How can that claim be made or the question raised?
First – a quick note on technicalities on appraisals – Comparable Sales are compared to the Subject property to try to lead the appraiser to a supportable “opinion of value”. Differences in properties are accounted for by “adjustments” to the comparable sale, which then leads to an “adjusted value” of the comparable. The adjustments are supposed to equalize differences in properties. Adjustments are supposed to be supported through market analysis, specifically “matched pair analysis“.
A simplified example of a “matched pair analysis” would be two houses that are identical in every way, with the exception of one of them having a fireplace. House A, without the fireplace sells for $100,000, and House B, with the fireplace sells for $101,000. What’s the value of the fireplace? Since the houses are identical in every way, the value of the fireplace is clearly $1,000. In that market area, in that price range, fireplaces are worth $1,000 and until proven differently, the appraiser is justified in adjusting comparable sales $1,000 for fireplaces (having them or not having them).
One of the things we’ve seen adjustments for lately, is the adjustment in “time”. This adjustment is made for changes in the market between when a comparable sale is sold and when your subject sold. If the market is dropping, then the adjustment to the comparable would be downward, and in a rising market, upward.
As you might suspect, appraisers have been making this adjustment…..a lot….lately. The problem is, they have been skipping the “matched pair analysis” process and just using median prices to justify the adjustment. This is NOT acceptable appraisal practice. But, if it’s become the norm, if it’s become acceptable, it should apply when median prices escalate.
Thus the headline. A recent market report indicates that median prices have been on a 90 day upswing in Clackamas, Oregon. Have the appraisers reversed their course and adjusted upward for time? No they haven’t. Why?
Lender pressure is why. The whole point of industry reform (HVCC and/or Dodd-Frank) was to eliminate lender pressure, but now the lenders have even greater methods of applying pressure with the new rules. Really, the problem starts in two places, regulation and the GSE‘s. The GSE’s are Fannie Mae & Freddie Mac. Their forms require the use of Median Prices. Fannie/Freddie, Barney and Chris (a criminal “friend of Angelo”) are behind this lender fraud. The rest of the market is captive and held to their criminal standards, including the poor appraiser.
Frankly, this only helps the banks, and it doesn’t do anything for the borrower, the seller. It doesn’t help stabilize our markets or improve our economy.
What to do? Well, don’t shoot the appraiser – he/she can’t do anything about what the lenders force them to do. Complain to the lender, complain to your legislators, complain to regulators, call Elizabeth Warren, complain long, hard and loud….maybe if enough voices are heard we can get out from under the tyranny of the banks and Fannie Mae and Freddie Mac.
Most Clackamas cities will use the incentive to help the county nationally market around 900 acres worth of eligible properties. Among other goals, strategic investment zones aim to lure companies that manufacture high-tech and energy-generation equipment.
To be eligible, businesses must invest either $100 million within the urban growth boundary or $25 million in the county’s rural areas to construct new facilities or purchase new equipment. Companies must also commit to hiring county residents first for new jobs created by the incentive.
Companies using the incentive would need to pay a community service fee equal to 25 percent of their tax savings per year. The figure is capped at either $2 million or $500,000, depending on whether or not the company locates inside the urban growth boundary.
None of Clackamas County’s traded-sector companies have an assessed tax value that exceeds $100 million.
“The Strategic Investment Zone is an important part of our portfolio of incentives and tools,” said Clackamas County Commissioner Jim Bernard, in a statement. “It’s a powerful 15-year incentive we hope will attract serious attention from large traded-sector firms once the economy rebounds.”
The incentive is an extension of Oregon’s state-administered strategic investment program. Santa Clara, Calif.-based Intel Corp., which reported $36 billion in 2009 revenue, used the strategic investment program to build $37.3 billion worth of facilities at its Hillsboro campus since 1999.
Chris Wagner, CMPS
American Capital Mortgage Corporation
555 SE 99th Ave., Suite 101
Portland, OR 97216
The mortgage industry has gone through more transitions in the past few years than Lady Gaga has had costume changes! Since mid-2007, qualifying has gone from just being able to fog a mirror to having to document your high school transcripts before your loan gets funded!
All joking aside, we are seeing some outstanding refinancing opportunities that simply did not exist a short while ago. Despite the current economic adversity, chances are good that you can significantly improve your current mortgage, simply due to the fact that we are seeing rates that haven’t been around since the 1940’s!
Here are just a few highlights
For those with an existing FHA loan: a streamline refinance will allow you to lower your rate without an appraisal or income qualifications! VA loans offer a similar program called IRRL (interest rate reduction loan)
For those whose conventional loans are owned by Fannie Mae or Freddie Mac: A “refi-plus” or the Home Affordable Refinance Plan (HARP) allows you to refinance, often without an appraisal, and if an appraisal is required, they provide for lowered values without paying for mortgage insurance while often allowing for limited income documentation as well.
Getting qualified is simple! Within a short 5 to 10 minute phone call, your mortgage professional should be able to learn everything they need to update your file and determine which program is the best fit. Realistically, most of the information are top of mind items and should be enough to get the ball rolling without the completion of a formal application. This will allowyou to get a good idea if refinancing now is a good idea for you.
Let’s get down to business……
Once you get a feel for what can be done based on your current circumstances and loan type, you will have the information necessary to make a good decision to get the best results you can, but there is more to it than just APR. Call it cultural training, but we have all been conditioned to pursue an interest rate like a raccoon runs after whatever is shiny. In both cases, what you end up with is not always good.
There are essentially four categories that when surveyed, the vast majority of clients will describe their satisfaction or dissatisfaction based on how the following transactional components were executed. You may consider keeping this list in the back of your mind as a scorecard while you are considering the individuals and institutions you will or are working with.
1. Communication: This is the number one source of concern that clients describe as a source of anxiety and ill ease. Our imaginations tend to work against us when we are left to our own and there are few things that are crueler than being ignored. Your broker/banker’s job is to effectively quarterback all of the people involved with your transaction and to report the progress and timelines to you in a pre-described manner. This is the only way that expectations can be set properly. Much like a safari guide, every trip is a little different, but there are enough similarities that your professional should know what to look out for, what to do if it is encountered and how it will affect your outcome. If you have trouble getting your calls or emails returned promptly when you are initially inquiring about a loan, you can only count on it getting worse down the road.
2. Honesty and Integrity: This should be obvious, but it is not. We are not talking about premeditated deception here. The level of disclosure required by all parties is geared towards virtually eliminating that. What we are talking about is a mortgage provider who quotes rates and terms prior to gathering the details of your transaction, thus paving the way toward disappointment. What would you think of a doctor who gave you a prescription without asking questions or examining you first? This kind of malpractice is due to an urgency to get a commitment from you and may indicate a lack of experience on the part of the interviewer. Internet advertisers often employ phone-room type data input clerks that often work from a script. Ask your provider for a written closing cost guarantee prior to spending any money besides the charge for a credit report. This will go a long way to indicate to you if the numbers are real.
3. Smooth and Complete Process: Perhaps you have already been, or know of someone who was the victim of the “Oh, just one more thing” series of phone calls requesting additional information that never seem to end once started. Granted, there are circumstances that in fact do generate requests that could not be anticipated initially, however you should receive a list of items required that you need to begin gathering immediately once your application has been taken. In addition, you should be given a timeline of the various milestones that will occur during your transaction. Examples would be, when appraisal is ordered, received, underwriting timelines, and ultimately when you will be signing. You might get a super low rate, but if it feels like you had to crawl over broken glass to get it and you have been working on it for 4 months, much of the shine will have worn off that apple by the time you actually close.
4. Rates, terms and fees: This also seems fairly straightforward, as it has to make economic sense to proceed. In reality, you may initially consider this to be the most significant detail when considering a lender. The fact is, the lenders and individuals who are still in business after the past few years had to be competitive, or they simply would not be around. It is wise to determine what your real savings is after all costs are considered. If it costs you $5000 to lower your rate and that saves you $100 per month, you want to be aware that it will take you 50 months before you reach the break even point of expenses versus savings. That could be an excellent strategy based on other criteria, but each situation needs to be considered individually in order to be genuinely accurate. In this case, one size does NOT fit all.
Action step: Don’t Wait!
Find out what can be done in your present situation. Don’t make assumptions regarding employment, home values or credit. You owe it to yourself to know for sure. Don’t wait until rates start creeping up, because they most certainly will. You are under no obligation to act once you do get qualified, and if you do nothing else, you can get an updated credit report from all three major credit bureaus. You have a historic opportunity to impact you and your family’s financial future, don’t wait!
From the Desk of Phil Querin, Partner, Davis Wright Tremaine, LLC, PMAR/OREF Legal Counsel
Although the initial annual percentage rate (APR) on a residential loan is disclosed in the Good Faith Estimate early in the purchase transaction, it can change before closing. Under the new rules enacted in the Truth in Lending Act, effective on July 30, 2009 (last Thursday), if the actual (i.e. the final) APR varies from that initially disclosed on the Good Faith Estimate by at least .125%, then there is a mandatory additional three (3) business day waiting period before the transaction can close. So if the final APR isn’t disclosed until late in the transaction, it could potentially force the three (3) business day period to extend beyond the closing date set forth in the Sale Agreement.
As you know, the Oregon Real Estate Forms (OREF) closing date is written in stone – there are no automatic extensions – so if it appears that the APR could be held up or there is any indication that the APR will change at closing, brokers would be well-advised to get seller and buyer to agree in advance to a written extension as a contingency if the final APR causes the three (3) business day period to extend beyond the scheduled closing date. OREF will be meeting shortly to consider some additional language for the new sale agreement form, although it won’t actually get printed and distributed until early next year. In the meantime, I have recommended to my clients that they may wish to consider adding an addendum to their sale agreements with language such as the following: ” In the event that Buyer’s final Annual Percentage Rate (“APR”) differs from the APR initially disclosed to the Buyer in the Good Faith Estimate by .125% or more, the Closing Deadline defined in the Real Estate Sale Agreement shall automatically be extended for three (3) additional business days in accordance with Regulation Z of the Truth in Lending Act ,as amended on July 30, 2008.”
This, of course, is subject to the review of the companies’ principal broker and legal counsel.
According to the Construction Monitor www.constructionmonitor.com and the Home Builders Association of Metropolitan Portland, here is the 2008 Year-to-Date Building Permit activity by county. It is at its lowest since 1991.
Many small builders haven’t built anything new in several months and in some cases more than a year. If you read my recent post “Market Update: New Construction“, you will see there is still a large inventory of new homes that builders need to unload. Remodeling is also lagging.
In addition, many of the local builders here have filed for bankruptcy protection as I reported in my “Top 50 Builders in Oregon” post. This weekend, I happened to notice another one of our larger local builders, whom I won’t name, is selling some of his lot inventory. Is he in trouble or is he just making sure he won’t be?
2008 Year-to-date Building Permit Activity by County
Disclaimer: All information in this post is subject to change without notice. Subject matter is an opinion, is not guaranteed, may be time sensitive, and may be based on information collected from several sources which may or may not be reliable at the time of sourcing.
(For more local and national real estate news, click on my monthly newsletter – JUNG’S JOURNAL – on my websitewww.bettyjung.com).