May You Live In Interesting Times...

We all probably know the playful Chinese curse: "May you live in interesting times." Watching the current political gambits on TV and YouTube it certainly reminds us that we live in a new instant age. Unfortunately, at least so far, this "silly season" seems to be a lot more about entertainment than substance.

The political process at the moment appears to be primarily (pun intended) a media and money circus, rather than a realistic and practical discussion of the work that needs to be done to deal with America's real problems, both economic and social.

Given our current economic doldrums, and the continuing problems of unfair taxation, high unemployment, millions of Americans still without health care, and the dismal condition of our infrastructure, it's easy to become disheartened.

Still, I feel that there's real hope to focus on.

Although we are firmly part of a global economy now, America continues to be the one country that still offers the most personal opportunity, growth, innovation and success for millions of people from thousands of diverse backgrounds.

We have all THE BASICS right here. Our economy is vast, responsive and solid under the current turbulence. Let's hope 2012 proves to be a year of wisdom, power and potency, for our country, its leaders...and our profession!


Ask Henry

Dear H2,
In a reassessment, is a foyer considered to be a room? Thank you for any input you may have.

William Kalif

Dear William,
In most areas of the country, a foyer is not counted as a room. If in your market area it is customary to do so, however, you should follow the custom. In order not to confuse the reviewers, you should explain in a comment the reason you included it.


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"The FHA Appraisal"
Denver, CO
February 23, 2012

This FREE one-day class discusses FHA appraisal requirements including Appraisal Protocol, & updates to FHA appraisal policy, and equips attendees with the knowledge to determine property eligibility. (The earlier class, on Feb. 16th, is full.)

This course provides a refresher for seasoned FHA appraisers, as well as provides valuable information to appraisers new to the FHA roster. Prior Registration by Feb. 20th is required, but the course is free of charge.

Click here: FHA Class


Not too Late to Comment...
The ASB is currently considering changes for the 2014-15 edition of USPAP. All interested parties are encouraged to comment in writing to the ASB before their upcoming meeting in Savannah, GA on February 10th, 2012.

The actual deadline for written comments is extended to March 12th, 2012. Respondents should be assured that each member of the ASB will thoroughly read and consider all comments. Comments are also invited at the ASB public meeting on Feb.10th in Savannah, Georgia.

Written comments on this document can be submitted by mail, email or FAX.

Snail mail address:

Appraisal Standards Board
The Appraisal Foundation
1155 15th Street, NW, Suite 1111
Washington, DC 20005

Email: asbcomments@appraisalfoundation.org
Fax: (202) 347-7727

To review the current proposed changes, click here: USPAP COMMENT

Ask Henry

Functional Obsolescence, GLA
Subject is a purchase marketed as 3,100 sq.ft. County has subject listed as 2,059 sq.ft. Appears subject possesses a finished upper level, apparently original and legal, which does not possess a bathroom.

I presume, at a minimum, that there is functional obsolescence? However, presuming the upper level is legally finished and otherwise of good quality, it's hard to compare to other properties with 3,000 sq.ft. that offer greater utility. Would you give partial value to upper level and not include in sq ft calculations?

Rick Bacich

Dear Rick,
It is not possible for me to give advice about specific properties. However, here are some thoughts that may be helpful. It is up to you to determine what the actual GLA is and use it as a basis for your appraisal. This is a separate problem from estimating what the value is. From what you say I see no reason not to include the upper area in the GLA. However you can give it less value than other parts of the house. You must make this judgment based on what is expected in your market area. You must describe what is causing a loss of value (if any) due to functional obsolescence.



~ SOPA Update ~

Senators Flee Internet Piracy Bill

Support for two online piracy bills in Congress dropped dramatically on Wednesday after opponents of the legislation staged a dramatic protest in which vast swaths of the Web effectively went dark. More than 4.5 million people signed their names to the Google petition and 300,000 people emailed or called their lawmakers, according to the protest organizers.

In New York, San Francisco and Las Vegas, protesters held rallies to draw attention to the bills. The Library of Congress said late Wednesday that it had been hit with a denial of service attack by “a group opposed to the online piracy legislation.” By evening, a number of lawmakers had done an about-face on the legislation.

The Senate version of the bill lost four of its co-sponsors, including Sen. Orrin Hatch (R-Utah). “It is simply not ready for prime time and both sides must continue working together to find a better path forward,” Hatch said in a statement about the Protect Intellectual Property Act.

Senators John Boozman (R-Ark.), Mark Rubio (R-Fla.) and Roy Blunt (R-Mo.) also released statements Wednesday saying that they had reservations and would not vote for the bill if it came up for a floor vote. In the House, where lawmakers are considering a similar bill called the Stop Online Piracy Act, or SOPA, House Speaker John Boehner (R-Ohio) told reporters that “it’s...clear to many of us that there’s a lack of consensus at this point” on how to proceed with the bill.

The online piracy bills had been aimed at protecting U.S. companies against foreign Websites that illegally post copyrighted material. Companies opposing the legislation had argued that the bills would impose heavy regulatory costs, harm innovation and give the government too much power to shut down Websites accused of copyright violations even if they are later found to be innocent of the charges.

“The entire approach is philosophically wrongheaded,” said Wikipedia founder Jimmy Wales last Tuesday evening in an interview with The Washington Post before the protest began. In a statement posted to his public Facebook profile, co-founder and chief executive Mark Zuckerberg said the bills “get in the way of Internet development.” Google’s chief executive, Eric Schmidt encouraged his followers on Twitter to sign Google’s petition against the bills, calling on them to “Defend the web!”

The darkened Web sites represent some of the largest properties on the Internet: Google easily has the widest reach, with 187.1 million unique visitors in December, according to data from ComScore. Wikimedia, which owns Wikipedia and other Wiki sites, and Craigslist also have broad audiences, reaching 83 million and 49.8 million unique visitors, respectively, in the same period. Reddit, which compiles links to funny stories, was visited by 4.8 million users last month. Another participant, Boing Boing, had 1.6 million visits.

Most responsible parties agree that some kind of intellectual property protections are needed in the current "free for all" world of downloads, uploads, YouTube, Wiki and Google. Still, the anarchic values of open structure and little regulation still hold the hearts and minds of most users of the Internet who fear that by regulating anything, the nemesis of overregulation and lost integrity will ensue.

Ask Henry

Final Utilities Inspection
Dear Henry
I'm a huge fan of your articles and Q and A for a long time.

I’ve been asked by a lender to do a "final inspection" on a HUD resale for just the utilities hookup. The original appraisal was done a few months ago by a different appraiser for a different client. The new lender (my client) is asking specifically that only the utilities be checked. Can I do that? And what form would I use (all the standard forms imply that the appraiser doing the final inspection is the one that did the original appraisal). Any suggestions on what form might protect me from being tied to the original appraisal?

Paul Ryan

Dear Paul,
It does not make any difference what form you use (or maybe just a letter) as long as it is crystal clear that you are not making an appraisal or rendering any opinion as to what affect the connection of the utilities will have on the value of the property. If you give such an opinion, you are making an appraisal and must conform to all the USPAP requirements for making an appraisal.

Thanks for your kind comments.



Choosing Comps in a Declining Market

Newly published guidance from the Appraisal Institute helps appraisers know when and how to use distressed sales, such as foreclosures, as comparable sales. Such knowledge is crucial in the current market where distressed sales are common, creating complex valuation challenges.

AI’s Guide Note 11: Comparable Selection in a Declining Market notes: "transactions used in an appraisal assignment require adjustments for changes in market conditions."

The Appraisal Institute’s Guide Note 11 says: “A declining market will likely exhibit very little sales activity. When the sales comparison approach is necessary, but there are virtually no current sales in the market area to analyze as comps, the appraiser must: (1.) Expand the geographic area for comp search, then adjust for location as appropriate, and/or (2.) Use less recent sales, then adjust for market conditions as appropriate.”

It continues: “Appraisers cannot categorically discount foreclosures and short sales as potential comps in the sales comparison approach.” However, due to differences between their conditions of sale and the conditions outlined in the market value definition, these might not be usable as comps.

Further, foreclosures and short sales usually do not meet the conditions outlined in the definition of market value, the Guide Note says. A short sale or a sale of a property that occurred prior to a foreclosure might have involved atypical seller motivations (e.g., a highly motivated seller.) A sale of a bank-owned property might have involved typical motivations, so the fact that it was a foreclosed property would not render it ineligible as a comp. However, the Guide Note also points out, if the foreclosed property was sold without a typical marketing program, or if it had become stigmatized as a foreclosure, it might need to be adjusted if used as a comp. Also, some foreclosed properties are in inferior condition, so adjustments for physical condition may be needed.

this link to download the free PDF: “Guide Note 11: Comparable Selection in a Declining Market