An Appraiser's View

March 26th, 2024 9:07 AM

IS THIS THE END of the real estate agent profession? 
            A fair question if you are a broker or agent, especially if you are one who advocated the use of online valuations and appraisal waivers because you did not believe appraisers brought any value to the real estate transaction. If this is you, you question because you do not value what you do any more than you valued what appraisers do. And just like with appraisers, you are wrong, but in the end it may not matter. 

The threat of the demise of every profession is real, has always been real, because change is inevitable.  

A Little History
Is technology the end of my profession? It is a question appraisers have asked themselves for the past 25 years, and with good cause. As the only unbiased and legally required honest participant in a real estate transaction, appraisers have been under attack by agents, loan officers, lenders, builders, banks, buyers, and sellers since the day I entered the profession 24 years ago. The day I started my training I received a magazine in the mail proclaiming the end of the profession was here as AVM's were gaining popularity. Over the past 24 years I have read an article a month on how I am being replaced with a variety of valuation tools, including appraiser modified AVM's, AMC's, BPO's, Zillow, and appraisal waivers. The articles always cause me a little stress, but with a little cognitive reasoning, I always come to the same conclusion. As long as the Lender is responsible for the loan, they will rely on appraisers that cannot be manipulated like data only valuation models, a.k.a "Big Data". 

Where does Big Data Come from? 
Well, for the most part, appraisers and real estate agents. 
15 years ago, a few AMC's forced appraisers to sign an agreement that once they sent their appraisal in, it no longer belonged to them. Appraisalport, an appraisal delivery platform, required this as well. Six years ago, the largest appraisal software firm was sold to the largest provider of data only valuation models, Corelogic. The purchase stipulated Corelogic could not data mine the appraisals of those who used the platform (Thank you Dave Biggers). Undeterred, Corelogic purchased Appraisalport in at the end of the same year. But that only gave them access to the data in a portion of the appraisals, so in early 2023 they introduced a voluntary program where appraisers could share their data between each other, all they had to do was agree that Corelogic could also use the data. I still get a couple emails a week asking why I have not agreed to this. Yes, even my appraisal software company wants to replace me lol. 
This all became possible because in 2010, in response to the real estate market bubble bust, Fannie Mae introduced the Uniform Appraisal Data set and required all appraisals be completed using uniform terminology so they could compare one appraisal to another to determine if there was fraud. The alarm was sounded by several appraiser organizations, and subsequently Fannie Mae assured appraisers they would not use the data collected from the appraisals to create their own online valuation model. Three years later they began offering appraisal exemptions if they already had an appraisal on the property. Those appraisal exemptions evolved over the past few years into appraisal waivers and as of April 1st, Fannie Mae allows anyone trained, not licensed, to provide a property inspection if the lender is willing to accept the data from the inspection. When combined with a data only valuation, Fannie Mae no longer requires an appraisal on any property. The deterrent for the lender is they have to accept the both the physical and data only property data as being accurate, and if it's not, they may have to buy the loan back from Fannie Mae, which I am assuming would only be discovered if the loan went into default. I have evidence that 1/2 that equation won't be an issue within the next year. Fannie Mae's has current online job postings for AI developers totaling over $50 million a year in salary offerings. It appears they are building their own valuation model using the data from the appraisals they promised not to data mine.

When Appraisers are gone, no one will look out for the consumer, unless....
AI will replace appraisers within the next three-five years unless the programmers and owners of the AI are held responsible at the same level appraisers are. (i.e. If they are found to have been used to inflate values by intent or through gross negligence, the programmers and owners are each subject to loss of career, a $1,000,000 fine, and up to 30 years in prison). That should include those who work at and run Fannie Mae.  I believe a class action antitrust lawsuit will happen after the next housing market decline. The question is, will it be too late to save the appraisal profession?   

All you talked about was appraisers, what about real estate agents? 
You are right. But I believe my journey is relevant to yours. I like to think. And I also think I'm intelligent. Over the years I concluded that if lenders were willing to spend millions of dollars and increase their risk to get rid of appraisers to reduce costs, turn times, and increase the number of loans they make, they would be willing to do the same for the two most time consuming and largest cost in a real estate transaction, the agents and the loan officers. The change in real estate commissions is only the 1st major change, softening you up for what's to come. I have long envisioned a system where you look online or in a neighborhood for a home, text a number, and the closest uber driver comes to let you in. "Showingtime" is a huge step in that direction. You think you can't be replaced? Forms have become standardized, mls is available to anyone, there are multiple platforms for uploading your own photo's, measuring, etc. All the tools are there to replace agents and brokers, and the only thing slowing them down is the NAR. 

Why you, (and they), are wrong, but it won't matter.
Like appraisers, honest and ethical agents bring enormous value to the transaction. Agents can help see through the mountains of "selling points" and advise buyers on the market, the neighborhood, the schools, even the neighbors, based on their own personal knowledge. They can help sellers get the most for the home by advising them as to what repairs they should make, providing decluttering and staging tips, and explaining up to date marketing ideas. Agents often have a network of people they work with including different loan officers for different types of loans, staging companies, landscapers, handymen, oops, handypersons, and even appraisers who will get accurate ANSI measurements, listing pricing for complex properties, and buying price for cash buyers. In short, honest and ethical real estate agents are critical to ensuring a seller gets the most for the property and a buyer gets the best deal. But in the end, it will not matter. 

Like the Blake Shelton song, you would call me crazy if I shared how I grew up. We were not wealthy, and for things that would wear out quickly, my parents took us to Kmart. But for things that mattered, like Toughskin jeans, appliances, tools, and tires, they shopped at Sears. Because when it mattered, they wanted quality over price. When I started adulting, I followed the same pattern. I bought all my tools and appliances at Sears, and they lasted. But then along came box stores and cheap imports, and the consumers bought into them for EVERYTHING. Sears was gone when I needed appliances in 2020 for my kitchen remodel, so I bought the highest quality box store appliances I could find. They were pretty, but they do not work as well as my Sears Kenmore Elite had, and 4 years later the stove needs replacing. Ugh. 

Consumers have switched to choosing price over value, even for long term items. And that is why I believe that although it may take 10-15 years, quality real estate agents and loan officers will be replaced with unethical ones. Because providing value takes time and money, and consumers prefer Walmart to Sears. 


Shopping for or updating your real property insuance? Make sure you have the right amount of coverage. 

Our wildfire crisis has forced many changes within the insurance industry over the past several years as they struggle to be profitable. Most insurance companies have a standard formula they use to ASSIST you in determining how much coverage you need, but it is up to you to determine if it is correct. If you have made improvements, these numbers may not reflect the true replacement cost of your structure. And in the case of disaster, you may be out tens of thousands! If it has been more than two years since you had your home appraised for insurance purposes or you have made any substantive improvements, don't take a chance, get an appraisal before updating your coverage! 

Investing in residential property

Let Eagle Appraisal Services help you determine REPRODUTION COST value for insurance purposes 

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Why Replacement cost vs Reproduction cost

A typical appraisal for mortgage reports replacement cost which is the cost to rebuild your home using similar materials. Reproduction costs takes into account the exact materials you used in constructing your home, and more importantly, the cost of the upgrades you have made. 

Protect yourself and your investment

It's easy to protect yourself: Hire a professional appraiser to ensure the property has the right amount of insurance coverage.


Posted by Jeff Pickerel on February 4th, 2024 10:26 AMLeave a Comment

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Do you look at your property tax bill and wonder why it keeps going up every year? Although a percentage of the increase is likely due to government imposed and voter approved “fees”, the largest increase is most likely due to an increase in your assessed value. This is especially true if you have owned your home less than 10 years! But what is assessed value, where does it come from, and is it accurate? Great questions, I’m glad you asked!

1st off, no, it is not accurate, nor is it intended to be. Here is why. Assessed value is the value your home is given by your county assessors office each year. The value can be developed by the assessor’s office by utilizing data from various sources, such as the price you paid for your home, adjusted for the average yearly market increase in your market area, improvements to your home or site derived from county building permits, and/or a “mass appraisal” of homes in your market by the assessor’s office staff appraiser. None of these include an actual inspection of your home nor do they currently have access to any appraisals completed on your home for any purpose. Therefore, it would be impossible for them to be precise in the development of your assessed value. This also why appraisers do not use assessed value as a data point when developing an appraisal (yet online valuation models rely on them, but that’s a different blog for a different day)

If you disagree with your property tax bill you can file an appeal with the assessor’s office and they will review your tax assessment, but they will not inspect your property, therefore a tax appeal is most successful when it includes a full appraisal by a licensed appraiser. We are an unbiased 3rd party with no interest in the outcome of your appeal, so the assessor trusts our opinion. Because we are unbiased, telling an appraiser what you need the property to appraise for should cause the appraiser to recuse themselves and refer you to a new appraiser. An appraiser’s job is to provide an opinion of value, not a high one, not a low one, just one that reflects what the market indicates your property is worth. There is however a way you can influence the appraiser’s opinion of value to be lower. Here’s how.

Complete the following steps before the appraiser arrives & it will affect the opinion of value of your home.

  1. Let your pristine landscape and hardscaping go. I’m talking dead plants, shrubs, knocked over tress, 2’ tall overgrown lawn with weeds. Take a jackhammer to sidewalks, patios, and retaining walls, and cause some real damage! You could even make a little extra cash by allowing contractors to pay to dump their construction debris all over your site.
  2. Do not clean your house for at least a month. Leave dishes, dirty clothes, mud, etc. where it is. Don’t take out the trash, let it pile. Stop by some yard sales and get free items to place throughout the house. Pile the floors with junk high, the counters even higher. Do not leave old food in the fridge. Appraisers don’t look inside the fridge and honestly, that’s just disgusting.
  3. Destroy your flooring. Bring an engine into the living room, get oil and grease on the carpet, leave an oil pan out with oil in it and a few parts laying on the floor.
  4. Decorate your walls with custom graffiti. This one can be fun! Get those old cans of spray out and go to town! Just make sure you are not artistic; a good Disney mural might have the opposite effect on the appraisal. A few well positioned holes in the drywall are always a good negative value impactor.
  5. Make it appear your roof is failing. You don’t have to destroy your new roof, just run a hose into the attic, attach a sprinkler, and let it run for a couple hours every day for a week. The damage will be extensive and should give the appraiser cause to make an assumption the roof is in need of replacing (along with the drywall, insulation, flooring, and well, maybe the entire roof depending on what the sprinkler hits)
  6. Have a kitchen fire! Go ahead and start a fire on your stove. Let the smoke damage your entire house. Do not clean it up. Do put out the fire though.

*Note* The above recommendations are both tongue in cheek and based on actual experiences I have appraising homes. Please do not do any of them. The cost to repair will outweigh any tax savings by tens of thousands of dollars.

Next week’s blog is “How to increase the value of your home by $5,000 with just a $10,000 investment!”

The point is if you need an appraisal for any purpose, tax, refi, estate, or divorce, improvements (or dis improvements) to your property aren’t necessary as they typically do not result in enough of a difference to warrant the cost of the improvements. Appraisers are also trained to “see” things that impact value, both positively and negatively, without you having to stage your home.  

If you need a tax appraisal for appeal, or just valuation for an estate, don’t damage your home! Give us a call today @ (916) 303-0960 and get an unbiased opinion of value. A valuation you can rely on.

"We Value Your Home" Tm
5693 Sparas Street
Loomis, Ca 95650
Cell (916)303-0960


Posted by Jeff Pickerel on December 30th, 2023 6:04 AMLeave a Comment

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January 27th, 2023 4:34 AM
It's been documented that a business that puts forth an opinion on a political hot topic is committing suicide. I believe that CAN be the case, but I also believe being silent on an important issue that is within your area of expertise can also be detrimental to that business. For me, racial bias in appraising falls in the latter category. So lets dive in. 
First of all, let me be transparent. I have not yet taken the course on racial bias that I will need to take before I can renew my license. I am purposely venturing an opinion prior to taking the course, because I am curious if my opinion and approach will differ once I have the required education? I am open minded but as of now cannot see how it could change. Here's why. 
Appraised values have been required by federal law to be unbiased since 1983.  Additionally appraisers are required to use the most relevant comparable sales or they are also in violation of both appraiser bylaws and federal law. The State of California also has laws against appraiser bias. Yes, I realize that just because there is a law doesn't mean everyone abides by it and that bias doesn't exist. It just means that a biased appraiser would need to be diligent in preparing a biased appraisal that would not raise red flags so as not to get caught. I'm sure bias happens, but not in my reports. I always report my opinion of MARKET VALUE which ensures I do not have bias or prejudice. What do I mean by "Market Value" and how does that keep me from being biased? 
Market value, as defined for federally related transactions, is what a TYPICAL buyer would pay for a home. The determination of a typical buyer includes location, size of home, size of site, age and condition of home, quality of home, etc.. Market value does not include a neighborhoods make up of race, religion, sexual orientation, etc. . Think "If I found a house I wanted to buy, who else would be looking to buy that home?" Those are the typical buyers for that house. Using comparable sales from outside the defined "typical buyer" market throws up a red flag that the appraisal needs to be reviewed which cause the appraiser more work. I think it's important to also understand what exactly is a comparable sales. 
A comparable sale is just what it sounds like. It is a sale of a home that you and other typical buyers would considered similar to the home you are wanting to refinance or buy. It is rarely an exact match, but should be similar in some of the following. Location (think things like School district, near freeway, rural area, etc), living area, bedroom count, bath count, stories, amenities, and site size. ie; If you are buying a 2500 square foot, 5 bedroom, 3 bath home, would you pay the same price as you would for a 1500 square foot 3 bedroom 2 bath home on a similar sized lot in the same neighborhood? Of course not. Similarly, you probably would not pay the same price for a home that is located in an neighborhood that has industrial and commercial uses as you would for one that is in a quieter neighborhood. Basically, comparable sales are sales that have the features most similar to the the home you are wanting to buy or refinance. A neighborhoods racial or religious profile should have no influence on which comparable sales an appraiser uses. In fact, I believe it has no place in any industry.  
I am not racist or prejudice. I have seen it and it's both disgusting and confusing. I like talking to people, especially those who have culture. How can someone judge a person without getting to know them? Do they not realize what they are missing out on? I have been invited to many family Bbq's of people I have just met and the celebration itself is the only reason I remember what race or religion they were. 
Anyway, I digress from the point of the post. (Climbs down off soap box) The point is, I understand racial bias exists in appraising, it just doesn't exist in mine. 
Have a great day everyone, talk to people you don't know, and enjoy life! 


Posted by Jeff Pickerel on January 27th, 2023 4:34 AMLeave a Comment

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Ok, now that I have your attention, no, the market is not declining in most areas, but I guarantee you it will. When? Well, if I knew the answer to that I would be sipping a beverage on the beach of a tropical island instead of trying to help people prepare for the coming market decline. That said, when asked, my magic 8 ball responds with "Without a Doubt" and "You may rely on it" instead of the  "Cannot predict now" it was coming up with just a few months ago. Given the accuracy of the 8 ball I myself have decided to prepare for the decline. I recommend you do the same. 
But how do I "prepare" for a market decline? I recommend three things. #1 Refinance out of a variable rate 1st mortgage. #2. If you have a HELOC balance either pay it off or refinance it into your 1st *Note* If when refinanced you will not be able to afford payment do not refinance. and #3. If you are considering investing in distressed sales by tapping into your home equity, increase the value of your home so you can get the lowest rate possible on monies borrowed. 
Which brings us to the meat and potatoes. How do you increase the value of your home in a declining market when with a few exceptions, remodeling currently  increases home value by only 70%-85% of the cost? Yes, I have seen all the tv shows and even know a few contractors who specialize in flipping properties. They have a spreadsheet that shows what they paid, what their costs were, and how much they sold it for, usually showing a 15-20% flip profit. But they are leaving out two important parts of the formula, their own labor costs and the time factor of an increasing market. (The home would have increased in value during the time they were remodeling whether they remodeled or not). Plus, if they are acting as the real estate agent they leave their 3-6% sales commission out as well! When these are added profit usually drops down below 10%. Which means the exception is, if your home is in need of repairs and/or significant updating, taking care of your home maintenance, finishing those projects, and updating your home can increase the value by as much as 10% in a declining market!  
My magic 8 ball says the market decline is coming "Without a doubt" so my advice is don't wait. Prepare your home today. 

Posted by Jeff Pickerel on September 21st, 2022 3:25 AMLeave a Comment

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July 12th, 2022 10:11 AM
Did you know? In mortgage lending you are never the appraiser's client? That doesn't mean that you are not someone's client. You are the client of your lender/loan officer, the lender/loan officer is the client of a 3rd party, and the 3rd party is the appraisers client. Confused? Wait until I get into intended users! Maybe I'll save that for another day.... 

My point is, even though you are not our client, you are the client of a client, and without you we would not have the income from appraising your house, nor the pleasure of meeting you. So even though you are not OUR client, we want you to know we will treat you and your property as if you were our client, to the extent the law allows, and that we appreciate you . ??

Posted in:Lending and tagged: appraisallending
Posted by Jeff Pickerel on July 12th, 2022 10:11 AMLeave a Comment

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May 9th, 2019 7:49 AM
Fannie Mae recently announced they are testing a change in the appraisal process which would involve having appraisers rely on a 3rd party data collector for the data elements they normally collect when they inspect a property. 
One can surmise the idea for this came about through a meeting between Fannie Mae and the CEO of a certain large property acquisition company who pioneered a similar idea during the last market downturn. The meeting happened at the suggestion of President Trump who is a huge proponent of technology and innovation. One can also then surmise that this is not the only change that is planned. When you consider that Blackstone used automated valuation models coupled with their property inspection data to make decisions on how much to pay for a foreclosed property, the intellectual partnership would surely be planning a similar move in the future. The only question that remains is will it actually work? 
I could bore you with the reasons it would work in tract homes that have typical updating, no deferred maintenance, no view, and typical locations, but would be marginally to highly inaccurate in all other instances, but instead let me state simply that data collected by 3rd parties that have zero liability is unreliable. Real Estate agents will stretch photo's to make a room look bigger, exaggerate views, quality, and condition just so they can get a buyer to look at a house. 3rd party photographers are more likely to get more work if the pictures they take make a house look better than what it is. And 3rd party data collectors are likely to miss many critical value details as they rush through a property because they have no liability for the missed item and they have 10 more inspections booked that day (using Blackstone's data collection model a 3rd party inspector will make $25-$35 per inspection, you do the math on how long they can spend on a property and still earn a living).  Based on this, in my opinion, the answer to whether this will work or not is "Not a chance." But that won't stop them from implementing it. 
Big Data is here. How it is used will not only determine the fate of the appraisal, real estate, and loan industries, it will determine the size of the next bubble, and the people affected by the fall when it bursts.  

Posted by Jeff Pickerel on May 9th, 2019 7:49 AMLeave a Comment

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