WORKING EFFECTIVELY WITH TODAY’S APPRAISERS December 19, 2013 Oscar Wei Senior Research Analyst

Problems reported by REALTORS®: Out-of-town appraisers who are not familiar with the local market conditions Inappropriate comparisons Turn-around time by both appraisers and banks is slow Excessive lender demands SOURCE: NAR – Realtors Confidence Index Survey, Sept 2012

Impact to Home Sales 63% reported no contract problems related to home appraisals 14% said a contract was renegotiated to a lower sales price as a result of a low valuation 12% said a contract was cancelled due to an appraised value under the price negotiated between the buyer and the seller 9% reported a contract was delayed 2% reported a contract problem due to a high appraisal SOURCE: NAR – Realtor Confidence Index Survey, Aug 2013

Survey Methodology 801 online surveys conducted in August 2013 Respondents: REALTORS® who closed a real estate transaction between August 2012 and August 2013 Sample error: 3.3% at 95% confidence interval

Type of Client Represented Q: During your last transaction where the buyer and seller entered into a valid contract and the transaction closed escrow or cancelled, which type of client did you represent?

Property Location Q: In which county was the property located?

Most Transactions Were Single Family Homes Q: What type of property was your last transaction?

Final Sale Price Q: What was the final sales price of your last transaction?

Final Sale Price Q: What was the final sales price of your last transaction?

Most Buyers Acquired Financing Q: How did the buyer pay for the property?

Share of Cash Buyers decreases for the first time after 7 years of continuous Increase Over a quarter of buyers paid with all cash The share of all cash buyers had been on the rise until this year SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Majority of Buyers Did Appraisals Q: Did the buyer have an appraisal done on the property?

Most Buyers Did Not Waive Appraisal Contingency Q: Did the buyer waive the appraisal contingency?

THE APPRAISAL

4/10 REALTORS® had Direct Contact w/Appraiser Q: Did you have direct contact with the appraiser at any time during the transaction?

Appraisers’ Company Affiliation Mostly Unknown Q: With which company was the appraiser affiliated?

Appraised Value Q: What was the appraised value of that property?

Appraised Value ≥ Final Sale Price by Final Sale Price Ranges Q: What was the appraised value of that property?

Type of Properties in Appraiser Report Q: What type of properties did the appraiser include in his/her report?

The Median Price for Equity Sales Declined for the 4 th Consecutive Month SERIES: Distressed Median Price SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Most Appraisers are Familiar w/ Local Markets Q: Was the appraiser familiar with the local market?

Satisfaction Rating of Appraisers (Mean: 7.1, Median: 8) Q: On a scale of one to 10, with one being very dissatisfied and 10 being very satisfied, how satisfied were you with the appraiser?

Satisfaction Level by Sales Price Q: What was the final sales price of your last transaction? MedianMean ≤ $300, $300,001 – $500, $500,001 – $1,000, $1,000,

Satisfaction Level: Non-Distressed vs. Distressed MeanMedian Used Non-Distressed Properties Only in Appraisal 7.08 Used Both Distressed and Non-Distressed Properties in Appraisal 7.18

Satisfaction Level: Appraised Value above or below Final Price MeanMedian Appraised Value < Final Price5.06 Appraised Value > Final Price7.58 Q: What was the final sales price of your last transaction?

REALTORS® Satisfaction Level with Appraisers Q: Was the appraiser familiar with the local market? MeanMedian Appraiser Familiar with Local Markets 7.68 Appraiser Not Familiar with Local Markets 43 Not Sure/Don’t Know5.46

Top Reasons for Satisfaction

Top Reasons for Dissatisfaction

CLOSING REMARKS

Share of Equity Sales Decreased for the First Time Since December 2012 SERIES: Distressed Sales SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Median Price YTY % Chg: US vs. CA SERIES: 30Yr FRM, 10 Yr T-Bond SOURCE: Federal Home Loan Mortgage Corporation, Federal Reserve Board

Issues with Home Appraisal Should Improve in 2014 As more distressed properties are clear Home prices continue to rise Lending standards loosen up

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