Spring Cleaning That Can Add Value

It’s that time of year when spring cleaning gets added to your “To Do” list. Here are some tips that can help not only freshen your home but add some value. If you are looking to sell soon, these ideas will make your home more marketable.

• Declutter- A clean and organized home looks more valuable and appealing to potential buyers. Start by decluttering your home and getting rid of any items that are no longer needed.

• Deep Clean - This includes carpets, floors, walls, and windows.

• Upgrade your lighting - Updating your lighting fixtures can make a big impact on the overall look of your home. Consider replacing outdated light fixtures with modern ones and use energy-efficient LED bulbs to save money on your energy bills.

• Fix minor repairs - If I had to point out the most important simple tip for maintaining the value in your home, take the time to fix minor repairs, such as leaky faucets, loose doorknobs, defective paint surfaces and scuffs on walls. These small repairs can make a big difference in the overall appearance and functionality of your home.

• Landscaping - Landscaping can make a huge difference in the curb appeal of your home. Trim bushes, mow the lawn, and plant flowers to make your home look more attractive and well-maintained.

• Paint - We all know that fresh paint does not necessarily add value. However, painting your home can significantly improve its appearance and make it look fresher and newer. Consider painting your front door, walls, and trim in neutral colors that are attractive to most buyers.

• Upgrade your kitchen and bathroom - While this might be one of the more expensive items you would consider, upgrading your kitchen and bathroom can significantly improve the value of your home. For budget friendly ideas, consider replacing outdated fixtures and consider painting cabinets. If you have a little more money in your budget, replacing countertops and floor coverings can make a big difference in the appeal of these rooms.

By taking these steps, you can improve the value of your home without breaking the bank. These minor improvements can make a big difference in the overall appearance and appeal of your home.

Are You Housing a Silent Killer?

Radon is a naturally occurring radioactive gas that is colorless, odorless, and tasteless. It is considered to be the leading cause in lung cancer deaths in non-smokers and the second cause amongst those who smoke which is why it is referred to as the silent killer. It is formed by the decay of uranium and thorium, which are present in most rocks and soils. The U.S. Environmental Protection Agency (EPA) recommends that homes be tested for radon, and that homeowners take steps to mitigate radon levels if they are found to be high.

The Environmental Protection Agency (EPA) recommends that homes be remediated if the radon level exceeds 4 picocuries per liter (pCi/L) of air. However, the World Health Organization (WHO) recommends a lower action level of 2.7 pCi/L. It's important to note that while the recommended action levels vary, there is no safe level of radon exposure. Radon is a known carcinogen, and the risk of lung cancer increases with higher levels of exposure. Even radon levels below the recommended action level can pose a risk over time.

Reducing radon levels in buildings can help to reduce the risk of lung cancer and other health problems associated with radon exposure. The process of radon remediation involves identifying the source of the radon, typically through testing, and then taking steps to reduce the amount of radon in the air.

Radon remediation can include sealing cracks and openings in the foundation, improving ventilation, and installing a radon mitigation system, such as a fan or other equipment that can help to vent the radon gas from the building. The specific approach used for radon remediation will depend on the nature and severity of the radon problem, as well as the characteristics of the building.

Overall, radon remediation is an important step to protect the health and well-being of those who live and work in buildings that may be affected by radon.

Murrysville 2022 Market in Review

The year 2022 was a year of historically low inventory and high demand, unlike anything Murrysville has seen in recent history. Interest rates have been a major player in the market this year and definitely caused some of the historic gains to cool off towards the last quarter of the year. As rates rose, activity slowed- at least to a certain extent. As you look through this report, you will notice that the rise in mortgage rates corresponds to other market data events.

The annual median home sales price rose from $330,000 in 2021 to $374,100 in 2022 which is a 13.4% increase. Compare that to the year 2020 when the median sale price was $300,000 and the increase was at 10%.  In looking to this coming year, it is safe to say that these increases will cool down. To what degree will depend on mortgage interest rates, inflation, demand and market saturation.

The general trend in the median sale price over the past year has been increasing with the peaks in those increases showing up during the summer months.

The supply has been historically very low in 2022 and this chart shows that there was a build up right around April. It is typically between March and April that sellers list their properties in anticipation of the height of the buying season.

The marketing times (expressed in DOM- days on market) has also been extremely low. However, in the past few months, this has been rising due to a cooling in the market most likely attributed to seasonal cyclical events during winter months and compounded by the rising mortgage rates. A rise in marketing times should be viewed as a possible indicator that listing prices are at a peak point and/or demand is starting to balance.

As is expected, the quantity of sales is most active in the months May through September.

The current number of active listings is also decreasing. We will have to wait to see if this starts to increase when the market typically experiences seasonal cyclical events around March or April when sellers like to place their properties on the market.

Not only as demonstrated in the previous chart which showed the number of actives decreasing, the median list price is also decreasing. This could be significant to keep in mind. As the marketing times increase and the list prices decrease, this could have a direct impact on the median sale price going forward. Only time will tell how all of this will affect 2023 sales.

Greensburg 2022 Market in Review

The year 2022 was a year of historically low inventory and high demand, unlike anything Greensburg has seen in recent history. Interest rates have been a major player in the market this year and definitely caused some of the historic gains to cool off towards the last quarter of the year. As rates rose, activity slowed- at least to a certain extent. As you look through this report, you will notice that the rise in mortgage rates corresponds to other market data events.

 The annual median home sales price for all residential properties in Greensburg rose from $149,950 in 2021 to $173,450 in 2022 which is a 15.7% increase. Compare that to the year 2020 when the median sale price was $135,000 and the increase was at 11.1%.  In looking to this coming year, it is safe to say that these increases will cool down. To what degree will depend on mortgage interest rates, inflation, demand and market saturation.

The general trend in the median sale price over the past year has been increasing with the peaks in those increases showing up during the summer months.

The supply has been historically very low in 2022. The supply appears to have had a sharp increase towards the end of the year which is counter intuitive to cyclical seasonal historical data.

The marketing times (expressed in DOM- days on market) has also been extremely low. However, in the past few months, this has been rising due to a cooling in the market most likely attributed to seasonal cyclical events during winter months and compounded by the rising mortgage rates.

As is expected, the quantity of sales decreased in the last quarter of the year.

One point of data I was surprised to see pertains to the actual number of transactions year over year for the last 3 years. The years 2020 and 2021 had a high number of transactions with 2022 showing a slight drop off. This is conversely affected by the fact that with fewer transactions, there was a higher median sale price.  

The current number of active listings is also decreasing. We will have to wait a few months to see if this starts to increase when the market typically experiences seasonal cyclical events around March or April when sellers like to place their properties on the market.

Not only as demonstrated in the previous chart which showed the number of actives decreasing, the median list price is also decreasing. This could be significant to keep in mind. As the marketing times increase and the list prices decrease, this could have a direct impact on the median sale price going forward. Only time will tell how all of this will affect 2023 sales.

What Makes a Room a Bedroom?

This question is one of the most common questions I get and there is much confusion as to what qualifies a room as a bedroom. While there is no official definition, there is only one requirement a room needs in order to legally qualify it as a bedroom- a window of adequate size so as to allow for ingress/egress.

Most think a bedroom requires a closet which is a misnomer. There are plenty of older homes I have been in where the bedrooms don’t have closets. Think about it… there was a day when most people only owned a few articles of clothing. During these times, when there weren’t closets, many owned an armoire which doubled as a closet and dresser.

So lets put to rest that a bedroom NEEDS a closet.

With that in mind, in todays markets, most expect closets so that they have a place to store their clothing, shoes, bags and whatever else people put in their closets. Here are some other things to consider when classifying a room as a bedroom:

1. Is it of adequate size? A bedroom should be large enough to accommodate a bed and provide some space for movement around the bed, room for dressers, et.. The minimum size for a bedroom may vary depending on local building codes or regulations.

2. Is there a door? A bedroom should have a door that can be closed to provide privacy. A door can also be an added safety feature. It is best to sleep with your door closed in the event of a fire.

3. Where is the room in proximity to a bathroom? A bedroom should be located within close proximity to a bathroom. If all your bedrooms are on the 2nd level of the home and the only bathroom is on the first level, this could be viewed as a functional obsolescence. No one wants to get up in the middle of the night to stumble in the dark through the rest of the house.

These are the basic features that make a room a bedroom. The only feature that is a requirement is a window. However, depending on local building codes, there may be other requirements that a room must meet to be legally considered a bedroom and typically, the market might be expecting more.

For Better or For Worse? FNME vs GPAR

Over the years, I have provided appraisals for properties owned by individuals going through divorce proceedings and have had the opportunity to be used in several counties as an expert witness. Whenever I am providing an appraisal for marital dissolution purposes, there are a few things I keep in mind. Most important is the possibility that my report might end up being used as part of expert witness testimony in a formal court proceeding. For this reason, it is important to know the correct form to use.

Most appraisers complete their reports on Fannie Mae produced forms as the majority of the work completed is for lending purposes. It is important to understand that these forms were created by and expressly for Fannie Mae purposes. There are pre-printed certifications which clearly indicate the use of and purpose for these forms.

Unfortunately, using Fannie Mae forms for litigation work is a mistake. While an appraiser should be aware of this, I have found in reviewing opposing counsels “expert” appraisal reports that many use the wrong form. Legal authorities have advised and forewarned that the use of the 1004 URAR appraisal form for litigation purposes carries the risk of having that report thrown out and ultimately, that side losing their case.

Per Jody Bruns, CDLP, using the wrong form could be a costly mistake and can jeopardize a case. Check out the full article here:

http://digitaleditions.walsworthprintgroup.com/publication/?i=286075&article_id=2358305&view=articleBrowser

In the future, if you are looking to have an appraisal completed for divorce purposes, be sure that you engage the services of an appraiser who has the experience and knowledge to know that using the correct form can make all the difference in your case.

Neighborhood vs Market Area

One of the foundations that determines the value of a property is the well known mantra- location, location, location. But what does that really mean? Simply put, the value of a property is in direct relation to where it is located- both its neighborhood and the market area it is located within. An appraiser should be able to define the neighborhood along with the market area in order to research and accurately report those factors that affect the value of a property.

What defines a subject’s neighborhood? A neighborhood is a group of complementary land uses, a congruous grouping of inhabitants, buildings or business enterprises. It focuses on four sets of considerations that influence value: social, economic, governmental and environmental factors. Sometimes, a neighborhood is well defined- consider some housing plans and subdivisions or even small towns. In more rural areas, the neighborhood is less easily defined and could encompass an entire municipality.

So then, how is the neighborhood different from the market area? A market area is the geographic or locational delineation of the market for a specific category of real estate. It is an area in which alternative similar properties effectively compete with the subject in the minds of potential purchasers, often referred to as the buyer pool. A market area is often much larger than a neighborhood. A property located in a subdivision could have a market area that includes additional alternative subdivisions that would have a similar appeal based on the location, school district, access to local amenities, median price range, etc.

Within any given market analysis is a term referred to as market segmentation. This is the process by which submarkets within a larger market are defined. Specifically, it is taking a look at the market data and determining segmented portions such as retirement communities, condominiums, investment properties, etc.

One example would be a sub-market for condominiums in Murrysville. Condominiums in this market area make up less than 10% of the overall real estate but there is a well defined buyer pool for these types of properties. In order to analyze the impact of value on a condominium in Murrysville, you would need to first analyze the plan it is located in (the neighborhood), then analyze Murrysville as a whole (the market area) and then further extract that data to analyze other similar condominiums in Murrysville (segmented market area).

As you can see, the location of any given property can be directly influenced by its direct neighborhood, the larger market area and the segment of the market that it is classified as.

In the near future, I’d like to take a very real but hypothetical look at an example property and how knowing both your neighborhood and market area has a direct impact on the data needed to be analyzed and the comparables chosen.

Appraisal Racial Bias (part 3)

I’ve been discussing the topic of real estate appraisals and the allegations of racial bias that has the possibility of creating issues for some homeowners or potential homeowners. There have been a few cases that have had the spotlight shown on them and the scenarios are all relatively similar.

It starts with an appraisal that is completed on a home where the occupant is of a minority race- whether the appraiser meets the occupant in person or there are pictures and other personal contents that elude to the persons race within the home. When the appraisal is completed it is perceived to be “low”. A subsequent appraisal is completed in which the home has now been “whitewashed”. If you haven’t heard of the term, it refers to the process of removing all indications of minority race within the home and even having a white person stand in as the fake homeowner. Some of the current cases out there are real life examples and others are experiments in which the entities conducting these are doing it for the sole purpose of trying to prove that the appraisal process is inevitably biased.

In either case, these are serious allegations.

I’d like to ask a few provoking questions that don’t have easy answers.

Does a value that comes in lower than what someone was expecting or desiring automatically mean the value is wrong?

When a homeowner or occupant is of a minority race, if the appraisal value is lower than what someone feels it should be, does that mean racial bias came into play?

Is it possible that the lower value was accurate and that the higher value was a case of reverse bias?

There is one case in particular that took place for a black couple out of northern California where the homeowners make this statement to CNN- “What that appraisal did is what we were actually asking the appraisers to do, to not consider race, to not consider neighborhoods and or the lines that have been drawn and perpetuated by redlining.” Based on this statement, if an appraiser stays within the neighborhood and the neighborhood happens to be primarily occupied by a minority group, does this indicate racial bias was a factor in completing the appraisal?

In the future, I’d like to discuss more the idea of neighborhoods and market areas. For now, I hope these questions have been thought provoking and at least given some pause to consider different angles.

Appraisal Racial Bias (part 2)

As mentioned in part 1 of this series, Federal Fair Housing Laws states in clear terms that when it comes to real estate, an individual cannot discriminate based on protected factors. These protected classes include race, color, national origin, religion, sex, gender identity, sexual orientation, familial status, or disability.

As of this writing, the current edition of USPAP is even more detailed when it pertains to the profession of appraising and it states “An appraiser must not use or rely on unsupported conclusions relating to characteristics such as race, color, religion, national origin, gender, marital status, familial status, age, receipt of public assistance income, handicap, or an unsupported conclusion that homogeneity of such characteristics is necessary to maximize value.”

USPAP is a document that is continually being revised. This task is accomplished by members of the Appraisal Standards Board which is an independent board of The Appraisal Foundation. They have been arduously addressing the matter of bias and as part of the current revisions being proposed, are conducting a comprehensive look into the Ethics Rule. As part of their process, they even consulted with antidiscrimination experts in July 2022.

Currently, the proposed changes to USPAP is in its 4th exposure and while I am not going to disclose the contents of these proposed revisions, it seems very apparent that the goal of the current board is to make it abundantly clear within USPAP that unethical and illegal discrimination is explicitly prohibited. If you are interested in reading the draft, you can find it on The Appraisal Foundation website of click on this link: https://appraisalfoundation.sharefile.com/share/view/s80c9bc7163694f5a809cb401316d53cf

Even though USPAP has for a long time always required appraisers to be unbiased, I am proud to be included in a profession that has chosen to continue taking this matter seriously and clearly spell out where we stand. The public needs to be assured that our profession has not, does not and will not tolerate unethical and illegal discrimination.

Appraisal Racial Bias.... Pardon our Interruption

Part 2 has been written and was ready to drop today except for the necessity to provide you important information regarding fast approaching upcoming hearings. Earlier this year, the CFPB’s (Consumer Financial Protection Bureau) Fair Lending Director, Patrice Alexander Ficklin, stated that they were going to prioritize resources to focus on the role of racial bias in home appraisals

The CFPB has announced that they will be holding a hearing with the ASC (Appraisal Subcommittee) specifically to discuss this issue. This hearing is open to the public but it requires an RSVP.

For information regarding this hearing and to RSVP, visit the CFPB’s website or click on the image below to follow the link:

Click Here to Explore Blogs by Topic

Appraisal Racial Bias (part 1) (Copy)

Racial bias is not a new topic but it is quickly becoming a heated debate point in the world of real estate valuation. Much of it centers around a few lawsuits in which an individual (or group of individuals) feel that an appraisal reflected a value lower than it should have because the appraiser considered the race of an individual within the overall equation and in turn, allowing it to negatively impact the valuation process.

I am not here to argue whether or not racial bias exists. As ugly as it is, I believe it does and in order to have a reasonable discussion about it, it must be acknowledged. I also believe, although I’d like to think it is minimal, racial bias exists in all professions- even mine. Without the proper acknowledgement, effective solutions cannot be achieved. With that being said, that is not the point of this article. What I would like to accomplish in the first part of this series, is to define the problem and refer to those regulations that prohibit racial bias in the appraisal profession.

What is racial bias and how can it be something that exists within real estate valuation? Racial bias refers to the primarily unconscious thoughts, preconceptions, or experiences that cause people to think and act in prejudiced ways.

According to an article written by Business Insider “Appraisal bias refers to discrimination in the appraisal process, such as assigning a lower value to a home because of the race of the person who lives there. Appraisal bias can happen consciously or unconsciously, or it can happen as a result of the lingering effects of historical discrimination that linked race to property values.

It's a violation of fair housing laws to discriminate in the appraisal process based on protected factors, which include race, color, national origin, religion, sex, gender identity, sexual orientation, familial status, or disability.”

You can read the full article here:

https://www.businessinsider.com/personal-finance/appraisal-bias

Not only is it a violation of fair housing laws, but it is also a violation of the USPAP (Uniform Standards for Professional Appraisal Practice) Ethics Rule that we as appraisers agree to observe. Under the Conduct portion of the Ethics Rule are the following statements:

“An appraiser must perform assignments with impartiality, objectivity, and independence, and without accommodation of personal interests AND

An appraiser must not use or rely on unsupported conclusions relating to characteristics such as race, color, religion, national origin, gender, marital status, familial status, age, receipt of public assistance income, handicap, or an unsupported conclusion that homogeneity of such characteristics is necessary to maximize value.”

In short, Federal Law and our own Ethics Rule prohibits appraisers from completing appraisals with any form of bias, including racial bias.

How to Remove PMI

What is PMI? PMI, private mortgage insurance, is required to be used when a homebuyer uses a conventional loan and the down payment is less than 20%. There are different rules for FHA and VA loans, so we will only be addressing mortgage insurance for conventional loans in this article.

The amount for PMI can range from $30 to $70 monthly for every $100,000 borrowed. This rate varies based on the borrowers credit score. The PMI is also recalculated every year based on the current loan balance so the premium decreases from year to year as the principle amount decreases. Since mortgages are amortized, monthly payments do not significantly impact the principle in the beginning of the repayment cycle. Therefore, the amount of PMI paid on a $250,000 loan can be estimated to cost at least $12,000 over the time period that PMI will be applied to the cost of the loan.

The purpose for PMI is to protect the lender from the elevated risk based on a higher principle due to the lower down payment made by the borrower at the time of the loan. Once there is a sufficient cushion of equity, the PMI can be removed.

So, how can you get rid of the PMI? First you need to check with your lender to find out their process to eliminate the PMI payment. PMI is often cancelled automatically once you’ve reached around 20% or 22% equity based on the original amortized payment schedule and original loan calculations. The other option is to provide a certified appraisal that shows the loan balance is no more than 80% of the homes value.

Recently, I have been going through the process to remove my PMI from my personal home that I bought 2 years ago. A lot has happened to both my home and the market I am located in that makes me confident that I meet the threshold for removing my PMI. Not only have I made significant improvements to my home in the past 2 years which include all new windows and doors, a new furnace and a new CAC unit, but the predominant price in my plan has increased by about 30% over the past 2 years.

As of this article, I have been paying around $60 per month totaling around $1,560 in PMI payments that I have made thus far. If I were to continue paying these insurance payments until the insurance was automatically dropped based on the original terms of the loan, the total would be over $5,600. The cost for the appraisal I am having completed to remove my PMI is $550. That would amount to about a $3,200 to $3,400 savings in insurance premiums.

If you bought your house within the past few years, it might be financially feasible for you to revisit your loan terms and look into removing your PMI payments. Many market areas went through substantial increases in the predominant sale prices that could have had a significant impact on the value of your home. These increases along with any significant improvements you have made to your home may have impacted the value of your home increasing your chances of having sufficient equity to meet the 20% threshold. Contact your lender and find out their procedures for eliminating your PMI earlier than the automatic removal. If your lender allows you to pick your own appraiser for this purpose, please consider the professionals at Town & Country Residential Appraisals.

A Most Embarrassing Experience

I might not look like the picture of health, but over the years, I have tried to take my health seriously. Since I’m not a morning person, I like to find simple ways to balance rushing around in the morning that includes getting my caffeine intake and breakfast. The caffeine is mandatory. Breakfast tends to be optional. One of those options includes protein smoothies since they are healthy and portable.

One particular morning, I made myself a smoothie that included a protein powder and fresh blueberries. My dual cup holder in the car is perfect for this. Driving to my first appointment, I alternated between the two. By the time I arrived at the house, I was happily caffeinated and the smoothie was gone. Perfect start to my day…. Or so I thought.

As is customary when I pull up to a house, I knock on the door and introduce myself as the professional that I am, do my best to make them feel comfortable by informing them of how I will be proceeding with the inspection and giving them a rough estimate of how long I expect it to take me. Traditionally, I do my measurements and take my pictures of the exterior first. Once completed on the exterior, I proceed to the interior. I will start with the main level, work my way up if there are more levels and then conduct my inspection of the basement last. Once I’ve seen everything, I will set my tablet up on a kitchen counter where I work my way through my checklist while asking them all the important questions such as when they might have replaced the roof last or how old the furnace is. This conversation usually lasts about 5 -10 minutes long. While having this conversation with the owner, it usually involves a small amount of chit chat just to be personable and this was no different. Once completed, I thanked them, gave my typical “have a good day” and walked back to my car.

As I get back into my car, I caught a glimpse of myself in the mirror and to my horror, saw myself staring back at me with bits of blueberry skins from my smoothie stuck all in between my teeth. I couldn’t help but laugh at myself and wondering about what must have gone through their mind. If it had been me in their shoes, I would have argued intensely with myself as to whether or not to say something. Say nothing won the argument. Lets just say that I look in the mirror before leaving my car now.

If you have a real estate funny story to contribute, please send it to me and I would be more than happy to add it to my blog.

A Different Kind of Value

The staff at Town & Country Residential Appraisals wants to wish all of you a

We are thankful for each and every one of our clients who have placed their trust in us.

There is no greater value than that of building relationships with those you love, trust and enjoy.

Please take time to spend with those who have enriched your lives like you have enriched ours.

Rear View Mirror or Crystal Ball?

Appraisals are a report that indicates an opinion of market value for a property. It is a reflection of what has been happening up until a certain point (our effective date) and not what is going to happen or might be continuing to happen.

What has happened could be different from what is going to happen. There is a place in real estate valuation for forecasting, but when completing appraisals for mortgage lending, divorce, estates, bankruptcy and listing work, we look at the sales and trends leading up to our effective date. Most often, our effective date is the day we look at the house, but there are times when our effective date is a retrospective look at a prior date such as a date of separation for marital dissolution purposes or date of death for estate purposes.

In any of these cases, the effective date that reflects the estimated market value is a culmination of the data analysis in the market leading up to that date. In other words, we are always looking in the rear view mirror to determine our opinion of value.

Over the past year, appraisers ran into situations where our rear view mirror was not equaling the rapidly changing markets. Houses were being listed and within less than 24 hours, sellers had multiple offers to choose from. Some of those offers included a percentage above the list price that seemed ludicrous, but buyers were desperate to get into a house and were getting discouraged by running into rejection after rejection so they were making very attractive offers. Inventory was low and this created the perfect storm. If you had cash and didn’t care about value, no problem. But if you needed a mortgage, the appraisal needed to reflect that it was worth what the buyer was willing to pay for it. In many instances, the history of sales did not make this possible. It either forced the buyer to bring the cash to the table to make up the difference or go back at the drawing board and start searching again.

Market value looks at how these actions between buyers and sellers have affected the climate in the market and use the sales that have closed as indicators of value for the property being appraised. It isn’t until you have an accumulation of data points that indicate buyers and sellers are reacting in concert that you have the ability to point to a changing market. In rapidly changing markets, it is challenging to correctly interpret the data and accurately reflect those changes. Those changes being reflected are not to be understood as an indicator that they will continue to happen, only that they have happened.

Lead Based Paint Can't Be THAT Bad... or Can It?

Homes built prior to 1978 have the potential to have lead based paint contained in it. In many of the areas I appraise such as Greensburg, Delmont, Export, Derry, Irwin, etc., that is a lot of homes. Probably 80% or more of the homes in these areas were built prior to 1978.

When lead based paint peels and cracks, it creates paint chips and dust. You can tell a deteriorated paint surface possibly contains lead when there is a pattern to the cracking termed “ alligatoring”. It creates a pattern that looks a little like scales or a grid. Another sign is if it creates a chalky residue when it rubs off. Also, any surface covered with lead-based paint where the paint may wear by rubbing or friction is likely to cause lead dust including windows, doors, floors, porches, stairways, and cabinets.

When performing appraisals for loans that are for FHA/USDA or VA financing, one of the issues that we as appraisers need to pay specific attention to is what is termed “defective paint surfaces” in houses that were built prior to 1978. Any paint that is found to be peeling, bubbled, flaked or chipped needs to be called out as a necessary repair to be professionally addressed due to the risks associated with lead based paint. To some it sounds like overkill. In fact, I used to think years ago, how can it be that bad?

So, why is this so concerning?

Is this something you should even be concerned about?

The very short answer is yes.

If you don’t read anything further in my article, please click on this link to read what the Cleveland Clinic has to say about lead poisoning. If you are like I was, this information might change your mind about the seriousness associated with lead poisoning.

https://health.clevelandclinic.org/lead-paint-dangers/

When lead is absorbed into the body, it can cause damage to the brain and other vital organs like the kidneys, nerves, and blood. Lead may also cause behavioral problems, learning disabilities, seizures, and in extreme cases, death. While it is harmful to all ages, lead presents the most danger to children. Infants and young children are more likely to be exposed to lead than are older children. They might chew paint that flakes off walls and woodwork, and their hands can be contaminated with lead dust. Young children also absorb lead more easily, and it's more harmful for them than it is for adults and older children.

According to The Cleveland Clinic “For a child, even the smallest amount of lead can cause developmental problems.” If there is one thing that is most important to understand about the risk of lead poisoning, it is this… The effects of lead poisoning CANNOT be reversed. The best way to avoid the danger is to minimize the exposure to the risk.

How do you limit your risk to lead poisoning when it pertains to real estate? You can avoid it almost entirely by choosing to purchase or rent a home that was built after 1978. If that isn’t possible, then you can either have all the lead based paint removed or treat existing lead based paint by using an encapsulent. Encapsulants are materials that are applied over lead-based paint to seal the paint to a surface and prevent the release of paint chips or dust. The material may be either a liquid or an adhesive. Encapsulation provides a barrier between the paint and the environment. Conventional paint is NOT an encapsulant. There are specific types of paint that are classified as an encapsulant.

In short, know the risks and be informed. Living in a home built prior to 1978 has the possibility of having lead based paint. You can limit your risk for the potential of having lead poisoning by having a good maintenance program addressing any known existing lead based paint, having it removed and/or having it encapsulated.

We are expanding again!

What do most real estate appraisal offices do when they are slowing down and scrambling to obtain more orders just to stay afloat?

We do the opposite of most….. we expand.

As the number one voted Gold Award Best of Westmoreland home valuation appraisal office, we are still busy and looking to expand our services.

Granted, order requests have slowed a bit which can be directly related to rising mortgage rates and that seasonal time of year when we traditionally slow down a little. However, this is the best time to reevaluate how we do business and take the necessary time it requires to train new personnel. Recently, we hired Meagan Connelly as a staff appraiser and we are actively recruiting more staff appraisers.

Meagan has proven to be a great addition to our team. She comes to us with 8 years of experience in appraising which is comprised mostly from commercial and non-lender residential work. Her commercial certification allows her to appraise any type of property. We are working to get her FHA/USDA approved and familiar with lender work. Her expertise coupled with her desire to jump right in and get assignments completed has added significant value to our already top notch service.

How will increasing mortgage rates affect you and your investment?

You would have to be living under a rock to not know that interest rates have been steadily rising and are currently at levels we have not see in many years.

According to the latest article as of this writing dated 10/21/2022, the 30 year fixed rate mortgage remains just shy of 7%. This is having a direct impact that is negatively impacting the housing market.

https://www.cnn.com/2022/10/20/homes/mortgage-rates-october-20

Image taken from bankrate.com

In the past month, I have started to see increasing supply that will soon be balanced and in my opinion, if the current environment remains the same or rates continue to rise, we will see the balance at best or the oversupply at worst we are used to seeing.

What happens when you have decreasing demand and higher supply?

This negatively impacts sales prices. In turn, this causes values to decline.

Unfortunately, this is not good news. It is difficult to know how far this decline will go or how long it will last. According to the CNN article I referred to, home sales have been falling month over month and we are in the longest housing sales slump since October 2007. They also state that applications for home purchases are down 38% and those for refinances have fallen off of a cliff.

This might not be the case for home appraisals and the home sales in our market area, but as is historically accurate in the past, we tend to be on the back end of the national curve. If what they say is true, then we are in the very beginning of this same slump and need to be prepared for the ride.

If you are in the market to purchase a home, refinance or require a home valuation for other purposes such as estates and divorces, you need to be prepared for the value of the property to possibly show a decline from the past 2 years.