Cornerstone Appraisal Services completed 687 appraisals in 2013, roughly flat from 2012. Is the real estate market still battling the effects of the recession? For us, 2008 was a difficult year. I took some time and tried to adapt and expand my practice. I do a lot of relocation and litigation work now. I do a lot of agriculture land and farm appraisals, and I have a contract with [the U.S. Department of Housing and Urban Development], which includes multiple counties. We had to diversify to survive. I needed to get away from bank work, because it tends to be a little more of a challenge to try and keep up with the pressures and return times. Some of my best clients in town are Great Southern and Metropolitan National Bank, but on the lending side it can get more challenging. That being said, I still do mostly residential and can appraise up to a four-family home.
Real estate agents have been optimistic about market increases lately. What are you seeing on your end? I’m not quite as optimistic. I think 2012 through mid-2013, we saw significant gains on the residential side, but it seems to have cooled off in the last year or so and is static now. When I started, we were all residential and all lending work. When 2008 happened, a lot of rules and regulations were changed. We went from being direct with an officer of the bank to a third party appraisal management company. As time has progressed during the last couple of years, those appraisal management companies have gotten huge and are owned by the banks. The number of people actually handing out those residential assignments has been drastically reduced. That has had an effect on an appraiser’s ability to solicit work. I mostly work with third-party companies now, but not necessarily by choice. We prefer to deal with lenders and have a relationship with them. The way the law is now, banks can have an in-house system, but the majority of the market goes through this third-party system.
How have these increased regulations affected your business? It was called the [Home Valuation Code of Conduct], and it started the appraisal management process. It’s complicated and a convoluted mess, and it didn’t used to be. These are things that have to be in place now because there were a lot of situations where appraisers were being pressured to inflate values.
HVCC has since been sunset, but many banks still comply with it to protect themselves. They are ensuring nobody can look back and say somebody was too close with an appraiser and inflated the value of that home. A lot of banks have stuck with that model. As with anything, when you have such a small pool of people doling out the work, they have a strong impact on prices paid for appraisals. Say a borrower went to Wells Fargo, and Wells Fargo charged them $600 or $700 for the appraisal. Wells Fargo then goes out and shops for the cheapest appraiser and pays say $300, then pockets the difference.
Overall, these regulations are good for the market. Dodd-Frank has some provisions in it that required appraisal management companies pay reasonable fees to an appraiser. The data for what is reasonable in a given market is so scattered, a lot don’t follow it. There is still that shopping aspect.
What’s the average appraised value of homes in southwest Missouri? The median right now is around $115,000 to $116,000. We appraise $2 million homes and $30,000, so I see the spectrum. From what I can see, we have regained a lot of ground we lost in late 2008 and into ’09. It has tapered off in 2013; we are static, but we are seeing some gains. They are more along the lines of 1 to 2 percent. They aren’t the gains we saw in 2005 or ’06.
You also are a licensed real estate agent. What trends are you seeing on that side? I’m most concerned with lower market, new construction homes because those prices just keep going up and up and at significant rates. They are at 5 and 6 percent increases year over year because of increased building costs. I’m not sure market participant’s wages and salaries can really keep up with that gain.
A lot of more rural markets, like Clever and Willard, the U.S. Department of Agriculture is propping up the whole deal by offering zero money down and low interest rates. I wonder if, as the prices continue, people are still going to be able to afford that new construction. Going into the Clever market, you can see where a new construction home will sell for $10,000 or $15,000 more than a house that’s a year or two old. That’s a substantial difference, but a lot of people are drawn to that new construction.[[In-content Ad]]
