We have had an incredible challenge recently with appraisals. You might remember the post I wrote in April called “The A Word” – we were even having trouble with them back then! However, since that post was written, the rules for appraisals have changed, and the challenge has gotten even deeper.
There’s a new set of rules and regulations for appraisers that was put into effect on May 1st. The Wall Street Journal ran an article about it, written by James R. Hagerty & Ruth Simon, on June 9th. This will give you a good picture of what is going on nationally with appraisals:
Appraisals are becoming one of the biggest obstacles for Americans trying to sell their homes, refinance their mortgages or tap into home-equity credit lines.
During the housing boom, appraisers often complained of pressure from lenders to inflate home-value estimates to justify dubious mortgage lending. Now, some people in the mortgage business — and some borrowers — say the pendulum has swung too far the other way.
Patti Sanders, an aerospace engineer in Oakdale, Calif., knew prices were down sharply but said she was “flabbergasted” recently when her 3,100-square-foot Victorian home was appraised at $250,000, compared with $635,000 assayed two years earlier. The new estimate prompted a lender to reject her application for a refinancing that would have lowered her mortgage payments about $400 a month.
Lenders burned by huge losses from defaults now are pressing appraisers to be more conservative. And appraising itself is more difficult with home prices fluctuating rapidly and transactions few and far between in some markets; sale prices from a few months back may no longer reliably indicate the value of nearby homes.
“If history is no longer valid, then it is very difficult to get good and accurate values,” said Mark Rattermann, an appraisal trainer in Indianapolis.
John Rooney, an appraiser in Phoenix, said about half the recent appraisals he has done for people seeking to refinance have been too low to allow it. Applying to other lenders is likely to cost borrowers $350 or more for another appraisal.
Valuation disputes are also throwing a monkey wrench into some sales. Chris Rubis, a real-estate agent in Fairfield County, Conn., said one client recently accepted an offer of about $750,000 on a four-bedroom, four-bathroom home. But the appraisal, which was done by someone outside the local area, came in last week at $700,000. That might require the buyer to come up with more cash for a down payment.
“It’s opened a whole new door for negotiation,” Mr. Rubis said.
Credit lines are also vulnerable. J.P. Morgan Chase & Co. recently froze one customer’s home equity line of credit because, the bank said, his Manhattan apartment – a 2,650-square-foot three-bedroom, two-bathroom duplex with a terrace appraised at $1.475 million in 2005 – was worth just $600,000. Chase told the borrower, who asked not to be identified, that the lower credit line would remain in effect until a new appraisal could demonstrate the value was much higher than $600,000.
The borrower then paid for a new appraisal that pegged the property at $1.8 million.
“To protect borrowers and the bank, we use an automated appraisal system on our portfolio,” a Chase spokesman said. “The system has proven effective. However, we encourage customers who think that the valuation is too low to order an appraisal and we will reimburse them…if it supports their claim.” Chase will restore this borrower’s full credit line, he added.
In some cases, lenders are requiring that appraisals be based on sales closed within the past three months rather than the prior six-month norm, appraisers said. Some lenders are also asking for comparisons with at least one sale in the past 30 days.
Taking their cues from lenders, appraisers are avoiding any estimate that could be deemed excessive. “I don’t want to stick my neck out,” said Mr. Rooney, the Phoenix appraiser.
The situation became more complicated on May 1 when the appraisal industry adopted the Home Valuation Code of Conduct. These new rules apply to mortgages that will be owned or guaranteed by government-backed mortgage companies Fannie Mae and Freddie Mac, which recently have accounted for about two-thirds of all new home loans.
Fannie and Freddie agreed to the code last year after New York Attorney General Andrew Cuomo accused them of failing to ensure that appraisers were shielded from pressure to inflate their estimates.
The code bars loan officers, mortgage brokers or real-estate agents from any role in selecting appraisers. This has encouraged lenders to outsource the selection to appraisal-management companies, or AMCs, which take a sizable cut of the appraisal fee. As a result, appraisers are under pressure to “do it faster, do it cheaper,” said Bill Garber, a spokesman for the Appraisal Institute, a trade group.
Debbie Huber, a Las Vegas appraiser for 20 years, said she has turned down requests from AMCs that offer to pay 50% to 70% of her standard fee and require that the work be completed in as little as 48 hours.
Some appraisers said AMCs settle for appraisers who have little experience or live far from the homes they evaluate. John Simms of Peoria, Ariz., said he often gets assignments more than 100 miles away in neighborhoods he doesn’t know well.
The upshot, appraisers said, is less accuracy and certainty about a property’s actual value.
The code also permits lenders to own stakes in AMCs. That means lenders can profit from a service they require borrowers to buy – and that protects the lenders themselves.
Appraisal-management companies said they need a big cut of fees to cover their costs and ensure quality. Jeff Schurman, executive director of the Title/Appraisal Vendor Management Association, said AMCs typically take about 40% of the fees and appraisers get the rest. Mr. Schurman said he has seen no evidence that AMCs’ practices lead to lower quality.
While the new code is likely to prevent some abuses, it also removes flexibility. For instance, loan officers or mortgage brokers used to be allowed to discuss specific home values with appraisers, who sometimes would advise against ordering an appraisal if it seemed unlikely to be high enough to warrant a loan. That would save borrowers money.
The new regime also results in higher costs in at least some cases. Mitch Ohlbaum, a Los Angeles mortgage broker, said one client was recently charged $500 for an appraisal that would have cost about $300 before the code took effect.
Another source of frustration: If a borrower is happy with an appraisal ordered by one lender but decides to seek better loan terms from another, a new appraisal will likely be needed. The Mortgage Bankers Association said it is looking at ways to make appraisals more “portable” from one lender to another.
This national problem is exactly the same problem that we are facing locally in Miami. My fingers are crossed that we can get the scales back to a balance soon!
Originally from Oregon, Kelsey and her fiancé moved to Miami to be back in the beautiful weather. After graduating with her bachelor’s degree from Washington State University, she has worked in finance most of her career, analyzing sales and pricing strategies. Kelsey has always had a passion for real estate and decided to pursue her real estate career here in Miami.
Kelsey works as Ashley’s buyer’s agent, facilitating and scheduling showings, assisting buyers with their home search and more. Kelsey and her fiancé live in Coconut Grove, which they love. As a member of Junior League Miami, The Coconut Grove Rotary, The Barnacle and the Coconut Grove Sailing Club, you can find her sailing, volunteering, trying new restaurants or even teaching group fitness classes. She also likes to enjoy a good glass of wine here and there! Contact Kelsey directly: kelsey@ashleycusack.com | 786-778-1113
Lillian Osborn is a Miami native and a proud alumna of St. Thomas Episcopal Parish and Ransom Everglades schools. From there she went on to study at Vanderbilt University in Nashville, Tennessee, and upon graduating Cum Laude in 2004, she began to work for Ashley Cusack. Though she started as a true “gofer,” her role grew and Ashley ultimately encouraged her to become a licensed realtor so that she could assist with showings, open houses, and with moving contracts forward. Lillian worked as a realtor from 2005 until 2008, at which point she got married and decided to make a career change. Between 2008 and 2015, Lillian worked at a local marketing firm, and then Ashley begged her to re-join the team – an offer that she happily accepted! Lillian is back in her role managing the office, handling contracts, working through and finalizing deals. When she is not working in real estate, you will also find Lillian at The Bar Method Miami, which she owns! Contact Lillian directly: lillian@ashleycusack.com | 305-742-7173
Caroline Rickert Cardenas is a Miami Beach native and a proud alumna of The Cushman School and MAST Academy. From there she went on to study at Florida State University and the University of Miami. Soon after graduation, Caroline served as Vice President of Licensing with Alina Shriver of Shriver Art, where they oversaw the Licensing business for international pop artist, Romero Britto. After having 3 children, Caroline decided it was time to spend more time focused on her family and soon got her real estate license at the encouragement of friends and family. She was introduced to Ashley and they soon met for breakfast and the rest was history. Since then, she has spent time working on and finalizing deals in Miami Shores, El Portal and Miami Beach, to name a few. When she is not working in real estate, you can find Caroline spending time with her husband David and their four small children. Contact Caroline directly: carolinercardenas@gmail.com | 305-298-6007
Cristina Diez-Arguelles is a Miami native. She graduated from Our Lady of Lourdes Academy High School and graduated from Florida International University with a Bachelor’s Degree in Liberal Arts. Cristina has worked in the real estate business for over 10 years, and became a licensed Real Estate agent in 2014. She loves Miami and is very familiar with different neighborhoods. Not only has she worked in Coral Gables for more than 10 years, she has lived in Kendall, West Kendall, Pine Acres, Cutler Bay and now residing in South Miami. On her spare time Cristina enjoys fishing and being outdoors, especially in Miami’s hot weather. Contact Cristina directly: cristina@ashleycusack.com | 305-219-3099
Often voted as one of the best places to live in Florida, Miami Shores is a lush residential area of Miami with a population of 10,756. It is located less than 15 minutes from downtown Miami, Miami Beach and the Miami International Airport.
Living in Miami Shores offers residents a dense suburban feel where most residents own their homes. Miami Shores offers locally-loved restaurants, shopping and parks. Many local small business owners, families and young professionals live in Miami Shores. It is a neighborhood that generational families established, and still call home.
Miami Shores Country Club is in the heart of this community and boasts one of the most unique courses in South Florida. With majestic oak trees and gently rolling terrain, the historic 18-hole championship layout will challenge and delight golfers of all skill levels.
Homes in Ponce-Davis typically sit on large lots, many with parcels that are over an acre in size. Because the lot sizes are bigger, homes tend to be bigger as well. Although technically located in Unincorporated Miami-Dade County, the Ponce-Davis neighborhood is really in the heart of it all. Surrounded by South Coral Gables, and High Pines, and just a stone’s throws from the pedestrian center of South Miami and the University of Miami, it is truly the most convenient location to every part of Miami.
Home to many sports and entertainment celebrities, as well as some of Miami’s most successful residents, Ponce-Davis is regarded as the most prestigious neighborhood, home to community leaders, established families and real estate investors.
Luxurious parks, fine restaurants, boutique shopping and prestigious schools are a quick walk or drive away – with Downtown Miami, the University of Miami and Miami International Airport easily accessible.
Tree-lined streets, friendly neighbors – many small business owners – and the best ice cream shop in town make this the perfect place for families of all kinds. See you at Whip-n-Dip!
For nature enthusiasts, the Bill Sadowski Park and Nature Center located in Palmetto Bay is another place of particular interest. Visitors to the park will marvel at the 822-gallon freshwater aquarium that showcases an array of indigenous fish and amphibians, as well as be captivated by the 30-acres of parkland. The park also offers observatory sites perfect for bird watching and stargazing as well as the more traditional amenities including picnic areas, nature trails, and boating and fishing.
The Village of Palmetto Bay holds annual events that attract hundreds of visitors, including the popular “In the Park with Art” at Coral Reef Park. The annual exhibition, held in October, is presented by The Cultural Council, Inc. and has been attracting local artists, national artists, residents and tourists alike since 2003.
Continuing its commitment to development and its residents, The Village of Palmetto Bay is currently planning to add a neighborhood library. Palmetto Bay also boasts markets, restaurants and lodging options.
While Coral Gables might be best known as home to the prestigious University of Miami, the city offers much more to boast about. Coral Gables is also home to many historical landmarks, including the largest tropical botanical garden in the United States, Fairchild Tropical Gardens. Commonly called Fairchild, the site is frequently used as a backdrop for traveling art installations from the likes of Fernando Botero, Roy Lichtenstein and Dale Chihuly, among others. Coral Gables also has the only swimming pool to be found on the National Historic Register, The Venetian Pool . The city’s Venetian Pool is an 820,000-gallon spring-fed grotto swimming pool with underground caves. The pool was built of native coral rock and is an awe-inspiring sight to behold by both residents and visitors alike.
Another attractive feature that makes the “City Beautiful” is its vast amount of immaculate landscaping and tree canopies. In fact, more than 50,000 trees shade the city’s 13.3 square miles and line the city’s bike paths and walking trails. The city also has 22 parks and 33 public tennis courts, as well as two public golf courses. Coral Gables is home to 36 miles of pristine waterways and contains multiple boating facilities in order for its residents to take full advantage of its abundance of water.
Famous for its grand Miracle Mile, Coral Gables replicates a European Old World style setting with its outdoor cafes and specialty boutiques. Apart from Miracle Mile, residents and visitors of Coral Gables turn to the Village of Merrick Park for luxury shopping. Merrick Park is a place where fashion and style come to life in an outdoor setting complete with fountains, lush tropical foliage and a serene garden. Merrick Park is home to such world class boutiques as Tiffany’s, CH Carolina Herrera, Gucci and Hugo Boss as well as the elite department stores Neiman Marcus and Nordstrom.
Affectionately known as “SoMi,” South Miami’s Downtown District encourages visitors and new businesses. Downtown SoMi is powered by a unique and eclectic mix of businesses and close-knit residents. Centrally-located with convenient and easy access from the South Miami Metrorail transit station, With shops, restaurants, sidewalk cafes, movie theatres and professional services, visitors and residents enjoy all the amenities that SoMi has to offer.
For the fashionistas looking for unique boutiques, South Miami has that too. From Vigi for upscale clothing, Cream for luxurious cosmetics and gifts, Country French and Margaux for beautiful home accessories, House & Paper for fine stationery and Footworks for all your sporting and exercise needs, you will be sure to find what you are looking for.
In 2001, the city of South Miami was announced an “All-America City” by the National Civic League. This prestigious award is awarded to only ten cities in the United States each year and is the highest honor a City can receive. The All-America award honored the city of South Miami for its leadership, relationship between its government and citizens and their involvement in the community.
Sitting directly on the sparkling waters of Biscayne Bay, The Grove is well-known to boat enthusiasts. Coral Reef Yacht Club, Biscayne Bay Yacht Club, Coconut Grove Sailing Club and Dinner Key Marina are all within walking distance of new condos, parks, entertainment centers and cultural events.
Nestled in between waterfront homes old and new is The Kampong: a historic estate and botanical garden with a fascinating array of tropical fruit and flowering trees. The Grove is a walkable neighborhood, with friendly neighbors, dog parks and a rich, unique blend of culture, architecture and history.
Pinecrest is home to a historic landmark site, where one of Miami’s oldest attractions, Parrot Jungle, once stood. The site is now inhabited by the exquisite Pinecrest Gardens, which houses such attractions as an exotic butterfly exhibit, petting zoo, playground and tranquil swan lake. Throughout the year, several recurring events are held at the park including a fine arts festival and a locally-sourced Farmer’s Market. During the summer, the park takes on the duties of summer camp.
One increasingly popular event at Pinecrest Gardens is the Taste of Pinecrest, an annual spring event since 2006. The event showcases restaurants from the Pinecrest area, provides entertainment from local school groups and features a judged art show. The event is sponsored by the Pinecrest Business Association, local restaurants and businesses. Proceeds from the festival are donated to five Pinecrest public schools.
Pinecrest has actively involved itself with not only beautifying its community through the addition of new parks and recreational areas, but also by striving to provide its residents with luxuries not found in every neighborhood. Pinecrest further distinguishes itself with the incorporation of free Wi-Fi spots at both Suniland Park and Evelyn Greer Park. Pinecrest even has its own radio station, WQFS 1590 AM, to help keep residents updated on upcoming events, notice of future meetings, and up-to-date information in emergency situations.
Pinecrest is home to some of the very best public schools that Miami has to offer, and it gives residents a chance to own large, sprawling properties amidst lush, beautiful foliage.
The skyline’s silhouette is complemented by a surplus of shopping destinations, fine dining establishments, lavish hotels and trendy art galleries. These skyscrapers, which house both luxury condominiums and headquarters of major multi-national corporations, play a critical role of providing employment to over 104,000 people on a daily basis. This area alone comprises over 18 million square feet of office and retail space.
If the hustle and bustle of the Downtown Miami scene gives the allusion of all work and no play, do not be mistaken. Downtown’s nightlife stays alive well after happy hour, being sure to keep party hoppers satisfied with a wide assortment of hip lounges and clubs. The development of Mary Brickell Village has become a destination for residents of this area in particular for food, drinks and fun. The new Brickell City Centre is a landmark $1.05 billion, 4.9 million square-foot, mixed-use development, featuring a 500,000-square-foot luxury and premium retail center.
Tourism destinations like Port of Miami alongside local favorites like American Airlines Arena, home to the Miami Heat; century-old buildings among new pockets of young residents who call the neighborhood home.
Our urban center also holds its own share of cultural experiences. As one of Miami’s key attractions amongst visitors is the Port of Miami, located in the Downtown area, and serves more than 3 million passengers per year and constitutes the number one cruise port in the world. Guests and residents alike enjoy the stimulating cultural experiences offered by the likes of the Perez Art Museum Miami (PAMM), the Miami Children’s Museum, the Adrienne Arsht Center for the Performing Arts, which includes the 2,400-seat Ziff Ballet Opera House and the 2,200-seat Knight Concert Hall, and now, the stunning new Phillip and Patricia Frost Museum Of Science. For the avid sports lover, visit the American Airlines Arena, home to the beloved Miami Heat basketball team. The arena is located next to Bayside Marketplace, a 20-acre waterfront retail complex that has become one of South Florida’s number one tourist destinations.