When will the Housing Market return to Normal?
by Henry S. Harrison

Last June, I answered an “Ask Henry” question from a reader: “When will the Residential Real Estate recession end?” My answer was that I thought that it would end beyond the term of whoever was elected President in November 2012. Between June and when Barack Obama was reelected President, the news media was full of press releases and commentator predictions that the country was well on its way to a real estate recovery.

On February 12, 2013, I listened to the President’s State of the Union Address. Here is what he said about the real estate recovery:

“Our housing market is healing, our stock market is rebounding, and consumers, patients, and homeowners enjoy stronger protections than ever before… Together, we have cleared away the rubble of crisis, and can say with renewed confidence that the state of our Union is stronger…Part of our rebuilding effort must also involve our housing sector. Today, our housing market is finally healing from the collapse of 2007. Home prices are rising at the fastest pace in six years, home purchases are up nearly 50 percent, and construction is expanding again… These initiatives in manufacturing, energy, infrastructure, and housing will help entrepreneurs and small business owners expand and create new jobs. But none of it will matter unless we also equip our citizens with the skills and training to fill those jobs. And that has to start at the earliest possible age…We’ll work with local leaders to target resources at public safety, education, and housing.”



Your New Layout
Hi Henry,
I've been a reader of your magazine for twelve years, and have always enjoyed it. I have not read it in quite awhile, as I have been buried with things to do - but tonight I made time to sit down and savor it, as I have always enjoyed doing.

Two things I really like - first of all, the long all on one page design is so much nicer than the link back and forth between pages design. I liked it immensely - stay with this design!

And secondly, as I have only seen the picture of you that was taken in about 1965 or so (?) I had my doubts you were a real person, and if you were, you must be over 120 years old, as you never ever put a picture of yourself anywhere, save for the one file photo that is used exclusively. Now, in the latest edition, I see you do indeed exist, along with your wife Ruth, and your fine looking Son H Alex. You certainly look more "scholarly" in your recent picture. Your wife is beautiful, and your Son - now you have someone that can write a legal column - ! What a bonus!

Although I have not been around as long as some appraisers (only 12 years), I remember getting a folder from Forms and Worms the first day of my first appraisal class, here in Denver. I have purchased several books over the years, and have always appreciated that the books were totally complete, and I was thus able to learn and accelerate in my field very fast because of that.

If I were you, I'd get rid of your stock picture and make a new one with all three of you in it. Your audience is around your age, so we don't mind gray hair. It's a package deal - and your package is better than mine... so don't hide.

The best to everyone - and keep up the good work. Things are always improving.

To Success, and Nothing Less,
Rick Stillman

Ask Henry

Short Notice Appraisals
Hi Henry,
On Christmas Eve evening I received a call from someone needing an appraisal. They wanted to put their house up for collateral to get a relative out of jail, and they needed an appraisal for the properties worth. The caller wanted it that evening. I was unable to provide the service as I had a house full of company, however I got to thinking about the request.

At that time of night I assume they were not interested in a full URAR report. I use the ClickForm software and can locate a Short Appraisal form and Desk Top Appraisal form. A Restricted Appraisal did not seem adequate in this situation.

Do you know what type of appraisal would have been acceptable for a bail hearing or to post bond assuming there is no MLS listing on the property? I will probably never get another call like this, but was just wandering what I could have done for the caller.


Dear Jennifer,
I have done some appraisals on short notice, but none like this.  My lawyer friends, who do bail hearing work, tell me that it can be quite profitable. We tend to forget that the type of report that is needed — according the USPAP — should be determined as part of the "Scope of Work" communication that takes place between the appraiser and the client.  This should include not only the type of report but more importantly the type of appraisal. Keep in mind that there is nothing in the USPAP that requires you to inspect the property. That said, you must always make a credible appraisal so you are going to have to include a credible description of the property and its condition.

Unfortunately, there is no standard about the type of appraisal required for a bail hearing.  A good source for this information would be the bail bondsman. I don't think I would want to be in a situation where you had been paid for your appraisal, only to find that it was not what the court would accept.

My advice to you and other appraisers who might like to develop this type of work is to develop a relationship with the bail bondsmen in your area.  If you have a lawyer friend who does this kind of work, they might be a good person to introduce you to some bail bondsmen (or women).



NYC Micro-Unit Apartment Competition Winner
by H Alex Harrison, Esq.

On January 22, 2013, Mayor Michael Bloomberg, together with city officials, announced the winner of the adAPT NYC Competition – a pilot program to develop a new housing model for the city’s growing small-household population. The winning entry, ‘My Micro NY,’ was designed by a development team comprising Monadnock Development LLC, Actors Fund Housing Development Corporation, and nARCHITECTS.

adAPT NYC is a pilot program that was launched in July 2012 through a Request for Proposals to develop a new model of housing – micro-units. The proposals were evaluated on several criteria, including innovative micro-unit layout and building design. The
MMNY proposal excelled in this category, with features like generous 9’-10” floor-to-ceiling heights and Juliette balconies that provide substantial access to light and air. The micro-units developed as part of this pilot will measure between 250 and 370 square feet.

Modular by design, the 55 micro-unit construction is reminiscent of the famous Habitat 67, designed by Moshe Safdie, which debuted at the 1967 Worlds Fair in Montreal, Canada. Safdie's design for Habitat 67 began as a thesis project for his architecture program at McGill University. Habitat 67 comprises 354 identical, prefabricated concrete forms arranged in various combinations, reaching up to 12 stories in height. Together, these units create 146 residences of varying sizes and configurations, each formed from one to eight linked concrete units.

The biggest difference between Habitat 67 and MMNY is MMNY’s transforming use of interior space. In lieu of fixed spaces, MMNY apartments offer a novel and innovative use of “programmable space,” which allows occupants to adjust the size and use of a room depending on their needs throughout the day.

Each unit comprises two distinct zones: a ‘toolbox’ zone containing a kitchen, bathroom and storage space; and a ‘canvas’ zone providing ample, well-proportioned flexible space allowing for individual expression, and serving as the primary living and sleeping area.

As micro-apartment living becomes more trendy, the appraisal industry will likely see an increase in appraisals of this type.

To view a video walkthrough of the My Micro NY concept,
click here.

In The News

All 50 states Present on Latest
Improving Housing Markets Index

Market Watch, Valuation Review

Monday, February 18, 2013 – The number of improving housing markets continued to expand for a sixth consecutive month to a total of 259 metropolitan areas on the National Association of Home Builders (NAHB)/First American Improving Markets Index (IMI) for February. This is up from 242 markets listed as improving in January, and includes entrants from all 50 states and the District of the Columbia.

“Just over 70 percent of the 361 metros covered by the IMI are listed as improving this month,” said NAHB Chief Economist David Crowe. “That's a far cry from when we initiated this index with just 12 improving metros in September of 2011 for the purpose of highlighting places that didn't fit the mold of the national headlines. Today, the story is about how widespread the recovery has become as conditions steadily improve in markets nationwide.”

The IMI identifies metro areas that have shown improvement from their respective troughs in housing permits, employment and house prices for at least six consecutive months. A total of 20 new metros were added to the list and three were dropped from it this month.

Read the entire article at Valuation Review, by clicking here.

New UAD Ad for BLOG

Ask Henry

Evaluations vs Appraisals
Dear Henry,
I was recently contacted by a bank I have done appraisal reports for the past 12 years – mostly 1004 reports for secondary markets, some 2055 reports for in-house lending – their e-mail asked what we would charge to do some “evaluations for renewal loans.” To me, the word “evaluation” is a play on words and the same as an appraisal.

After the last few years of being questioned on every blank on the form, griding listings, extra comps etc. – it is a shock to the system to be asked to do an evaluation for which we are supposed to make up the form. I have heard of some appraisers in a nearby town and competing appraisers in my town who are doing some evaluations with a greenhorn trainee.

Is this acceptable practice with the rules we live under?

Wendell Sears

Dear Wendell,
The USPAP defines an appraisal as follows:

"APPRAISAL: (noun) the act or process of developing an opinion of value; an opinion of value. adjective) of or pertaining to appraising and related functions such as appraisal practice or appraisal services.

Comment: An appraisal must be numerically expressed as a specific amount, as a range of numbers, or as a relationship (e.g., not more than, not less than) to a previous value opinion or numerical benchmark (e.g., assessed value, collateral value).....The use of other nomenclature for an appraisal, appraisal review, or appraisal consulting assignment (e.g., analysis, counseling, evaluation, study, submission, or valuation) does not exempt an appraiser from adherence to the Uniform Standards of Professional Appraisal Practice."

Therefore, it seems clear to me that whenever you provide an opinion of value you must make an appraisal that conforms with the all the USPAP requirements for making an appraisal. However, you do have a choice as to what reporting form to use. If the lender / client is going to be the only user of the report, then you may chose to use a Restricted Appraisal Report, which requires a lot less information. However, this does not excuse you from doing everything needed to make an appraisal.

I have been told that a few states allow "evaluations" that do not meet the USPAP requirements for an appraisal. Since enforcement of the USPAP is up to the individual state, and not the Appraisal Foundation, appraisers in those states may chose to make Evaluations. You should call the Appraisal Commission in your state and ask them the same question you are asking me. I’d be curious to hear their response!


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Homonyms to Worry About
by Dr. Poly Syllabic

A major challenge for foreign speakers of English is that it is replete with homonyms: words that sound alike, but have entirely different meanings. In fact, homonyms plague nearly everyone who tries to write coherently in English. They are easy to confuse, and hard to spot when proofreading.

The worst examples are shown below. It behooves you to print this list out and keep it close, especially for the person who is your designated office proofreader. Don't have one? Get one! Like a designated driver, a designated proofreader will keep you from making the grammar errors that reduce your credibility and lower client confidence.

Please feel free to send in other examples of homonyms or other annoying grammar errors that confuse appraisers and the public, for us to publish!

Dr. Poly Syllabic


THEY’RE = They are | THEIR = belonging to them | THERE = in a location
Their house is over there; they're replanting the garden.

YOU’RE = you are | YOUR = belonging to you
You're in a great market; it may be time to sell your house!

IT’S = It is | ITS = belonging to it
It's time for the league to change pitchers. Its best new starter is Andrews.

WE’RE = we are | WERE = happening in the past | WHERE = a place/location
We're all going to Disney, where we met last year. When we were there, we stayed in a super hotel.

COULD’VE = could have | COULD OF = simply incorrect. Use “could've,” but only if you really must!
We could've won the lottery, but missed by one number.

LOOSE = not tight | LOSE = not winning
His tie was loose and his hair was mussed, but he still didn't lose the poker hand.

EFFECT = result | AFFECT = act upon
The effect of the recession was to affect all the prices in the neighborhood.*

* Exception, in Psychology, when it is a noun, synonymous with "emotional state": His affect was troubling as it was very flat and unresponsive.

Ask Henry

Determining Adequacy of Insurance Limits
Dear Henry,
Do you have an explanation as to why Fannie Mae allows the cost approach to be used for determining adequacy of insurance limits? Let me explain.

“The lender wants to be sure the property owner carries adequate insurance to protect the lender.”

If this were the case, why would the lender request the cost approach? The cost approach is a new construction based estimate, not the cost to rebuild after a loss. It may be more accurate to say that lenders need documentation to satisfy Fannie Mae requirements to sell their mortgages into the secondary market. The estimate from the cost approach will satisfy Fannie Mae, but that wouldn’t be adequate insurance to protect the borrower or the lenders’ collateral. The insurance industry has different cost guides.

  • Marshall & Swift/Boeckh – RCT & BVS (not the same cost guide as the MVS books)
  • Xactware – 360-Value
  • e2Value

These are all reconstruction based replacement cost estimating tools. Borrowers that are advised to set their insurance limits based on the “replacement cost” estimate in the cost approach section of the real estate appraisal will be underinsured. They won’t have enough to fully recover from a total loss, and they’ll be in jeopardy of a coinsurance penalty on any partial losses.

So I ask again, can you explain why Fannie Mae allows the cost approach to be used for determining adequacy of insurance limits?

J. Nixon

Dear John,
Fannie Mae & Freddie Mac do not require the Cost Approach but permit its use when the appraiser thinks it is necessary. If in your scope of work dialogue with the lender/client a cost approach is asked for I see nothing to prevent you from providing it. I do believe that the reproduction cost you provide could be useful to the lender. I don't understand why using the reproduction cost would result in the property being under insured. There are a variety of ways homeowner insurance policies are written concerning what definition of value will be used to determine the amount of a claim or the amount of insurance needed.

Many insurance policies are based on the Actual Cash Value of the improvements. This is the depreciated value of the improvements. It does not include the value of the site and site improvements. Some insurance policies are based on replacement cost of the improvements. Usually this is less than the reproduction cost. The URAR begins the cost approach with an estimate of the "Reproduction Cost."