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Difficulties Selling the Appraisal Business

June 17th, 2013 by Bill Collins Leave a reply »

The Difficulties in Valuing and Selling an Appraisal Practice

A Nevada appraiser had the following comments regarding our remarks in the last newsletter on valuing and selling an appraisal practice:

“As usual, great stuff. However, perhaps I can supply an addendum to your article on selling an appraisal business.

I am planning to leave the Appraisal Business after 33 years to begin a venture in the Valuation Industry providing “raw data” for rate desks. I have investigated the value of an Appraisal Business during the past year. The outcome is not pretty.

Unless you have one of the 10+- largest firms in the Country with their own AMC and revenue in the 10’s of millions…good luck!!! Even these firms are going to have to polish up the brass to find a buyer. I have a minor in accounting and have done my share of business appraisals in my career. The Appraisal Business with declining revenue, unbelievable regulations/bureaucracy and rapidly declining members couldn’t paint a worse picture for resale!!!

I have personally tried to broker 6 Appraisal Businesses in the past 3 years. These businesses covered both residential and commercial, some had very little exposure to Mortgage business or AMC’s. I used every marketing source possible including the Social Media. I had very few offers and once these people analyzed the past 3 years tax returns/income & expense statements they quickly went bye-bye.

Bill, I think it is very important to inform Appraiser’s the reality of a business sale and not rely on this as an expected source of retirement capital. Let me know your thoughts.”

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AppraiserNews is a FREE publication, supported by advertising and sales of products designed to help appraisers support and grow their businesses. Please consider supporting us today by seeing what we and our sponsors have to offer.

Narrative 1 Commercial Express

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Correction from Last Newsletter

Numerous readers pointed out that it was Yahoo (of course), not AOL, that acquired the blogging site Tumblr.  We apologize for the mistake but want to re-emphasize the points we made for appraisers thinking of retiring or leaving the field during the next couple of years: they should start planning carefully for this (especially those technologically challenged) by

-Upgrading their operations utilizing the newest appraisal software and
-Engaging new media/social media firms to assist them in proactively marketing their appraisal practices.

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To help appraisers evaluate which AMCs are right for them, we have compiled this directory of over 200 AMCs and National Appraisal Companies, listing complete, up-to-date contact information and other details for each listing.

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Foreclosure Activity Increases in May

On June 11th, RealtyTrac reported that foreclosure starts increased by 4% in May but were still down 33% from one year ago.  Foreclosure filings (default motions, scheduled auctions and bank repossessions) increased 2% last month but were down 28% from a year ago.  RealtyTrac noted the continued shift in activity from the so-called judicial to non-judicial states: five of the six states with the highest foreclosure states were judicial states (Florida, Ohio, Maryland, South Carolina and Illinois).

A link to the entire RealtyTrac report is found here:

U.S. Foreclosure Activity Increases 2 Percent in May Boosted by 11 Percent Rise in Bank Repossessions

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Is the "Inventory Shortage" a Myth?

On June 12th, Realty Trac’s Senior Staff Writer, Octavio Nuiry wrote about the concept of a shortage of housing inventory put forth by many (especially the National Association of Realtors) in an article titled “The ‘Inventory Shortage’ Myth”. 

Mr. Nuiry notes the recent Census Bureau report that there are 13.9 million vacant year-round homes in the U.S. out of an overall inventory of 133 million homes (10.45% of all units).  While this is the case, home sales and prices have been generally rising at the same time that homeownership is down.  Purchases by large institutional investors are up substantially, a situation described by the author as follows:

“…major banks and their Wall Street buddies, many of whom were subprime lenders five years ago and now have transformed themselves into real estate “investors.” These all-cash foreclosure investors are buying distressed property at the low end of the price scale, muscling out first-time homebuyers and smaller mom-and-pop investors. Big investors, like Blackstone, Colony and others, are snatching up low-priced foreclosures in bulk and renting them out to people who can’t buy. By amassing thousands of rentals, the Wall Street landlords are putting a crunch on housing supply, driving up prices and lacing their pockets with profits.”

Mr. Nuiry makes the point that housing “scarcity” is a result of “underwater” borrowers who can’t sell along with the refusal of banks to modify said underwater mortgages.  He points out that ¼ of all borrowers (11.3 million homeowners) are underwater and unable to sell, refinance or obtain a mortgage loan modification.

On June 13th, Zillow reported that their number of homes for sale in early June was down 12.2% from one year ago, a reduction of 5.3% from late January when they reported a decline of 17.5% in listings from the year before.  Zillow’s chief economist, Stan Humphries, noted in the news release that as new supply comes to market the pace of home appreciation would likely drop from recently seen annual levels of greater than 5% to figures closer to “historic norms” of 3 or 4%. 

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Delinquency Rates Decline for Commercial and Multi-Family Properties

On June 4th, the Mortgage Bankers Association (MBA) reported that delinquency rates declined in the first quarter of 2013 for most commercial and multi-family properties.  Jamie Woodwell, the MBA’s Vice President of Commercial Real Estate Research stated in their news release that:

"Commercial and multifamily mortgage performance continues to improve. The improving economy and property fundamentals are supporting loan payments and fewer loans are maturing this year than did last year or the year before.  With interest rates still low, property incomes improving and property values on the rise, those loans that are maturing are facing an easier environment in which to refinance.”

The MBA reported the following delinquency rates (based on unpaid principal loan balance) for the five largest investor groups:

Life company portfolios: 0.09 percent (60 or more delinquent);

Freddie Mac:  0.16 percent (60 or more days delinquent);

Fannie Mae:  0.39 percent (60 or more days delinquent);

Banks and thrifts:  2.43 percent (90 or more days delinquent or in non-accrual);

CMBS:  8.55 percent (30 or more days delinquent or in REO).

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Long Island Industrial Buildings for Lease at 60 Cents/Sq Ft; For Sale at $3.00/Sq Ft

Courtesy of Bill Greiner of Greiner-Maltz Real Estate, a leading commercial/industrial real estate firm on Long Island, here is a link to a flyer giving information on the above offerings…circa 1953!

1953 Greiner-Maltz Flyer

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Rates & Dates

Freddie Mac, the Mortgage Brokers Association (MBA) and HSH Market Trends all reported another week in which mortgage interest rates rose in their most recent surveys. 

On June 13th, Freddie Mac reported that 30-year fixed-rate mortgages increased to 3.98% from the previous week’s rate of 3.91%. Freddie Mac reported that this was the sixth straight week of increases with rates rising by 0.63% since May 2nd.  They also noted that last year at this time the 30-year rate was 3.71%. 

The MBA in its most recent Weekly Mortgage Applications Survey released June 12th, for the week ending June 7th, reported that 30-year rates with conforming loan balances ($417,500 or less) increased to 4.15% (the highest rate since March 2012) from the previous week’s rate of 4.07%.   The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) rose to 4.25% (the highest rate since May 2012) from 4.20% one week earlier.  Rates for FHA backed mortgages also increased to 3.81% (the highest rate since April 2012) from the previous week’s rate of 3.76%.

In their press release of June 12th, the MBA reported an increase of 5.0% in mortgage applications.  The report noted that “Despite the increase in the refinance index last week, the level is still 11 percent lower than two weeks prior and 36 percent lower than the recent peak at the beginning of May”.  Refinance applications represented 69% of all applications, up from 68% last week. 

On June 14th, HSH Market Trends reported that 30-year mortgage rates rose for the sixth straight week to 4.15% from 4.10% the previous week.  They also reported a rise of 18 basis points in FHA backed 30 year mortgages which increased from last week’s rate of 3.74% to 3.77%. 

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

Additional information from HSH can be found by going to: HSH.Com

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Ask Angie

We would first like to congratulate our most recent winner: Nanci Hayes, Certified General Appraiser with Yankee Appraisals.  Yankee Appraisals has been serving northern New Hampshire and Western Maine since 1980.  Angie notes that not only is Nanci a professional, experienced appraiser but she has won her contest before.  Nanci was the first to answer correctly that Alan Kay was the author of the quote “The best way to predict the future is to invent it"; Voltaire said that “The perfect is the enemy of the good”; and Nietzsche is the author of the quote “Without music, life would be a mistake.”

Today’s questions:

1. Who Said: "Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies."

a) Ralph Nader
b) Sarah Palin
c) Groucho Marx
d) Andrew Cuomo
e) None of the above

2. Who said: "I, not events, have the power to make me happy or unhappy today. I can choose which it shall be. Yesterday is dead, tomorrow hasn’t arrived yet. I have just one day, today, and I’m going to be happy in it."

a) Socrates
b) Thomas Hobbes
c) Groucho Marx
d) Taylor Swift
e) None of the above

3. Who said: "A black cat crossing your path signifies that the animal is going somewhere."

a) Harpo Marx
b) Chico Marx
c) Groucho Marx
d) Catwoman
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 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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