course is now available to most appraisers who are interested in completing this before the end of 2011. See if courses are available in your area and save up to 20% on course fees by going to our Online McKissock Portal.


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Some Recent Real Estate Reports

On December 15th, CNNMoney’s Les Christie discussed RealtyTrac’s latest report and why a new wave of foreclosures may be about to bring in the new year.  Links  to Mr. Christie’s article and the RealtyTrac report are found here: Scheduled Foreclosure Auctions At 9-Month High as New Foreclosure Wave Builds

Foreclosures Fall, But Outlook Isn’t Bright

On December 16th, the SEC charged six former executives of Fannie Mae and Freddie Mac with securities fraud related to misrepresentations of their holdings of subprime or high risk mortgage loans.  Links to the SEC press release and a report by CNNMoney’s Aaron Smith are found here: SEC Charges Former Fannie Mae and Freddie Mac Executives With Securities Fraud

SEC Charges Former Execs of Fannie, Freddie

While Fannie and Freddie ex-execs were getting kicked around, Mark Zandi in the Washington Post on December 15th had some nice words for the FHA including the following:
“It has become fashionable to rail against government intervention in the economy, and the FHA is a favorite example by those trying to show the government’s overreach. In reality, the FHA shows how government action during the Great Recession forestalled a much worse economic fate. If FHA lending had not expanded after private mortgage lending collapsed, the housing market would have cratered, taking the economy with it.” A link to the complete article is found here: FHA Role May Be Bloated, But We’d Be Much Worse Off Without It

On December 9th, Rusty Weston of Yahoo! Real Estate discussed their recent survey which found continued support for the American dream of homeownership, along with a newly “Green” component and a link to this report is found here: Yahoo! Study: American Dream Homes Turn Green

On December 15th, CNBC’s Diana Olick discussed the projected growth in “green” construction and retrofitting in commercial real estate, along with the increased value associated with such work.  A link to Ms. Olick’s video is found here: Green Buildings Pay

According to HousingWire’s Kerri Panchuk, Standard & Poor’s Rating Services reported yesterday that the delinquency rate for collateral backing industrial commercial mortgage-backed securities had reached 12.05%, a 22 year high.   The article did note that the report indicated that the industrial segment was the only property type which was currently at a historic high.

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What Our Readers Have to Say About The Difficult State of the Appraisal Profession

Jon Cappaert, who performs appraisals in both Wisconsin and Michigan writes that:
“I am 34 years old, and have been appraising since 2005.  I am a Certified Residential Appraiser.  I don’t mind the 1004MC or the new UAD, I can’t handle all the the client specific requirements that the AMC’s have and  they all have different requirements.  I don’t have time to read each of the AMC’s flyers every other day telling me what needs to be on the report.  All they want to do is to try and make their appraisals look better than the rest.  The only thing I can do is charge more for the extra work.  I think other appraisers in my area are feeling the same way, because I am still getting more than enough work.  Bottom line is that they need to pay for our extra work.”

Buffalo, New York appraiser Jerry Pirritano writes: “How does anyone expect a professional opinion of value instantly. Broadcasting assignments at reduced fees with unrealistic turn times yet requiring quality work doesn’t equate.  How long does an attorney take, or realtors, title, surveyors…”

A New Jersey appraiser (who prefers to remain anonymous) writes: “As for the number of appraisers renewing their licenses, don’t be mislead if it appears that a large number are renewing. My son and I (both certified with > 20 years experience) are renewing this month but our appraisal work is effectively nonexistent. We’ve attempted to demand our C&R fees but this eliminated over 90% of our work. We’re moving on to new endeavors and plan to be part time appraisers only.  I suppose this is our meager contribution to the industry… adding a few more assignments for those appraisers deciding to (or being force to) work for the C&R fees dictated by the AMCs.”

Atlanta, Georgia appraiser Clay Posey writes: “You can add my name to the appraiser retired list.  I have been appraising in the Atlanta area since 1977.  I just turned in my business license, my MLS account, my MLS lockbox key, all my data services, and put my tape measure out to pasture.  I have had it.  I did keep my license active because it takes so much to get one, just in case.

This profession was enjoyable until about  2009, when all these new regulations started up.  I don’t need AMC’s or anything connected with them, and I hope all of you remaining appraisers can survive working with them.  I calculated that my on my last appraisal, I earned around $90 a day, before expenses.  After expenses, about $80.  I turned 65 and am now turning over my work to you younger guys.  Good luck to all of you.”

Colorado appraiser Ray Starks writes: “This has forced me out of the appraisal business after 16 years.  So far we have identified over $100,000 in fees owed to Colorado Appraisers for work done thru the Loft between August and September.  (Name withheld) Credit Union contracted with them in August even though they were told that the Loft had a poor reputation.  They owe me $9000.   We intend to go after the Lender/Client/end user!  I have filed complaints with the California and Colorado Attorney Generals, the California and Colorado Department of Regulatory Agencies, and The BBB.  So far the BBB and DORA have asked the credit union to respond… If we can band together and hold the lender ultimately liable it would set national precedence.”

Virginia appraiser Jeff Phillips writes: “I keep reading the industry news and all the nonsense that is out of control. At least out of the appraiser’s control. What I don’t see are solutions to this nonsense. I am considered a "young buck" in this profession. I have been appraising for 10 years and I am 37 years old. I have yet to see a solid or size-able voice for the appraisers. Why are we not or unable to take control of our industry? To me, this is the issue I do not understand. Why are we not united? The real estate agents are. They do not seem to have had their fees or industry devastated like ours. I admit I am not aware of their changes, however, I have not heard any of them complaining. Please advise or offer advice as to your opinion or the readers opinion of why this is. I appreciate your time. Keep up the good work.”

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End of Year Reminder For Appraisers

So, what are you waiting for? How many times do we have to tell you to allocate some time each day to building your private appraisal practice?

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"Perils of Indemnity"

The above is the title of an article written by Charles R. Franklin of Belongia, Shapiro & Franklin, LLP which was provided to AppraiserNews.com by John Torvi of Herbert H. Landy Insurance Agency.  The article further discusses some of the concerns which we discussed in the last newsletter regarding the indemnity clauses which appraisers are frequently being asked to sign.  Mr. Franklin concludes his comments by saying that:

“The moral: know who you are dealing with. Do some due diligence. While there soon will be nor requirement to sign contracts with indemnity clauses, if you choose to do so, BEWARE! Make sure the clause is clear and that it actually reflects your intentions, and because of unintended consequences and possible unforeseen events, make sure you are appropriately and adequately protected.”

Please feel free to contact AppraiserNews.com if you would like to receive a reprint of this article in full

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Rates & Dates

Mortgage interest rates declined significantly in the most recent weekly reports issued by Freddie Mac and the Mortgage Bankers Association (MBA).

On December 15th, Freddie Mac reported that rates for 30-year fixed-rate mortgages dropped to 3.94% (matching a historic low) from 3.99% during the prior week.  Frank Nothaft, vice president and chief economist for Freddie Mac.  Mr. Nothaft reported that “Over the first nine months of 2011, households lost almost $400 billion in property values which contributed to a $1.4 trillion reduction in overall net worth. In addition, serious delinquency rates (90 or more days delinquent plus foreclosures) on mortgages increased slightly between June 30 and September 30th”.

The MBA in its most recent Weekly Mortgage Applications Survey for the week ending December 9th, reported that 30 year rates with conforming loan balances ($417,500 or less) declined to 4.12% from 4.18% during the previous week.   The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.47 percent from 4.52 percent.  At the same time, the average rates for FHA backed mortgages declined to 3.94% from the prior week’s 3.98%.  In all three instances, the MBA noted that the rates were now at the lowest point of the year.

In their press release of December 14th, the MBA also reported an increase of 4.1% in mortgage applications during this most recent week with refinance activity up 9.3% and purchase mortgage applications down 11.8%.  Refinance applications rose to 79.7% of all applications in this most recent survey. 

Additional information from Freddie Mac can be found by going to: Primary Mortgage Market Survey PMMS – Freddie Mac

Additional information from the Mortgage Bankers Association can be found by going to their site at: Research and Forecasts – Mortgage Bankers Association

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Ask Angie

We want to congratulate our most recent winner: New York State Certified Residential Appraiser Dhanraj Singh who is with Reliable Appraisal Service.  Mr. Singh was the first to answer that Albert Einstein said “Any intelligent fool can make things bigger and more complex… It takes a touch of genius – and a lot of courage to move in the opposite direction”, Thomas Jefferson said “Do you want to know who you are? Don’t ask. Act! Action will delineate and define you” and Groucho Marx joked that “A child of five would understand this. Send someone to fetch a child of five.”  Today’s questions:

Today’s questions:

1. Who Said: "Most of the things worth doing in the world were said to be impossible before they were done."

a) Louis Brandeis
b) Steve Jobs
c) Albert Einstein
d) Isaac Newton
e) None of the above

2. Who said: "All important events in the world–whether admirable or monstrous–are always spearheaded in the realm of words."

a) William Shakespeare
b) Vaclev Havel
c) Winston Churchill
d) Salman Rushdie
e) None of the above

3. Who said: "I once wanted to become an atheist, but I gave up – they have no holidays."

a) Groucho Marx
b) Woody Allen
c) Henry Youngman
d) Jerry Seinfeld
e) None of the above

The first person to respond with the correct answers wins a choice of one of the following:

One Free Regular Listing on AppraiserHelp.com

A Free Copy of the Directory of Appraisal Management Companies (Available Now to Members of AppraiserHelp.com and FHAAppraisers.com FREE!)

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Tell us what you think!

We invite your responses to any of the issues raised in this newsletter. Please e-mail us at: bill@appraiserhelp.com with your thoughts!

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We really hope you find our newsletter to be informative!  If you have any input on future topics for discussion, please email me your questions and I will do my best to address them in the next issue.  If you want to look back at past issues you can see our archive at www.appraisernews.com

Regards,

Bill Collins, Appraiser Help Inc.

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