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Contributor: Kelly Dorsch

• Developing an opinion of market value, instead of an anticipated sales price
• Worldwide ERC guidelines and specific client guideline
• Estimating the competitive list price range for the SUBJECT property
• Valuing the property above the current listing price in a stable or declining market
• Incorrectly analyzing market trends that would include absorption rates and inventory levels
• Omission of the actual days on the market on page four for the neighborhood
• Discussing extended marketing times in the report for the defined market segment,  then indicating normal marketing time as 0-120 days on the report
• Applying market change and forecasting adjustments
• Discussing how personalized décor will affect marketability and making corresponding adjustments on the grid
• Selecting appropriate comparable sales and competing listings
• Appraising the property “as is” instead of appraising based on planned improvements
• Applying appeal ratings on pages two and three that match the appeal ratings on the sales grid
• Calculating gross living area
• Properly adjusting  for identified differences on the grid
• Marking the market segment forecasted trends and analysis as stable while also indicating the forecasted price trend is anticipated to continue at an accelerated/decelerated pace
• Indicating that repairs and or improvements are needed  and will significantly impact marketability and neglecting to estimate the recommended improvements effect on marketing
• Estimating significant recommended improvements and neglecting to add them to the grid
• Including language about mortgage guidelines or Fannie Mae requirements in the supplemental addendum

Each of these items presents a challenge to both the reviewer and the appraiser.  They will generate additional questions from the reviewer to the appraiser and may extend the process of determining a guaranteed purchase offer and delay an offer from the client to the transferee.  Avoiding these common red flags will allow the appraiser and reviewer to enjoy a more seamless delivery of the appraisals to the transferee.

Related Entries

• AG Warns Against Craigslist Scams

The story below, published in the Westchester Journal News, is yet another reminder to renters that they need to be very careful to avoid scammers that are getting bolder and more clever. Working with a reputable broker is an easy safeguard against fraud.

Victims mount in rent scam. Con artists post phony ads, abscond with money from would-be renters. Realtors decry web ads that doctor for-sale sites
 

Tom Forte was stunned when he walked through his front door to discover that a young woman and her baby had settled into the home. It turned out the single mother from Yonkers had paid $1,000 to a phony real estate broker, who apparently broke in through a back door and let her in the front door after handing her a dummy set of keys. As they exchanged bewildered looks, it soon became clear that they all had been victimized by the latest, and most brazen, incarnation of the Craigslist home rental scam. “The worst part is that she had just moved out of her old place,” said Forte, who was just days from closing a deal to sell the $485,000 investment property in the Woodlawn section of the Bronx. “I had no choice but to order her to leave.” The case represents a new extreme in the national scam, which is affecting real estate agents, sellers and would-be renters throughout Westchester, Rockland and Putnam counties.

For years, con artists have been copying pictures of “for sale” properties, doctoring and re-posting them as “for rent” on Craigslist and other online classifieds to dupe people who are desperate for affordable housing into wiring deposits. But Realtors across the region say they’re seeing more people fall for it, partly because the scammers are no longer just luring victims from afar; they’re now setting up appointments with unsuspecting renters and showing them the homes before disappearing with their money. The worst part is that police really cannot do much about it. By the time law enforcement gets involved, the scammers, who often use fictitious names, are typically long gone.
That’s why real estate agencies are now taking it upon themselves to warn the public about a scam that has become a growing problem for the industry.
“You’d have to be an imbecile to fall for such a scam years ago, but it’s gotten much more blatant,” said Geoffrey Barry, manager of a Houlihan Lawrence real estate office in White Plains. “Now they’re actually coming to the houses.”
Since February, he has had a half-dozen of his listings targeted, including Forte’s house in the Bronx, and others in central and southern Westchester.
Dafna Gorfinkle, who is selling her ranch-style house in White Plains, realized that she had been the target of the scam when strangers began ringing her doorbell late into the night. “On a given day, there could be as many as three to four different families,” she said. “It was quite scary.”
The people wanted to check out her property after seeing a phony Craiglist ad that read: “$1330/4 br – FOR RENT:- Adorable & Spacious 4BDR Home in WestChester (White Plains, NY).” The scammer exchanged emails with interested parties, using Gorfinkle’s name and claiming she needed a renter because she had been assigned by the government to assist AIDS patients in West Africa. Gorfinkle contacted Craigslist to have them remove the ad, but it kept popping up with different wording. She also reported it to White Plains police, several times, but the case never did get solved.
“This has been going on in our industry for a few years now, and, every time we report it to police, the FBI or Internet fraud bureaus, they take down the information, and nothing seems to happen,” Barry said.
Police acknowledge their frustration. “Once suspects leave with the money, without any physical evidence left behind or any idea who the person is, it’s very difficult for us to track down and prove,” Yonkers police Lt. Patrick McCormack said.
Several homes in the southwest section of the city were targeted in August 2010. A couple of the homes were under renovation, so fraudsters persuaded workers to let them inside. In other instances, they showed up during open houses and ushered gullible victims around under the nose of actual sellers.
Victims who were anxious to seal what seemed like awesome deals handed over cash, a classic no-no.
Realtors have tried their own form of combat. “I could smell them a mile away,” said Craig Scher, senior broker of CS Realty Relocation Services in Harrison, who emails Craig of Craigslist directly when he notices the bogus ads. They get removed immediately.
Adam DiFrancesco, associate broker with Coldwell Banker in New City, said his agency tracks the fraud by setting up “Google alerts” that automatically send emails when its properties get posted on Craigslist.
It helps protect my clients against fraud and incorrect information being published online,” DiFrancesco said.
The state’s Better Business Bureau, which has been warning about the home rental scam since 2009, calls this a national problem that requires renters to keep their own guard up.
That’s something Edward Thomas, 40, did when he saw an online ad for a Yonkers rental and went on his own to check it out. “It seemed a little too good to be true,” he said of a one-bedroom apartment on Laurel Place listing for $700 a month. “I’m glad I personally inquired more about it, because I might have fallen for it.”
Barry, of Houlihan Lawrence, said he has tried to deter scammers by attaching “Not Available for Rent” signs to the “For Sale” placards he posts on clients’ lawns. But he said the signs inevitably get torn out by the Craigslist crooks.
It was the February case involving the Yonkers mother, he said, that “really crossed the line for me.” “My agent felt horrible and I felt horrible,” he said, “so I called my boss and said, ‘What can we do about this?’ ”
His answer: Warn the public to watch out for the evolving Craigslist scam.

With job growth in recent months, more young people are moving out of their parents’ homes or away from shared rooms and into their own rentals. Also, more families who would have previously purchased a home are staying in rentals longer. Many are having trouble qualifying for a mortgage or are waiting for the market to hit bottom. With more people renting it means more competition, especially for apartments.

International employees coming to the United States are seeing that it is more difficult to rent than ever before. With the rising rental prices and the lack of inventory, it is making an already stressful time in their lives even more challenging. Since most transferees are not aware of the present rental market, they come to the US thinking that the perfect home will be available for their stay here. Another challenge transferees are facing is that rental properties are getting swept up quickly, so most have to have cash on hand to the get the rental they want. This is especially difficult if their company or relocation company are paying for their housing. The best thing to do is to set expectations and inform transferee’s and their companies how difficult the US rental market is. A new renter needs to realize every minute counts when choosing their new home. 

Contributor: Ashley Freese

Demand

• Nationwide, the rental market continues to be a landlord’s market
• Tenant demand outpaces supply in most regions
• Impacted by the housing market collapse, homeowners electing to become renters have steadily decreased

Vacancy Rates

• Extremely low. Less than 5.2% in most markets and as low as 1-2% in some markets. Vacancy rates have fallen for 7 straight quarters

 Availability

• Remains low. Despite high demand, only 37,678 new multifamily units were constructed in 2011, the lowest annual total in 31 years

Rental Prices

• Up 4.7% nationwide during 2011
•  Top Annual Rent Increases by Metro (2011)

State of Texas Driver’s License Residency Requirement Change

April 2, 2012, new residents must prove that either their residence or domicile is in Texas and that they have lived there for at least 30 days in order to apply for an original Texas non-commercial driver license or ID card. This new directive will lengthen the current process for obtaining a Texas driver’s license and may require expatriate assignees to have rental cars in excess of 30 days

State of Massachusetts Driver’s License Sponsor

As a reminder, in the state of Massachusetts a sponsor is required for the road test, even if the applicant possesses a valid foreign driver’s license. If not accompanied by a sponsor, the Class D road test will not be given. The sponsor must:

• Be at least 21 years old
• Have had at least one year of driving experience
• Have a valid driver’s license issued by his or her home state. Holders of foreign driver’s licenses are not eligible to be sponsors

It is recommended that the applicant seek a qualified sponsor from a reputable driving school and many will also provide a vehicle for the test. Typical costs are $80-100. Our Destination Services Consultants will not be able to sponsor the applicant

Chicago G8 Summit

• Chicago will be hosting G8 and NATO summit from May 19-21st, 2012. High security levels will make traveling within the city and finding any short-term lodging nearly impossible

2011 Rental Market Report – MPF Research

According to MPF Research, an industry-leading market intelligence division of RealPage, Inc, national occupancy rates climbed 1.1 percentage points from last year. As indicated from the occupancy chart (right) occupancy rates slightly declined .2% from Q3 to Q4, primarily due to a typical seasonal slowdown of rental activity.

Future Projections

• A .5% increase in occupancy is expected throughout 2012
• Rental prices are expected to rise 4.5% across the U.S.
• Boston and NY markets may encounter rental price increases up to 8.3% and 7.3%, respectively
• 1,900 new rental units are expected to open in the Seattle (King County) market throughout 2012. Vacancy rates expected to drop to 4% and rental prices in that county are projected to increase 4.2%

After 33 years of relocation appraising, I have learned important lessons and a set of personal rules has evolved.  Certain ERC Guidelines have been laid down and must be adhered to; however, I have also established and pursued my own personal demands for overseeing each segment of the relocation appraisal process.  For me, failure to review or to ignore these guidelines and personal standards for each assignment can lead to an unfavorable outcome.  Now retired and still being of sound mind, let me share with you these important lessons and set of personal rules.

A high variance is often a result of a deficient inspection.  The use of a comprehensive inspection form with an all-encompassing interior detail is paramount. The point is that, in the rush of the assignment, too much is being left to memory, with the result that important factors are not mentioned or addressed in the report. It will help to recognize and address interior décor, quality of components, features, and physical and functional inadequacies. The point is, don’t just fill in the form blanks!  I developed my own form that I took on each inspection. The more time I took filling in this form, the better, and more defensible, my submitted report was.

It is impossible to provide too much pertinent factual information. You must be sure of the relevant facts and the questions regarding variance will not be about the facts but how those facts are weighted and valued.

Every step in the relocation process has its purpose and provides connection from one section to the other—starting with the property inspection to the final reconciliation analysis.  Point out the key interrelationships and reunite the significant data that may impact value. The effects of failing to provide proper linkages of pertinent data may result in callbacks or a higher variance.

Passion should never cloud reason.  Decisions have to make sense based on current facts and past experiences. Decisions must be objective and logical. Allow the facts to form your appraisal decisions.  This leads to the further point, which deserves strong emphasis: Use the lessons of the past without taking them for granted as predetermined for the future.

While on site, sketch a complete floor plan and always review it for any functional inadequacies for the market segment. Review the interior photos for there may be something you missed in your report.  Be sure the total of your interior measurements roughly jibes with your exterior measurements.

Don’t underestimate the importance of comprehensive neighborhood and site analyses.  These are needed to determine whether the subject is typical for its neighborhood, if it is over improved, below general values, or if there is any adverse external factors.  Does the site have any hidden problems: is it in the flood plain, or are there wetland restrictions?  Does the landscape conform?

Good decision-makers know that they need help from others without breaking ERC guidelines.  Identify key people who can make specific contributions to the decision-making process and ask them for their advice and counsel. Is there someone whose judgment you trust? It may be the listing agent, sales agent, disinterested appraiser, home inspector, etc. If the property is listed, always call the listing agent to ask about how many showings there have been and if they would share any positive or negative comments given by a typical prospective buyer about the home.  This leads to the further point, which deserves strong emphasis:

The report must contain market data from reliable sources that have been properly verified and documented.  You know that guilty feeling and consequences when you fail to take the time to document and verify listings and sales. Comparable sales thoughtlessly selected, hastily verified, and carelessly adjusted can lead to high variances.

Considering the law(s) of probability is speculation or a gamble.  When evaluating the likelihood that the event or result will occur within your marketing period, there must be actual market evidence.  The risk of foregoing a forecasting adjustment solely based on an announcement of a plant expansion is high. The same goes for making a forecasting adjustment based on the publication of a plant closing.  The possible or probable consequences are considered and addressed, whether positive or negative, but adjustments are made only when the market clearly indicates they are necessary.

What property features are desired in the market segment?  Are your listings and sales really competitive alternatives? Comp and listing review and selection are as important as the inspection process.  Determining the property’s competitive position in its market segment is a key to market analysis.

Always review all the appraisal principles on each assignment because your property may be impacted by one of them. This leads to an additional point, which deserves highlighting: learn from, adapt to, and anticipate change.

After all these years I have learned that one thing is certain:  you may improve your variances through experience and gaining a professional mastery of the comprehensive body of knowledge relating to relocation issues but you will never gain a complete mastery over the appraisal relocation process.  Demand for a particular home depends on a wide range of factors, and many of those factors are out of the direct control of the appraiser. The personal guidelines and standards for each assignment may not be new revelations but you must have the discipline to review them on each assignment and prepare a thorough report.  It’s a mistake to believe that the relocation appraisal does not have a life of its own.  You would be misguided if you think once you submit the appraisal your job is completed.  Monitoring your successes and failures is an ongoing process that is critical to fine tuning your relocation appraisals in order to reduce variances. 

Thomas G. Fryer
tfryer43 @gmail.com
The Woodlands, Texas