The Difference A Year Can Make


Some Important Points To Consider:

  • The latest Freddie Mac Primary Mortgage Market Survey reports the 30-year fixed rate at 3.7%.
  • Freddie Mac’s projection for Q2 2016 is that the rate will be 4.7% (a full percentage point higher)
  • The Home Price Expectation Survey predicts that home prices will appreciate by 4.4% during this same time

The impact waiting a year to purchase your dream home can make on your monthly payment is significant. Contact a local real estate professional today to discuss your options before the experts’ predictions become reality!

AMC Appraisal Perspective Through Rhetorical Misdirection

Spot on. Unfortunately this is about to get even more surreal when Fannie rolls out their big data Collateral Underwriter Tool. Again, if this data is so awesome, why won’t they share it with the appraisers?

FNMAFanniemae, completeREA, CREA, Nana Smith, 203-212-3788

Part below is a blog from the MatrixBlog of MIller Samuel Inc. Real Estate Appraisers & Consulting, I came across this morning once my frustration with AMCs companies came to climax!


“As much as I think I held their attention for the entire hour allotted, my presentation fell short of getting audience adrenaline pumping like the Jordan Petkovsky, the Chief Appraiser of a TSI Appraisal, a large national AMC and affiliated with Quicken Loans. I still wonder how beneficial this public relations could be by talking to the industry like a politician – as if residential appraisers were clueless to the “incredible benefit” that AMCs provide our industry.

Here are a few of the questions (paraphrased) posed to an audience comprised of heavily experienced residential and commercial appraisers:

Q: “I realize there is friction between AMCs and appraisers. What has to happen to solve this problem?”
A: Someone in audience: “Someone has to die” followed by a burst of laughter from the entire room.

Q: “We spend millions on powerful analytics. Wouldn’t it be great for appraisers to get their hands on this technology?” (repeated 2 more times slowly for effect).”
A: Someone answered: “You have to spend millions on technology because the appraisal quality is so poor you need to analyze the markets yourself.”

Q: “How do we attract new appraisers into the business?”
A: My answer “Until appraisers are fairly compensated when banks are made to be financially incentivized to require credible reports, nothing will change.”

Q: “How do you think banks feel about the reliability of appraisals today? They don’t feel the values are reliable.”
A: My answer “Because AMCs pay ±half the market rate, they can only mostly attract form-fillers (aka “corner-cutters”). They don’t represent the good appraisers in the appraisal industry.”

Q: “We focus a tremendous amount of effort on regulatory compliance on behalf of banks and boy are they demanding! We even have a full time position that handles the compliance issues.”
A: My comment – that’s a recurring mantra from the AMC industry as a scare tactic to keep banks from returning to in-house appraisal departments. Prior to 2006 boom and bust cycle and the explosion of mortgage brokers with an inherent conflict of interest as orderers of appraisals, the profession was pretty good at providing reliable value estimates. The unusually large demands by regulators (if this is really true and I have serious doubts) is because the AMC appraisal quality is generally poor. If bank appraisal quality was excellent, I don’t believe there would be a lot of regulatory inquiries besides periodic audits.

What I found troubling with his presentation – and I have to give him credit for walking into the lion’s den – is how the conversation was framed in such an AMC-centric, self-absorbed way. I keep hearing this story pushed by the AMC industry: The destruction of the modern appraisal industry was the fault of a few “bad actors” during the boom that used appraisal trainees to crank out their reports. That’s incredibly out of context and a few “bad actors” isn’t the only reason HVCC was created – which was clearly inferred.

Back during the boom, banks closed their in-house appraisal centers because they came to view them as “cost centers” since risk was eliminated through financial engineering – plus mortgage brokers accounted for 2/3 of the mortgage volume. Mortgage brokers only got paid when the loan closed, so guess what kind of appraisers were selected? Those who were more likely to hit the number – they were usually not selected on the basis of quality unless the bank mandated their use. Banks were forced to expand their reliance on AMCs after the financial crisis because the majority of their relationships with appraisers had been removed during the bubble – the mortgage brokerage industry imploded and banks weren’t interested in re-opening appraisal departments because they don’t generate short term revenue.

The speaker spent a lot of time talking like a politician – “we all have to work together to solve this problem” “appraisers have to invest in technology.” When asked whether his firm had an “AVM”, he responded almost too quickly with “No” and then added “but you should see our analytics!”

The residential appraisers in the audience were largely seething after the presentation based on the conversations I heard or joined with afterwords.

It’s really sad that appraisers don’t have a real voice in our future. We’ve never had the money to sway policy creation and we can’t prevent the re-write of history.

See full article bellow




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Cap Rates vs Yield Rates in the Income Approach

synopsis, crea, completerea, nana smith stamford ct

Synopsis  In the income approach analysis of real property value, there is often confusion as to which rates to use and what these rates represent. In the direct capitalization approach, the cap rate is merely the ratio of stabilized net operating income to sales price – i.e. the property dividend rate.

In discounted cash flow analyses or other yield capitalization techniques, future cash flows are discounted by use of a discount rate which is a true yield rate – which can be directly compared to other before tax, unleveraged return rates such as stock and bond yields, etc.

discussion, crea, competerea, compete real estate, answers, nana smithDiscussion The premise of the Income Approach is that the value of a property is the present value of future benefits of property ownership. All of the Income Approach techniques discount or translate, in some fashion, future net cash flows to a current property value. This is usually done on a before tax, before financing basis and usually deals with the net income stream from the real estate – before financing charges, depreciation or taxes – what appraisers call Net Operating Income (NOI).

dirrect capitalizationDirect capitalization is simply applying an appropriate overall capitalization rate to next year’s stabilized NOI. This cap rate is the property dividend rate or, more popularly, simply the ratio of next year’s NOI to sales price – usually supported by direct market evidence gleaned from other market sales.

cap rate, completerea, CREA, compete real estate asnwers, nana smith, appraiser, stamford, ctProperties that have high demand and / or low risk have cap rates in the low end of the range. Properties that have high risk and / or low demand have cap rates in the high end of the range. Put another way, savvy investors try to pay high cap rates (i.e. relatively low price relative to NOI) while retail type buyers for popular properties have to pay low cap rates (i.e. demand bids the price up for a given income stream).

The strength of Direct Capitalization is its simplicity and familiarity with market players – particularly for smaller commercial properties. A variation of this approach is also used in small rented residential properties – where a gross rent multiplier is applied to stabilized rents. The gross rent multiplier is simply the sales price divided by next years’ stabilized gross rents. Obviously, to be used effectively, the appraiser must know the terms of the lease – i.e. who pays what and also what the likely occupancy will be next year.

Loan Real Estate Stocks
Cap/Dividend Mortgage Constant NOI/Sales Price 1/PE Ratio
Yield/Discount Rate Interest Rate Discount Rate Dividend rate + Price Growth Rate

In other words, the discount rate is the property yield rate and includes a component related to annual income (read an annual dividend with stocks or, alternatively, NOI with real estate) and appreciation at resale (future stock price with stocks or, alternatively, future sales / reversion price of the property at the end of the investment term with real estate). The above discussion reflects property yields that are appropriate for the overall property cash flows. Obviously, a similar analysis could be done for only the equity component of future cash flows (i.e. NOI less debt service) – the resulting present value of the equity would then be added to the mortgage amount to arrive at an indicated property value.

inally, support for cap rates is usually direct market evidence from other sales and these market cap rates are not adjusted but simply used to bracket or select an appropriate cap rate for the subject property. Remember, next year’s NOI is usually used for the subject and therefore should be used on the comparables.

Support for yield rates is usually from market indices such as published yield rates on real estate from surveys of national lenders or from investor interviews or from yield rates required from other alternative investment options.

This article presented By Thomas A. Steitler, MAI


Phone: +1 203 858 6727

Office: +1 203 212 3788

Complete Real Estate Answers, Inc.
27 Fifth Street, 2nd Floor, Stamford CT 06903

Nana G. Smith, Proprietor

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Investing in Real Estate

Complete Real Estate Answers InvestingShift your minds focus from spending to investing.

The wealthy and successful do not spend their money…

…they invest it.

They realize that North American tax laws favor investing over spending.

If you buy a house you cannot write it off for tax breaks.

The wealthy in contrast would invest in an apartment building that produces cash flow, appreciates in value and will offer write offs year, after year, after year.

Most of you will go out and buy cars for comfort and style…

…the wealthy will invest in cars and trucks for their company that are deductible because they are used to produce revenue

Along with investments that will make them money, investing a nice percentage of their money on education plays a huge role in why they are successful.

They are always investing their money on education which include online courses, information products and all types of of books on self success and self development.

Get reading and get educated, it will only benefit your life’s situation helping you grow


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