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Opinion Editorials

Bad appraisals killing real estate deals – is there a solution?



The tiresome issue of the misunderstood appraisal

Raise your hand if you’re tired of hearing about low appraisals in the news.  Raise your other hand if you have no clue what the definition of a “faulty appraisal” even is.  If both of your hands are in the air, that’s awesome, mine were.

Let’s go back to class here for a second. An appraisal is an opinion of value, it determines how much a home is worth on a given day and time, based on age, size, condition, and several other factors. There are three methods on how this can be done – the income approach, for commercial or (duh) income producing properties, like multi-family homes, the cost approach, often used for manufactured homes, and occasionally for new construction – how much it literally costs to build or rebuild a home, and finally the most common, is the comparison approach, using active and sold comps in the neighborhood. 

When done for a home purchase, an appraisal is done to protect the bank from lending more money on a home than it’s worth. It isn’t completed to meet the agreed upon price in the contract. It’s not there for the buyer’s peace of mind. It sure as heck isn’t there for the seller or Realtors involved. The lender is the client, they are the ones who are insuring their investment in the transaction by getting an appraisal ordered.

NAR and NAHB members claim lost deals

For nearly a year, between 10 and 18 percent of NAR members surveyed have reported at least one deal which has been delayed or killed due to appraisal issues. Usually the issue is that the appraisal is not meeting the contract price, and either the transaction falls apart completely, or the sales price needs to be renegotiated. Recently a report was released by the NAHB, wherein they are also reporting issues with appraisals. Within the last six months, of their surveyed members, roughly 60 percent said the appraisal was less than the contract price, and about half said the appraisal was less than the cost of building the home.

Both groups are trying to correct the problem of problem appraisals. In a NAHB statement on December 8th, they note they have been holding appraisal summits in Washington for several years with banking regulators in order to urge change of appraisal practices. One of their major concerns at this time is the use of distressed comps in new construction sales. NAR will be hosting a webinar in January with suggestions to make sure appraisers are qualified. Questions Realtors can ask when meeting an appraiser at a home, ensuring they know about upgrades, and providing neighborhood comps.

Not all appraisals are bad, but when they are…

This is all well and good. It never hurt anyone to be more informed about a property. However, to me, a crappy appraisal is one that isn’t up to standards, that is completed sloppily, inaccurately, one that doesn’t take all information into account, one in which data is falsified. Most appraisals are of quality, but when they are bad, they are really bad.

Not meeting contract price, for whatever reason; the home was overpriced to begin with, it was over-improved, the market is rapidly declining- possibly due to job loss or other economic issues, the market is driven by distressed properties, or even the condition of the home itself, this simply is not a reason to get into a huff. And I kind of have to say tuff tiddlywinks. The contract price, and sometimes even upgrades, don’t mean a whole lot, when the rest of the immediate area can’t support the value.

Katie Cosner, occasionally known as Kathleen, or KT, is a Realtor® with Cutler Real Estate and is active in her local Board of Realtors® on the Equal Opportunity & Professional Development Committee. She has been floating around online for a number of years, and is on facebook as well as twitter. While Katie has a few hardcore beliefs, three in the Real Estate World to live and die by are; education, ethics, and the law - insert random quote from “A Few Good Men” here. Katie is also an avid Cleveland Indians fan, which really explains quite a bit of her… quirks.

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  1. Ben Goheen

    December 16, 2011 at 1:39 am

    Since every area is different, so having a nationwide regulation against using a distressed property to new construction is bogus. A new construction appraisal I did a couple months ago came in low because there were TONS of 1-5 year old (bank owned) homes in the area selling for $20k less. You can't justify a higher price just because the builder won't break even – not my problem.

    What's worse, a 'faulty' appraisal or completely inaccurate information listed in the MLS? Unfortunately the latter is way more common.

    • Kathleen Cosner

      December 16, 2011 at 7:25 am

      Agreed Ben. My fav example is this: A person can *ask* whatever they want when they sell their home, there's no law against it. There's nothing stopping Buddy the Dog from throwing a For Sale out front and a list price of $500k. Just like there's nothing stopping Xena the Kitty from agreeing to pay that cool $500k. However, if the house is only worth $100k, that's all *any* bank will ever lend on it. Ever.

      • John

        December 27, 2011 at 2:24 am

        I must disagree with your view on the appraisal world of today. I am a former real estate agent, and current part time builder, in that I own a company with a partner that builds entry level spec houses. (Although we have not built one in over 3 years) The last house we built had an offer put in on it, contingent on an acceptable appraisal which the buyers were to have done. The appraisal came in under their offer, although not drastically, but they did show me the appraisal. One of the "Comparables" was a 5 year old foreclosed house, that I had been through when it was for sale. The home was a true distressed property, as there was a lot of damage done before it was foreclosed, and it was build with cheap material and with some pretty shabby workmanship.

        I also refinanced my own home 1 1/2 years ago, and there were only 3 comparables used, due to the lack of them. My home is a 19 yr old 1940 sq ft, full brick, full basement ranch, constructed not the best material, but above average. One of the comparables was a 2457 sq ft 2 story, vinyl siding without a basement that sold for $210,000. Sorry, this is not a comparable! The most recent sale of the comparables was a 6 yr old, 2064 sq ft, full brick ranch with basement. Of the 3, this was the most like mine, and sold for the highest amount at $284,000. The 3rd was sold almost 12 months earlier and was a 34 yr old 1750 sq ft brick ranch with basement, that sold in less than a month for $170,000, to settle an estate.

        There ARE many issues with appraisals today that need to be corrected. The biggest is using foreclosures as comparables for new construction.

  2. Rosemary Gleason Reed

    December 16, 2011 at 9:23 am

    Specializing in Short Sales appraisals are critical to successful marketing when shorting an FHA loan. Last year I received an appraisal well above what the comps showed and upon review found it was based on a ranch, a bungalow and a colonial. (This home was a 90 year old colonial in a neighborhood made up of almost identical homes. ) Here's the kicker…the colonial used was actually an ACTIVE listing. Armed with all this to show it was sloppy and inaccurate, I still fought that appraisal through HUD for months and never got anywhere.

  3. Roger Perez

    December 20, 2011 at 9:17 pm

    I have been a real state broker, appraiser and builder for 25 years and have seen a lot of both sides of this argument. To Realtors and builders a bad appraisal is one that they dont agree with. Your article is good for the most part, unfortunately some Realtors and builders dont have a clue of what they are doing, they are priamrily salesmen, thats all. Some houses are appraising at less than construction cost because "cost does not equal market value". There are scores of beautiful , brand new houses sitting empty. They are only worth what somebody is willing to pay, which right now is nothing. You said it well with the cat and dog story , anyone can ask or pay whatever they want for an item, if the buyer pays cash there is no appraisal and he can overpay all he wants. The appraisal is only there to help the bank decide how much they are willing to lend (risk) on a deal, its not there to help an uninformed buyer to buy an overpriced house that some real estate agent told them what a great deal it is.

  4. Bill Ding

    April 25, 2012 at 11:56 pm

    Ben said; “. A new construction appraisal I did a couple months ago came in low because there were TONS of 1-5 year old (bank owned) homes in the area selling for $20k less. You can’t justify a higher price just because the builder won’t break even – not my problem.”

    While I agree that an appraiser is not to give a misleading report so that the builder won’t lose money, I’m going to have to strongly disagree with the broad brush that was used with REOs and New. If Ben had said that there were other non distressed arm’s length new construction that were similar selling for $20k less, then I would agree. But you have 2 factors that you are not factoring.

    1. New construction, (aka C1 UAD rating) vs Previously owned (aka C2 rating). Like new cars, people value new over used. Same can be seen with homes. Why do you thing that Fannie makes appraisers label new as C1 condition and previously owned, like new as a C2 rating. If your subject is new…you need to compare apples to apples. On that note, you can’t use land sales with construction costs. You need to compare a completed construction open market sale. You also need to use other developers to avoid scams, inside dealings, straw buyers, etc.

    2. Using distressed sales as comps. More often than not, there is a market reaction towards a REO and Short Sale. This needs to be taken into consideration. The bank did not want to own that house, they are not in the RE market and they have a huge problem on their back with all these foreclosed homes and they need to get them off the books. It is a distressed sale. There is undue stimulus to sell these properties. One of the conditions of Market Value is that the appraiser is to find the most probable price the subject house would get in a sale of typical buyer/seller motivations and without undue stimulus to sell. Often you have a bifurcated market where you have 2 values happening between the traditional seller without undue stimulus and a lender sale. The buyer knows the bank has to sell and they have the unfair upper hand with them. There is also a stigma attached to bank sales. They are “as-is”, special warranty deed, non-disclaimer, vacant for God only knows how long, sales. I like to think of them as a box of chocolates ***cue Forrest Gump*** Banks are a pain in the rear to deal with, the agents are often extremely difficult to talk to as well. Lien problems, title problems…all sorts of nightmares that people tell. I won’t even get into the physical conditions that are found.

    Market Value talks a great deal about motivations of the buyer/seller. Have you ever called the bank and asked what their motivations were. What made them price it like they did…how many foreclosed homes are on their books, etc??? I’m sure many of you are laughing the deer in the headlight look you would get. You could always ask the agent for a good laugh, too. In any event, REOs are unverifiable.

    All these factors that affect value must be considered. You can use C2 homes as comps as well as REOs (you’re not required to)…but should you use them, the market reaction needs to be checked and make appropriate adjustments so that it is a reflection of the most probable price of the subject’s new construction without undue stimulus. MV does not say to find the most probable price of a distressed USED house sale. There may be a “TON” of REOs in the market and driving the prices down. Of course, the prices of the non-REOs will reflect any influence they have in the market.

  5. Lori Herrington

    May 3, 2012 at 11:18 am

    We had an appraisal done to do a re-fi on our home. When the appraisal came back it was 20k less than what we expected. Upon a thorough review we found that the appraiser “rounded down” on each room in the square footage measurements, leaving off 80 sq feet as compared to 4 other previous appraisals that concurred the real and actual sq footage of our home.

    Additionally, they did not add value or even acknowledge the fact that we had an outdoor kitchen (complete with sink, fridge and built in grill) nor the fact that we had well water on the property. The comparables they used were all homes that were similar in age to ours…..however these homes had not been remodeled/upgraded as ours has. Several years ago we updated the home and included a gourmet kitchen complete with custom cabinets and granite countertops. All of the comps had the type of cabinets you would find in a low end apartment. and the flooring throughout our house is new, nice quality hand-scraped hardwood floors, where as the comps all had old out-dated carpets. (we also have several friends that are real estate agents, so I KNOW that there ARE comps of houses sold within 15 miles of my home….same age, remodeled similarily…..that SOLD for $10.00 a square foot higher than the value of our appraiser gave us in her report).

    In addition to ignoring the value of materials used inside our home (many more not listed). The appraiser gave us a price per square foot matching the lowest of the comps that she used…..with no explanation as to why the lowest number was used….not even an average. We do not have an abundance of foreclosed homes in our area….the housing crisis affected our area minimally as we are far removed from large metropolis areas. My husband is a banker and has worked with this appraiser on several other deals recently where they just failed to recognize a room in one home, gave innacurate square footage, valued a brand new home as old vs. new construction, on and on. Although the appraiser’s supervisor and owner of the company agreed that the mistakes were made on our appraisal as well as the others they flat our refused to make corrections. We brought them 3 prior appraisals to prove the square footage inaccuracy and provided them with copies of true comps.

    We had to pay $450.00 for this! I am outraged that they can handle business in such a way and have no one to answer to. My fear is that this type of problem will continue to go on unanswered and house prices in our area will start trending down based solely on bad appraisers. Any suggestions?

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Opinion Editorials

7 ways to carve out me time while working from home

(OPINION / EDITORIAL) It can be easy to forget about self-care when you’re working from home, but it’s critical for your mental health, and your work quality.



Woman in hijab sitting on couch, working from home on a laptop

We are all familiar with the syndrome, getting caught up in work, chores, and taking care of others, and neglecting to take care of ourselves in the meantime. This has always been the case, but now, with more people working from home and a seemingly endless lineup of chores, thanks to the pandemic. There is simply so much to do.

The line is thinly drawn between personal and professional time already, with emails, cell phones, and devices relentlessly reaching out around the clock, pulling at us like zombie arms reaching up from the grave. Working from home makes this tendency to always be “on” worse, as living and working take place in such close proximity. We have to turn it off, though.

Our brains and bodies need down time, me-time, self-care. Carving out this time is one of the kindest and most important things you can do for yourself. If we can begin to honor ourselves like this, the outcome with not only our mental and physical health, but also our productivity at work, will be beneficial. When we make the time to do things we love, our body untenses, our mind’s gears slow down that constant grinding. Burnout behooves nobody.

Our work will also benefit. Healthier, happier, more well rested, and well treated minds and bodies can work wonders! Our immune systems also need this, and we need our immune systems to be at their peak performance this intense season.

I wanted to write this article, because I have such a struggle with this in my own life. I need to print it out and put it in my workspace. Last week, I posted something on my social media pages that so many people shared. It is clear we all need these reminders, so I am paying it forward here. The graphic was a quote from Devyn W.

“If you are reading this, release your shoulders away from your ears, unclench your jaw, and drop your tongue from the roof of your mouth.”

There now, isn’t that remarkable? It is a great first step. Let go of the tension in your body, and check out these ways to make yourself some healing me-time.

  1. Set aside strict no-work times. This could be any time of day, but set the times and adhere to them strictly. This may look like taking a full hour for lunch, not checking email after a certain hour, or committing to spending that time outdoors, reading, exercising, or enjoying the company of your loved ones. Make this a daily routine, because we need these boundaries. Every. Single. Day.
  2. Remember not to apologize to anyone for taking this me-time. Mentally and physically you need this, and everyone will be better off if you do. It is nothing to apologize for! Building these work-free hours into your daily schedule will feel more normal as time goes on. This giving of time and space to your joy, health, and even basic human needs is what should be the norm, not the other way around.
  3. Give yourself a device-free hour or two every day, especially before bedtime. The pinging, dinging, and blinging keeps us on edge. Restful sleep is one of the wonderful ways our bodies and brains heal, and putting devices away before bedtime is one of the quick tips for getting better sleep.
  4. Of course, make time for the things you absolutely love. If this is a hot bath, getting a massage, reading books, working out, cooking or eating an extravagant meal, or talking and laughing with a loved one, you have to find a way to get this serotonin boost!
  5. Use the sunshine shortcut. It isn’t a cure-all, but sunlight and Vitamin D are mood boosters. At least when it’s not 107 degrees, like in a Texas summer. But as a general rule, taking in at least a good 10-15 minutes of that sweet, sweet Vitamin D provided by the sun is good for us.
  6. Spend time with animals! Walk your dog, shake that feathery thing at your cat, or snuggle either one. Whatever animals make you smile, spend time with them. If you don’t have pets of your own, you could volunteer to walk them at a local shelter or even watch a cute animal video online. They are shown to reduce stress. Best case scenario is in person if you are able, but thankfully the internet is bursting with adorable animal videos, as a backup.
  7. Give in to a bit of planning or daydreaming about a big future trip. Spending time looking at all the places you will go in the future and even plotting out an itinerary are usually excellent mood-boosters. It’s a bit different in 2020, as most of us aren’t sure when we will be able to go, but even deciding where you want to go when we are free to travel again can put a positive spin on things.

I hope we can all improve our lives while working from home by making time for regenerating, healing, and having fun! Gotta run—the sun is out, and my dog is begging for a walk.

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Opinion Editorials

Why robots freak us out, and what it means for the future of AI

(OPINION / EDITORIAL) Robots and humans have a long way to go before the social divide disappears, but research is giving us insight on how to cross the uncanny valley.



Close of R2D2 toy, an example of robots that we root for, but why?

We hate robots. Ok, wait, back up. We at least think they are more evil than good. Try it yourself – “are robots” in Google nets you evil before good. Megatron has higher SEO than Optimus Prime, and it’s not just because he’s so much cooler. It cuz he evil, cuz. It do be like that.

It’s not even a compliment to call someone robotic; society connotes this to emotionless preprogrammed shells of hideous nothing, empty clankbags that walk and talk and not much else. So, me at a party. Or if you’re a nerd, you’re a robot. (Me at a party once again.)

Let’s start by assuming robots as human-like bipedal machines that are designed with some amount of artificial intelligence, generally designed to fulfill a job to free up humanity from drudgery. All sounds good so far. So why do they creep us out?

There’s a litany of reasons why, best summed up with the concept of the uncanny valley, first coined by roboticist Masahiro Mori (Wow he’s still alive! The robots have not yet won) in 1970. Essentially, we know what a human is and how it looks and behaves against the greater backdrop of life and physics. When this is translated to a synthetic being, we are ok with making a robot look and act like us to a point, where we then notice all the irregularities and differences.

Most of these are minor – unnaturally smooth or rigid movements, light not scattering properly on a surface, eyes that don’t sync up quite right when they blink, and several other tiny details. Lots of theories take over at this point about why this creeps us out. But a blanket way to think about it is that our expectation doesn’t match what we are seeing; the reality we’re presented with is off just enough and this makes us uncomfortable .

Ever stream a show and the audio is a half second off? Makes you really annoyed. Magnify that feeling by a thousand and you’re smack in the middle of the uncanny valley. It’s that unnerving. One possible term for this is abjection, which is what happens the moment before we begin to fear something. Our minds – sensing incompatibility with robots – know this is something else, something other , and faced with no way to categorize this, we crash.

This is why they make good villains in movies – something we don’t understand and given free will and autonomy, potentially imbued with the bias of a creator or capable of forming terrifying conclusions all on its own (humans are a virus). But they also make good heroes, especially if they are cute or funny. Who doesn’t love C3PO? That surprise that they are good delights us. Build in enough appeal to a robot, and we root for them and feel empathy when they are faced with hardships. Do robots dream of electric sheep? Do robots have binary souls? Bits and zeros and ones?

Professor Jaime Banks (Texas Tech University’s College of Media & Communication) spends a lot of time thinking about how we perceive robots. It’s a complex and multifaceted topic that covers anthropomorphism, artificial intelligence, robot roles within society, trust, inherently measuring virtue versus evil, preconceived notions from entertainment, and numerous topics that cover human-robot interactions.

The world is approaching a future where robots may become commonplace; there are already robot bears in Japan working in the healthcare field. Dressing them up with cute faces and smiles may help, but one jerky movement later and we’ve dropped all suspension.

At some point, we have to make peace with the idea that they will be all over the place. Skynet, GLaDOS in Portal, the trope of your evil twin being a robot that your significant will have to shoot in the middle of your fight, that episode of Futurama where everything was a robot and they rose up against their human masters with wargod washing machines and killer greeting cards, the other Futurama episode where they go to a planet full of human hating murderous robots… We’ve all got some good reasons to fear robots and their coded minds.

But as technology advances, it makes sense to have robots take over menial tasks, perform duties for the needy and sick, and otherwise benefit humanity at large. And so the question we face is how to build that relationship now to help us in the future.

There’s a fine line between making them too humanlike versus too mechanical. Pixar solved the issue of unnerving humanoids in their movies by designing them stylistically – we know they are human and accept that the figure would look odd in real life. We can do the same with robots – enough familiarity to develop an appeal, but not enough to erase the divide between humanity and robot. It may just be a question of time and new generations growing up with robots becoming fixtures of everyday life. I’m down for cyborgs too.

Fearing them might not even be bad, as Banks points out: “…a certain amount of fear can be a useful thing. Fear can make us think critically and carefully and be thoughtful about our interactions, and that would likely help us productively engage a world where robots are key players.”

Also, check out Robot Carnival if you get the chance – specifically the Presence episode of the anthology.

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Opinion Editorials

4 simple tips to ease friction with your boss while working remotely

(OPINION / EDITORIAL) Find it challenging to get along with your boss while working from home? Here are a few things you can try to ease the tension.



Woman stressed over laptop in remote work.

Most people probably feel like their relationship with their boss is fine. If you’re encountering friction with your boss for any reason, though, remote work will often exacerbate it—this is one instance where distance doesn’t necessarily make the heart grow fonder. Here are a few ways to remove some of that friction without adding to your boss’ overflowing plate.

According to CNN, determining the problem that exists between you and your boss should be your first step. There’s one caveat to consider, however: Your boss’ boundaries. Problem-solving on your own time is fine, but demanding more of your boss’ time—especially when you’re supposed to be working—may compound the issue.

An easy way around this is a low-impact communique—e.g., an email—sent at the beginning or end of the workday. Since that’s a more passive communication style that takes only a minute or two out of your day, it’s less likely to frustrate your boss further.

If ironing out the issue isn’t your prerogative for now, examining your boss’ parameters for success is another place to start. Does your boss prefer to receive multiple updates throughout the day, or do they want one summative report each morning? Do you respect your boss’ preferred communication styles? These are important questions to ask during remote work. If you find yourself reaching out more than necessary, for example, it may be time to cut back.

It can also be difficult to satiate your boss if you don’t know their expectations. If you’re able to speak to them about the expectations regarding a project or task, do it; clarifying the parameters around your work will always help both of you. It is worth noting that some supervisors may expect that you know your way around some types of responsibilities, though, so err on the side of complementing that knowledge rather than asking for comprehensive instructions.

Finally, keep in mind that some bosses simply don’t communicate the same way you do. I’ve personally been blessed with a bevy of nurturing, enthusiastic supervisors, but we’ve all had superiors who refuse to acknowledge our successes and instead focus on our failures. That can be a really tough mentality to work with during remote periods, but knowing that they have a specific communication style that hampers their sociability can help dampen the effects.

As always, communication is key—even if that means doing it a little bit less than you’d like.

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