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The state regulatory agency (Office of Real Estate Appraisers) disciplines appraisers all the time. If you go and read the newsletters they post on their website you’ll see how many appraisers get reproved or fined or suspended or revoked. A lot more appraisers get suspended or revoked than realty agents, and I can guarantee you that appraisers are absolutely no worse than the agents and brokers in terms of conduct.

Nationwide, hardly a week goes by but that some appraiser gets sent to jail. Often times they are the only party involved with a fraudulent deal who gets serious discipline or jail, even though they never get anything more out of one of these fraudulent deals than their standard fee.

I woud say that most appraisers carry errors and omissions insurance, which of course is of no use if they’re committing or enabling fraud.

I’ll never stick up for a crooked appraiser, but I will say there is no such thing as a predatory appraiser; that is, one trolling the streets in search of a scam or a victim. Appraiser misconduct generally takes the form of enabling an unreasonable deal from which other people benefit; usually at the behest or coercion by a realty agent and or mortgage originator. If you’re at all concerned about bad appraisals the first step would be to hold those other professionals to their own standards of conduct as closely as we are held to ours’.

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“Another point here is that 10 years ago your same arguments would have prevented the construction of San Elijo Hills, 4 S Ranch, Del Sur. Well they were built and people are paying 700K a pop. In 10 or 20 years we will see new area rebuilt. Prices then will probably be a whole lot higher then they are today.”

If you’re talking 10 or 20 years, that’s a lot different than talking about the next 2-7 years. A person who can take advantage of the opportunities in the near term AND in the long term will probably do better than someone who has to wait for the long term to break even.

Dollars in the near term have a greater value than the same amount in future dollars.

This ain’t 1997, and it’s going to be a while before 1997 comes around again. You might want to keep in mind that people who bought in 1989 didn’t come back into the black until 1998 or so. In the interim, they were mostly in a losing position, even if they never had to book those losses through a sale.

This brings up another point; just because a lot of the 2004-2006 buyers haven’t sold yet doesn’t mean their assets haven’t lost them money – they just haven’t realized their losses by booking them as a sale.

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I truly wish I could prove you wrong, but it only takes a couple of idiots to spoil it for the rest of us; and right now the appraisal business has a lot more than a couple idiots.

If it’s any consolation, appraisers are regulated and those appraisers who have cooperated and enabled this fraud are subject to all kinds of civil, administrative and criminal penalties. Up to and including prison. Unlike with stock scams and the like – which require insider information that isn’t readily available – proving appraiser misconduct is relatively simple, if a little labor intensive. These folks can all be brought to account if the government or the investors have the interest to pursue them.

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Most of the subprimes have some variation of the same story – volume at the expense of everything else. Most of the Alt-A lenders are only slightly better.

An appraiser has an ethical obligation to avoid communicating a misleading appraisal or allowing other people to communicate a misleading appraisal. That obligation is hardwired to their license; it is not an option and it is not some abstract ideal.

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Raybyrnes,

The idea that imported money will stabilize us because everyone wants to live here has so far failed to materialize.

The market of which you speak is so thinly traded that it could quadruple and our regional medians would barely reflect the effect.

Do you have any idea how few of these transactions there are? In 2005 there were a total of 504 sales in the MLS above $2,000,000 for the entire year; in 2006 that number dropped to 458 (which is a 10% decline by volume). YTD for 2007 is 154.

The reason I started out at $2,000,000 is because the price ranges below that are rife with financing terms that clearly indicate that many of those buyers in places like Carlsbad and Encinitas are not even among the almost-wealthy, let alone the super-wealthy.

Bear in mind, most of the above numbers are in the $2,000,000 – $3,000,000 range, which is hardly the realm of the superwealthy to whom you refer. The number of sales in the last 28 months above $4,000,000 only amounts to 151. When compared to the 70,000 sales of SFRs/condos that have sold during that time period, this number is so small that it’s insignificant to the RE economy as a whole, regardless of their transaction value.

Meanwhile the number of listings in these price ranges is high and going higher. There are currently 634 listings priced at or above $2,000,000. That’s 138% of the number of such sales for all of 2006. There are 162 active listings at $4,000,000, which is 257% of the total number of such sales in 2006. We have built far more of these properties in this region – with more in process – than we have grown or imported buyers for.

Simply put, many of these listings must sell at some point over the next year because they include new spec homes against which the builders are mortgaged to the hilt (there are 56 listed that were built in 2006 or 2007); they include RE moguls who are currently losing their ass because of the decline of their business interests; and because of the natural rotation in and out of wealth that normally occurs. Too much supply and not enough demand usually equals declining prices.

Simply put, I don’t see a single data point that supports the idea that there will be a windfall of imported money that will support pricing throughout the coastal region let alone the entire region over the long term. That’s not to say it couldn’t happen in the future, but it obviously isn’t going to happen during this economic cycle.

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Raybyrnes,

Do you really think the pricing structure here was created by people moving into town?

You’re using a variation of the “everyone wants to live here” comments that the RE bulls were using to explain the now-discredited New Paradigm and it’s later iteration, the Soft Landing.

I suppose it could happen, but I’d have to see it first and so far there’s absolutely no indication that it will happen. At the moment, we have population outmigration as far as the homeowner class is concerned. More are leaving than are coming in.

Even La Jolla and Del Mar are slow right now, and the shadow areas of Rancho Santa Fe are in some real trouble. We haven’t imported enough outside money to prop those areas so far; what makes you think it’s going to happen in the next few years? The first 50% of the Boomer generation is already of retirement age and so far they haven’t shown up yet.

Homes in the coastal region, which only extends about 3 miles inland, comprise but a fraction of the total housing inventory. Is that fraction of sufficient size to cause all the other areas to be overvalued relative to the local economy by 100% or more?

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I don’t think you want to separate what’s happening in SD county with the OC and LA markets. Overvalued is overvalued, regardless of location. San Diego is widely considered to be one of the canary towns in the nation because the specufever started here first and ended here first. That’s why all eyes have been on SD. The economists want to see out how those trends will play out in other town.

The fact that the OC hasn’t suffered much yet doesn’t mean the trend will simply pass them by. In fact, their declines may manifest themselves more quickly as their trend plays catch up.

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We’re still paying for the last bailout.

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The engineering for most residential subdivision sites includes grading anywhere from 2 feet deep to however deep they have to go to get to stabilized soils. The subdivision project site I just appraised had an extensive geological report finished that indicated grading would go from 3-12 feet in different areas of the site, and then filled and compacted to provide a suitable base upon which to pour those slab foundations.

There are other ways to build foundations, for example a lot of the hillside homes use reinforced concrete columns or pilasters, sunk into the hillside till they reach granite or bedrock to provide that foundation.

Improper site preparation is a major concern for builders and they generally give it a lot of attention, long before a bulldozer rolls onsite.

Incidentally, if you’re buying a new home and you want any little problems to be cleared up before they become big problems, spend the $300 to have a home inspector come in and perform a technical inspection. Have them look specifically for construction defects and hold that builder to the current building codes. Do it before you take possession of the home.

It might even be a good idea to have them come in about a week prior to closing so the builder isn’t pressured for time to clear these details up. If there are a lot of them, have the builder address them and let them know up front that the inspector is coming come back to verify their completion and the builder would be on the hook for any return visits. Negotiate this two-stage inspection from the outset so as to keep your costs down. It’s well worth the money. And I would never take a referral for a home inspector from my agent – I’d pick them myself.

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Retracted

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It is the law of unintended consequences in action. If RE was the economic engine of the last few years, it’s decline should be assumed to have a corresponding effect on the general economy. Several of the bulls have pointed this out, and to that extent I think they are correct. Wishing for the 50% decline is equivalent to wishing for very hard times for a lot of people, including people who currently do not now own a home or who are not employed in the RE sector.

Those of you who intend on timing the market for entry or re-entry at the bottom should probably plan in advance for how much more difficult the process will be. You will need a downpayment, you will need good credit and verifiable income and employment. Interest rates may be significantly higher, thereby increasing your monthly payment beyond what it would be under the current interest rates. I would not anticipate it to be that easy for most people.

Right now, a good way to invest your money may be to invest in your own skills and to increase your employability, ’cause you’re going to need a good job to buy a house when everyone else is on the ropes. And I don’t say that to mean you should run out and get a real estate license, either.

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Alex_angel has his critical thinking cap on. Good eye. These instances are not mere “oversights” nor are they coincidental. The options/upgrades operetta is as much a part of their marketing plan as the routine the car dealers use when they want to pack your car purchase with $2,000 or more of hidden spiffs.

By the way, another reason the builders want to do all the finishes is because they wouldn’t want you to see what the place looks like prior to them covering everything up. They have a cliche about that, the wording of which escapes me at the moment.

I have a brother-in-law who’s a building contractor. when he and his wife bought a new home he was walking through the house all through the construction process and noting the technical errors that were being made. He held that builder to correcting all those problems – they surely hated seeing him walk into their sales office because everytime he walked in he had a new list of fixits. Underneath the drywall and floorcoverings he probably has the best house in the subdivision.

Friends don’t let friends buy options and upgrades from builders.

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Once you get utility connections to a site and all the initial infrastructure out of the way you don’t have to start over just because you’re building a new structure. Some fees, permits, environmental impact studies, biological reports, soils analysis, engineering reports etc., are all vastly simplified or eliminated altogether with a site that’s already been developed once.

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“Preferred lender” sometimes turns out to be a mortgage broker working with a line of credit from a lender; that’s how Lennar operated with most of Bressi Ranch and La Costa Oaks. Trust me, they wouldn’t be steering a buyer toward a specific lender if there wasn’t some monetary benefit for doing so. Obviously, if there’s a monetary benefit the borrower is the one who’s doing the paying, although what they’re paying may not exceed typical financing costs if the lender is giving a discount in exchange for the volume.

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They’re still building in Cielo, and there’s still a lot going on over in The Bridges (even though that place technically has its own Zip). The Crosby, which is located directly across the intersection from Cielo (albeit in 92127’s zip) is also going string, although those homes are mostly production homes, not customs. Then of course, there’s Santaluz, about 1/3 of which are customs. Then there are all the wannabe projects in the Del Mar Heights area (Rancho Del Mar, The Preserve, Duck Pond, Meadows Del Mar), as well as Wildflower in Olivenhain.

There are no shortage of McMansions in North Central. And most of them have easier access to the I-5 corridor. Cielo seems to be more proximate to the I-15 corridor.

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