MAY  2011

ELLIOTT® RECRUITING APPRAISERS FOR COMPLEX PROPERTIES

FOREIGN PURCHASES OF U.S. REAL ESTATE
INCREASES DRAMATICALLY

According to the National Association of Realtors (NAR) $82 billion was spent on U.S. real estate by foreign buyers in the one-year period, which ended last March. That’s $16 billion more than the amount foreigners spent on real estate in this country in the previous 12-month period.

The NAR credits the surge in such real estate activity to more foreign college and university student in the country and more executives throughout the world working in the United States. The organization has historically credited the foreign interest in American homes to desirable home pricing (compared to that in other countries, even before the real estate meltdown), opportunity to rent the home and long-range potential for increase in value.

“The U.S. has always been a desirable place to own property and a profitable investment,” said Ron Phipps, president of NAR. “In recent years we have seen more and more foreign buyers coming here to take advantage of low prices and plentiful inventory.”

The average price paid by a foreigner for a U.S. home was $315,000, significantly higher than the average American home price of $218,000, the NAR reported.

“Besides the strength of the dollar and the general economic trends in the U.S., international buyers are also recognizing the benefits of home ownership in this country, especially in the case of recent immigrants,” Phipps added. “Many foreigners perceive owning a home here as an important accomplishment in their efforts to become established in this country.”

KANJORSKI SAYS MORE APPRAISAL REGULATION SHOULD COME

Former U.S. Congressman Paul Kanjorski took aim at the appraisal and credit-rating industries, during the Global Technology Summit 2011 in Las Vegas, and alleged that these industries were a significant cause of the mortgage meltdown that reached a climax in 2008. Kanjorski, who represented Pennsylvania’s 11th District in Congress from 1985 until 2011 and rose to chairman of the Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, said that credit ratings agencies played a major role in creating the situation that led to the economic collapse. The once-powerful Congressman who was defeated for re-election last November, called credit ratings agencies “an abomination,” according to a report in National Mortgage News. He said they, as well as the appraisal industry, need in to be further regulated.

The former Congressional leader revealed that, as the crisis was brewing in September 2008, members of Congress, Federal Reserve officials and Treasury Department leaders sought consultation from 40 Nobel prize-winning economists, according to the National Mortgage News article.

“The clear consensus of all 40 was that, if we failed to act, then the American market would fail and within 72 hours, the entire world Market would have failed,” Kanjorski said.

He also revealed that a military unit based in North Carolina was on standby in case of riots or other chaos in Washington.

Kanjorski did not rule out the possibility of Fannie Mae and Freddie Mac rebounding to the point that they could repay the government all the money used to bail them out and might even become private companies again. He also noted that the federal government is holding serious talks of consolidating them with FHA. Active in the creation and passage of the Dodd-Frank Act, Kanjorski admitted that the new law has its weaknesses.

“We did not do a perfect job,” Kanjorski told his audience of Dodd-Frank. “But there was not a perfect job that could be done.”

FORECLOSURE CRISIS STILL HAS A LONG WAY TO GO

As reports are coming out that foreclosures are subsiding, a highly recognized economic expert has warned that plenty of foreclosures are on the horizon.

“If the national foreclosure crisis were a baseball game, we would be in about the top of the sixth,” wrote John Schoen, senior producer at MSNBC. “And we may have to go to extra innings.”

These somber words came from an article Schoen recently wrote for msnbc.com, entitled “Foreclosure flood may not have crested yet.” In the article, Schoen backed up his opening statement by saying that there had been 6.5 million homes foreclosed upon since 2006 and that, according to the Mortgage Bankers Association, 4.3 million homes were owned by “seriously delinquent” borrowers. Schoen credited the current ease in foreclosure activity to increased paperwork by lenders in the wake of the recently-revealed robo-signing activity.

“When those foreclosures occur, they will create another wave of ‘distressed’ sales as banks move quickly to move those properties off their books,” the article continued. “Distressed sales have been the major force pushing home prices lower.”

CRAFTY NAMING OF SUBDIVISIONS CAN INCREASE
THEIR PROPERTIES’ VALUES

A study conducted by economists at the University of Georgia concluded that naming subdivisions with certain words actually increased prices of homes in these developments. An article written on this study by Catherine New of Huffington Post Media Group reported the study, which tracked MLS data in Baton Rouge, La., concluded that the words “Country Club” in a subdivisions name could attract an extra 5.1% from buyers of property in the subdivision and just the word “country” in the name fetched an extra 4.2% under the same circumstances.

Other words that seemed to boost property value in subdivisions, according to the article, published by AOL Real Estate were “pleasant,” “acres,” “hills,” “estates,” “ridge” and “heights.”

HOME PRICES RISING IN SOME CITIES; FALLING IN MOST

As the national average home price continues to fall, some metropolitan areas are actually experiencing average home price gains. According to Federal Housing Finance Agency (FHFA) figures, the following metropolitan areas had the biggest average home-price gains from the fourth quarter of 2009 to the fourth quarter of 2010.

1. San Jose, Calif.

2.  Honolulu

3.  Pittsburgh

4.  Fort Myers, Fla.

5.  Bethesda-Frederick-Rockville, Md.

6.  Fort Wayne, Ind.

7.  Buffalo, N.Y.

8.  Oklahoma City

9.  Boston

10.  San Antonio

Meanwhile, the FHFA listed the following metropolitan areas for experiencing the largest percentage drops in home prices during the same time period.

1.  Reno, Nev.

2.  Boise, Idaho

3.  Lakeland-Winter Haven, Fla.

4.  Phoenix

5.  Orlando, Fla.

6.  Jacksonville, Fla.

7.  Braden-Sarasota, Fla.

8.  Pensacola, Fla.

9.  Tampa-St. Petersburg, Fla.

10.  Tacoma, Wash.

ASK MARTITIA

QUESTION:  A potential client tells an appraiser that if he cannot appraise a property for a certain amount, he must decline the assignment. Does USPAP allow an appraiser to accept such an assignment?

MARTITIA:  No. According to the Uniform Standards of Professional Appraisal Practice, an appraiser must decline any assignment that requires any of the following characteristics:

1. The requirement of a predetermined opinion of value.

2. The direction in assignment results that benefit the client.

3. A minimum amount for the opinion of value.

4. A stipulated result, such as a loan closing, after the appraisal.

5. A subsequent event which occurs as a result of the appraiser’s opinion of value.

Martitia Mortimer, Elliott's executive vice president, answers appraisal questions on a regular basis in Elliott Evaluation News.

QUOTES  

"It is very easy to accuse a government of imperfection, for all mortal things are full of it." – Michel de Montesquieu

"Ambition is the germ from which all growth of nobleness proceeds." – Thomas Dunn English

"Propaganda does not deceive people. It merely helps them deceive themselves." – Eric Hoffer

"Distrust anyone in whom the impulse to punish is powerful." – Friedich Nietzsche

"A man who gives his children habits of industry provides for them better than by giving them a fortune." – Richard Whately

Newsletter Editor: kevin@elliottco.com
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