I believe there is a screaming flaw in the mortgage process when it comes to appraisals (but it is not the appraiser’s fault). I never fully understood why this didn’t get more attention when I worked as an appraiser some 7+ years ago, and I especially don’t understand why this hasn’t gotten serious attention after the housing crash, since I believe it is a direct factor in the extent of the losses suffered by the banks.
Disclaimer: in recent years I have not worked in the real estate business, and I don’t know if things still work exactly the same. I’m not aware of any fundamental shift.
In the mortgage process, it is the loan officer is the one who hires the appraiser in most cases (with the buyer/borrower’s money). The loan officer gets paid a commission when a mortgage loan is closed. They do not lose any money should this loan end up in default later, somewhat in the same way that a car salesman won’t lose money on a car that gets repossessed down the line. They are in effect commission based sales people, with the objective to sell and close loans for the broker or lender. This is usually true for mortgage brokers, and also direct lenders like banks.
Of course there are rules and guidelines to follow, but the fact of the matter is that the motivation of the loan officer is to close loans to earn commissions, plain and simple. Therefore, their interest is to get an appraisal with a number on it that supports the deal so the loan can close. This number is almost always made known to the appraiser (with any sale for example, the appraiser must be given a copy of the sales contract, and analyze it as part of the appraisal).
The result of this dynamic is that the loan officer can exert pressure on the appraiser to hit the magic number they need. Depending on the situation this can be implicitly done, or blatantly explicit; either way, the appraiser knows that his livelihood depends on getting jobs, and getting future jobs depends on keeping the loan officer happy. Even when the loan officer does not purposely wish to influence the appraiser, the implicit pressure is still going to be there as the appraiser knows getting future business depends on closings getting done, and naturally a loan officer prefers an appraiser that helps makes closings happen more than an appraiser with impressive analytical and research skills, and accurate assessments.
The end result is a lot of appraisals with higher valuations than the true value of the property, with of course bigger losses for the lender in the event of foreclosure later, sometimes substantially so. It can also be bad for a home buyer, who ends up borrowing and paying more than the property is really worth (though at times, especially with refi’s, the borrower knowingly pushes for as high a number as they can, so they can pull more cash out of the house).
Please understand that I’m not blaming loan officers for what they do (except in those cases where they blatantly push the appraiser for numbers they know are dishonest and/or are dishonest themselves), they are for the most part only trying to be as successful as they can at their jobs, and earn as much money as they can. It is the process that is flawed.
It is interesting that the lender’s underwriters, whose job it is to protect the lender from risk and make sure the loan is in order and everything is above board, can order a review appraisal (basically another appraiser’s review and verdict on the quality and accuracy of the original appraisal, including its own estimate of value) if they have reason to believe the appraisal is not up to par. If I was a lender that did not want to lose money on foreclosures, I would ALWAYS have the underwriter or handle the appraisal, completely detached and independent from all parties with a stake in the closing.
While I never fully understood this, the best explanation for why lenders do this I have come up with, is simply greed – making as much money as possible off as many loans as possible, many of which are re-sold anyway. But then I still don’t understand why the lenders who end up holding the bag (like the secondary market) allow this situation to exist, even though if I recall correctly Fannie Mae guidelines (which lenders must adhere to if they want to sell the mortgage to the secondary market, like most do) specifically prohibits anyone with a financial interest in the closing to control the hiring of appraisers. Yet it happens all the time.
Anyway, thankfully these days I don’t have to think about this much anymore.
A lot of the speculation about what an improving housing market will mean for the economy has centered on new construction. After all, if the housing sector comes roaring back, new homes being built will translate into more construction workers with jobs.
But there’s another way that the improvement in housing could translate into economic gains, one that is potentially larger but much harder to estimate in advance. One of the biggest questions for the economy in 2013 is how much a stronger housing market will translate into more consumer spending. It matters a great deal; residential investment is 2.5 percent of overall economic activity right now, while personal consumption is 71 percent. It would be great to see a rise in building activity, but the consumer is where the major macroeconomic action is.
House sold? Time to go to the mall. (SOURCE: REUTERS)
A good starting point is “wealth effects.” This is simply the idea that when people become wealthier, such as when their stock portfolio rising in value, they will feel more flush and therefore spend more money. Figuring out just how large these wealth effects might be is notoriously difficult, and they can vary a lot depending on any number of factors. A 2006 study estimated that a $1 rise in the value of homes triggers 2 cents of additional spending in the quarter immediately following, and nine cents total. In a paper last year, Charles Calomiris, Stanley Longhofer, and William Miles found that the wealth effects from housing vary significantly depending on whether the homeowner is old or young, poor or rich—but their overall estimate is that a dollar of extra housing wealth triggers five to eight cents in additional spending.
That, by the way, is much more than their two cent estimate of the wealth effect from a gain in securities. In other words, if Calomiris and his colleagues’ estimates are right, rising home prices should mean more for the American consumer than a comparable rise in the stock market.
So what would that mean in practical terms for growth? Over the year ended in November, the Federal Housing Finance Agency’s index of U.S. home prices rose 5.6 percent. If that rate of home price increases continues, it would increase the value of the entire U.S. housing stock, $17.2 trillion in the third quarter, by about $963 billion.
Using the Calomiris estimates, an increase in home values on that scale should then trigger between $48 billion and $77 billion in extra spending. On the high end of that estimate, that would represent about an 0.7 percent gain in consumption spending and half a percent gain in GDP. That may not sound like a lot, but is a pretty big deal; in an economy that has been growing at a 2 percent rate for the last three years, 2.5 percent would be a welcome shift upward.
But there is reason to suspect that this unique economic moment could make the impact of higher home values higher than usual. In the Great Recession, spending fell by even more than could be attributed solely to the wealth effects caused by falling home prices. A vicious cycle set in through which falling home prices contributed to people being underwater on their mortgages, which had an outsized impact on their spending. Research by Atif Mian, Kamalesh Rao, and Amir Sufi last year found that in counties with high degrees of household debt and home price declines, retail sales fell much more than elsewhere.
That raises some interesting possibilities. It seems at least plausible that this vicious cycle could work in reverse. If homeowners who ended up underwater on their homes accounted for a disproportionate drop in spending, could home price increases that bring their net worth into positive territory have a disproportionate positive effect on spending?
We are in sufficiently uncharted territory that it is hard to predict with confidence, but this may be one of the best hopes for an improved consumer-driven economy in 2013. Maybe, just maybe, there exist tipping points by which a rise in home prices pushes families from owing more than their home is worth to owing less, and once they cross that tipping point, they will spend more freely.
Regardless of whether that effect exists or not, what is clear is that at a time when spending will come under pressure from a rise in the payroll tax, the best hope for the American consumer is to be found on the home front.
Every good tract builder — even the most parsimonious — will usually spring for a good-quality door and lockset at the front entrance of their new homes. Why? Because marketing studies have demonstrated that a good solid-feeling front door leaves an impression of quality that carries over throughout the house. Builders refer to this sometimes illusory impression of quality as “perceived value.”
The same trick can work for your own home. You may not be able to afford hardwood panel doors or first-quality locksets throughout your house, which could run to hundreds of dollars per door. But chances are you can afford a good-quality front door and, even more important, a first-rate entrance lockset.
Many prewar homes have beautiful front doors equipped with really substantial locksets, noted by Access Locksmiths. If you’re lucky enough to still have yours, don’t replace it. A decent finish carpenter can repair a sagging or scraping front door fairly easily. Likewise, a balky lockset can be taken to a locksmith for repair.
On the other hand, if your front door is flimsy, uninteresting or truly beyond repair, consider replacement. The choice of door designs (and price ranges) is vast. However, most entrance doors fall into one of three basic categories: steel, fiberglass and wood. The price variations between common versions of each are surprisingly small, so choose them on merit, not cost.
Steel doors won’t warp — the main reason they’re marketed for residential use. Many also have good insulative value. On the downside, they can rust and dent, and many are embossed with grossly exaggerated wood grain patterns that aren’t very convincing on close inspection.
Fiberglass doors combine the warp resistance of steel with excellent insulative value and a much more realistic wood grain look. They can be planed and sanded, and are designed to accept either paint or stain (although the staining procedure is different than for wood). A carefully finished fiberglass door presents a fairly convincing copy of wood, while requiring less maintenance over time.
Still, nothing has quite the heft of a solid wood door. Genuine wood presents a look and feel of quality that neither steel nor fiberglass can match — one reason the latter products are so anxious to imitate it. Yet wood doors do have drawbacks, including susceptibility to warpage and rot, so-so energy efficiency, and a need for vigilant maintenance.
Once you’ve found a door that suits you, think about a good-quality entrance lockset. There are lots of manufacturers to choose from, but only a handful make truly first-class products. Look for high-quality locksets at better hardware and lumber dealers, and ask a sales assistant for help.
Many styles of lockset are available with matching door knockers, doorbell escutcheons, and the like. Because not all finishes are in stock, you may have to order a few weeks in advance. And be prepared to pay several hundred dollars for a decent-quality entrance lockset, and more for paired doors.
At these prices, you’ll be sorely tempted to buy a cheaper lockset that “looks just the same.” But it won’t feel the same or last the same. Remember what builders have known for decades: You don’t get a second chance to make a first impression.
This is a 50-year-old-plus brick home on a slab with pilings. It had underslab plumbing work in last 10 years, and this problem started after that work was done. The only access to this area is through the closet wall.
Someone suggested using spray foam to seal off the area, but I don’t know how you could keep it from just falling to the ground, and the ground is considerably below the slab. Can you help? –Emily S.
A: It sounds to me like the problem isn’t so much with how to stop the moisture from coming up as it is with what’s causing that moisture in the first place. As soon as you mentioned that the problem started right after you had underslab plumbing work done, the warning flags really started waving for me.
I’m very concerned that whatever plumbing work was done either a) wasn’t done correctly or b) triggered another leak somewhere else, which wouldn’t be uncommon in a house that’s more than 50 years old. You certainly don’t want to close off that moisture site around the tub, because you could potentially be ignoring other problems under the house, as well as trapping a lot of moisture under there where it can cause mold and structural problems.
I would encourage you to contact a licensed plumbing contractor who’s experienced in underslab repair work and have them come out and take a look. They can diagnose what problems, if any, you might have with the plumbing, and after that’s taken care of the moisture problems should dissipate as well.
Q: We have a beautiful spiral stairs, railings and wooden spindles, and they need to be painted. What would you suggest? –Kenneth C.
A: First, any old paint that is peeling needs to be removed, and then you need to sand these areas smooth. Next, clean and lightly sand all the old wood to remove dirt, grease and oils, and to slightly roughen the wood. Finally, apply a top coat of gloss or semigloss paint, depending on your preference. Do not use flat paint, as it won’t hold up well in this application and doesn’t look very good either. You can use either latex or oil-based paint, but use a good-quality material.
You can apply the paint using a brush. However, you will get a nicer, more consistent result if you spray the paint instead. If you are spraying, you might also want to consider using pigmented lacquer, which is often used on kitchen cabinets. It’s a durable finish that is also very smooth and attractive.
Getting a good result on something as intricate as a set of spiral stairs requires a lot of patience, and you need to work slowly and methodically to get a good finish. For that reason, you might also want to consider having a professional painting contractor do this for you.
Q: I was on the roof of a friend’s house and smelled sewer odor coming from the pipe coming out of the roof. Is this normal? I never smelled it coming from my vent pipe on my roof. –Ruth C.
A: The purpose of the plumbing vents is twofold. They provide an opening into the drain and waste system that allows the pressure to be equalized so that the water in the drains will flow. It’s similar to the fact that if you punch one small hole in the lid of a can and then try to pour out the contents, they will flow out very slowly. But if you punch a second hole in the lid, the flow increases dramatically.
The other purpose of the vent is to allow sewer gasses present in the system to escape to the outside so that they cannot build up in the system or in the house. How much gas is present in the system at any one time will vary, which is why you may smell it coming out of the vent at one time but not at another.
When I was in the fourth grade, I had to do a report about the moon. My dad handed me the Encarta CD-ROM to do my research, and immediately, I wanted to talk to it. I needed to find information about the moon and specifically how it affects tide cycles, so I wanted to just ask like I saw them do on Star Trek, e.g., “Computer, cross reference X and Y…”
Of course, I couldn’t do that. The technology simply wasn’t advanced enough yet for Encarta to be spoken to, or even, proficiently recognize natural language queries such as “How does the moon effect the tide cycle?”
To find what I needed, I had to type “moon” and wade through the article looking for the relevant parts.
Fifteen years later, technology—led by Apple’s virtual assistant Siri and Google’s predictive search program Google Now—are helping us realize a world in which computers not only understand natural language queries but predict what you may be searching for and present it to you before you actually search for it.
Other than creating epic science projects for today’s fourth graders, these developments will likely have a very significant impact on the process of SEO, and on how companies will have to position themselves in order to remain relevant in a world of “answers, not links.”
The Biggest Players in Discovery Marketing: Google, Apple (& Facebook?)
Apple and Google have been carefully positioning themselves to be the biggest players in the new discovery marketing playground—both technologies let searchers receive information in new and intuitive ways. The major disruption to the current search market is the keyword in the last sentence—receive.
Instead of making users search for information by typing it in with keystrokes, Siri is a virtual assistant that delivers information to users that verbally ask questions whereas Google Now actually anticipates users’ needs.
While there certainly are differences between Siri and Google Now, they have a commonality in that Apple and Google both want searchers to be immersed in their platforms—and their platforms only. They don’t want consumers to access their tool for one thing and another tool for something else. They strive to be a one-stop shop for all consumers’ needs—search, calendar, email, contacts, etc.
This means that the more accurately and effortlessly the two can deliver relevant data to users, the more engaged their users will become. In fact, it was reported this week that Apple is in talks with FourSquare about a data-sharing deal that will integrate local data from FourSquare into Apple’s mapping application. If this partnership pans out, it will be a huge step in making Apple (and Siri) into a seamless app that users never have to leave when they’re making plans for a night out.
Users that do not buy in to these kinds of all-encompassing systems, which use information they learn about a user to make recommendations or deliver better results, will likely find that mainstream and non-personalized search results are becoming increasingly rare. Brands will also find a point of diminishing returns; they won’t be able to effectively advertise to those consumers that don’t opt in to all that the technology platform offers.
Facebook is very relevant here as well. Even though it does not yet have a category-killer search app like Apple and Google, it already knows the most about its users and has the most user buy-in into its ecosystem; therefore, the platform has the most relevant user information to leverage.
Although Facebook’s brand new Graph Search is not a category-killer in search, or even a direct competitor to Google’s brand of Web search, it is a definite indication that allowing its users to discover as well as be “discoverable” is a major priority of the company.
In fact, Facebook CEO Mark Zuckerberg tellingly called out that the new feature is designed to “return to you the answer, not the links…”Facebook also rolled out a local search service just last month, which seems to be another step in that direction, as well as a major play in local.
Imagine the following scenario: I enter the location “Dallas, TX” on my Google calendar and Google serves up ads for car rental and hotel deals in the area. Furthermore, what if I were served ads and offers based not only on my location but also on search history and geographic region?
While the above scenario is still speculative, it’s a good hypothetical example of discovery marketing: A world in which brands must work to make themselves known and “discoverable” to their users.
Here are the key takeaways for marketers ready to be “discovered”in this new search environment:
More than ever, you need to really know your customer.
In a world where not showing up via a virtual assistant or predictive search is the equivalent of showing up on page 2 or below of Google, local businesses must work to engage their customers, specifically encouraging user-generated content such as reviews which will create the kind of natural language relevance that will help their site stand out.
This new kind of search relies on the mobile device “knowing” the spoken language of its users, which would not include the typical marketing jargon one would find on a website. Businesses have to know about their customers. What is important to them when they search for businesses in your category? Whatever it is, it may be beyond the scope of traditional keyword research, but will be more important than ever.
Beyond just mastering the art of being found, you need to master the art of being useful.
In-store maps and inventories are going to become more important than ever before, because people are going to be presented with buying options predictively. Brands need to truly think about the opportunities to share more “real time feed” data into these ecosystems, so the real-time answers that we demand are always in our pockets.
When all else fails, standard links results are still going to be relevant.
Traditional links on Google search results pages aren’t going anywhere for a long time. After all, it has always been and will continue to be the backbone of their core offering. However, Google is providing layers upon layers of information and possibilities in addition to these links.
When, for example, and iPhone user asks Siri a question, Siri then pings one of its many data sources as it looks for an immediate answer to the query. If, and only if, Siri cannot answer the question by pinging Wolfram Alpha, Yelp, or something else, she will then apologize and ask the user if he/she would like to use Google to find the answer. In this way, Google will remain crucial as the backfill to users when nothing else is adequate.
To stay relevant, marketers must position themselves in these new channels by encouraging user interaction and reviews and working to remain top-of-their-class in local and mobile—even as the landscape is shifting all around them.
Purchases of new U.S. homes unexpectedly decreased in December, a temporary blemish as the industry wrapped up its best year since 2009 to emerge as a bright spot for the economy.
The 7.3 percent drop in December sales to a 369,000 annual pace followed the prior month’s 398,000 rate that was faster than previously estimated, Commerce Department figures showed today in Washington. Builders sold 367,000 homes in 2012, the most in three years and the first annual increase in seven.
Construction of new properties rose last month to a 954,000 annual rate, the fastest pace since June 2008, according to Jan. 17 Commerce Department figures. Photographer: David Paul Morris/Bloomberg
Robert Shiller, a professor at Yale University and co-creator of the S&P/Case-Shiller index of property values, talks about the global economy and the U.S. housing market. He speaks with Tom Keene on Bloomberg Television’s “Surveillance” on the sidelines of the World Economic Forum in Davos, Switzerland. (Source: Bloomberg)
Michelle Meyer, a senior economist at Bank of America Merrill Lynch, talks about the outlook for the U.S. economy, housing market and Federal Reserve monetary policy. She speaks with Pimm Fox on Bloomberg Television’s “Taking Stock.” (Source: Bloomberg)
Mortgage rates near record lows, improved job prospects and a rising number of households should keep stoking demand and benefit builders such as Lennar Corp. (LEN) and KB Home. Combined sales of new and previously owned properties last year rose 9.9 percent, the biggest annual gain since 1998 and an indication residential real estate is helping drive growth.
“2013 will show more of an increase in prices and more positive sales activity and housing starts,” said Anika Khan, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, a unit of the biggest U.S. mortgage lender. “We expect to see residential investment adding to growth despite a very sluggish overall pace of economic growth.”
Stocks rose, sending the Standard & Poor’s 500 Index to its first eight-day rally since 2004, as companies posted better- than-estimated earnings. The S&P 500 climbed 0.3 percent to 1,498.94 at 11:51 a.m. in New York.
The strength in housing is helping extend the U.S. economic expansion even as the global economy struggles.
Britain’s economy shrank more than forecast in the fourth quarter as the boost from the Olympic Games unwound and oil and gas output plunged, leaving the country on the brink of an unprecedented triple-dip recession. Gross domestic product dropped 0.3 percent from the three months through September, when it grew 0.9 percent, the Office for National Statistics said today in London.
In Japan, consumer prices fell in December for the seventh time in eight months, underscoring the risk that the central bank may struggle to reach a 2 percent inflation target unless it implements new easing measures earlier than planned.
The median estimate of 77 economists surveyed by Bloomberg called for a 385,000 pace on U.S. new-home sales in December. Forecasts ranged from 340,000 to 406,000 at an annual rate after a previously reported 377,000 in November.
For all of 2012, new-home sales increased 19.9 percent, the biggest jump since 1983 and the first gain since 2005.
At Lennar, the largest U.S. homebuilder by market value, revenue jumped 42 percent in the three months ended Nov. 30 from a year earlier.
“2012 was a turnaround year that confirmed what we had been seeing and communicating for several quarters, and that is that we are in fact in the early stages of the housing recovery,” Stuart Miller, chief executive officer at Miami- based Lennar, said on a Jan. 15 earnings call. “The recovery began in micro markets across the country, and it’s continued to spread.”
Los Angeles-based builder KB Home (KBH) said this week that orders for new dwellings climbed 54 percent in the first seven weeks of its fiscal first quarter.
Today’s Commerce Department data showed the median price of a new home in the U.S. increased 13.9 percent last month from a year ago, climbing to $248,900.
In December, purchases decreased in three of four regions, led by a 29.4 percent slump in the Northeast. Sales also fell 11.1 percent in the West and 8.4 percent in the South. They rose 21.3 percent in the Midwest.
The housing data for last year show the market gained vitality in 2012. Construction of new properties rose last month to the fastest pace since June 2008, according to Jan. 17 Commerce Department data. The December figure capped the best year for homebuilding since 2008.
Today’s report showed the supply of new homes at the current sales rate climbed to 4.9 months from 4.5 months in November. There were 151,000 new houses on the market at the end of December, up from 149,000 the prior month.
Some 1.82 million previously-owned homes were on the market in December, the fewest since January 2001, according to National Association of Realtors data earlier this week.
The building environment has brightened the mood among construction companies. The National Association of Home Builders/Wells Fargo builder sentiment index held at 47 in January, the highest since 2006. Nonetheless, readings below 50 mean more respondents said conditions were poor.
“We think that 2013 is going to be a good year for the U.S. construction industry,” Charles Bunch, chief executive officer of paint and glass maker PPG Industries Inc. (PPG), said during a Jan. 14 earnings call. “You’re seeing a lot of anecdotal information about, in certain markets, the housing resale market strengthening. We’ve seen increases in new-home construction permits and starts, so, overall, I would say we’re fairly optimistic.”
Figures from the NAR earlier this week showed previously owned homes sold at a 4.94 million rate in December, the second- highest since 2009. Last year 4.65 million homes were sold, up 9.2 percent from 4.26 million in 2011 and the most since 2007. The annual advance was the biggest since 2004.
Sales of new homes, counted when contracts are signed, are considered a timelier barometer than purchases of previously owned dwellings, which are calculated when a deal closes. Newly constructed houses accounted for 7.3 percent of the residential market in 2012, down from a high of 15 percent during the boom of the past decade.
Yesterday Twitter launched a new video sharing app called Vine. The service lets you compose and share six-second videos using its iPhone app. As Sharon Vaknin pointed out, currently there’s no way to set any of your videos, or even your profile, to “private.” Any videos you upload are going to be public; viewable by anyone using the service.
There is a way to create a video using the Vine app and share it privately, however. It’s not an ideal workaround (that would be privacy settings in the app) but it’s an easy way to still be able to get creative with Vine and share your work with friends without the rest of the Vine community seeing it.
What you’ll need to do is create a Vine as you normally would. Once you tap “Next” to go to the share screen, the video is saved to your Camera Roll. Since the video is already saved, you can either turn off the “Share on Vine” switch and tap “Done,” or go back to the compose screen, tap the X, and delete the post.
With the video saved to your Camera Roll you can then share it — privately — through MMS, iMessage, e-mail, and so forth.
Again, it’s not an ideal sharing method, but it does allow you to maintain your privacy should that be a concern.
Mt Kisco Has Low 2012 ‘Days on Market Average’ | RobReportBlog
Average Days on Market for 2012 Sold Homes 207 Armonk 176 Chappaqua 201 Pound Ridge 238 North Salem 198 Bedford NY 235 South Salem 186 Bedford Hills 175 Mount Kisco 196 Katonah