This is The Norris Group's real estate investor radio show, the award-winning show dedicated to thought leaders shaping the real estate industry and local experts revealing their insider tips to succeed in an ever-changing real estate market hosted by author, investor and hard money lender, Bruce Norris.
Joey Romero:Hi and welcome to The Norris Group real estate radio show and Podcast. I am not real estate investor Bruce Norris. I am filling in for Bruce Norris. My name is Joey Romero. He is traveling to California from Florida. As many of you know he is residing in Florida now, he is headed out this way and we didn't want to miss B. Be nice to me. It's my first radio show I'm hosting. So, let's just pretend that, that thumbs down button doesn't even exist, how about that? So, Joining us today is Bob King. He's a certified general appraiser with Del Rey Appraisal Services. Del Ray is a full service, real estate appraisal firm, providing consulting services throughout Southern California and is an SRA-designated member of the Appraisal Institute. Bob's residential real estate appraisal experience includes single family, single family income property, 2-4 unit residential income property, land, and condominiums. He's also worked on appraisals for the FHA, REOs, estate planning appraisals, retrospective appraisals, and divorce property settlement appraisals. Bob is even served as an Expert Witness for the Superior Court of San Bernardino County. I'm sure there's some interesting stories there. So, we welcome Bob King today. Hi, Bob.
Bob King:Good morning.
Joey Romero:Good morning. So, how does the, how does science and technology degree transfer to appraising?
Bob King:Well, this is kind of my third career, I guess, which is pretty common in the appraisal industry. I worked in aerospace industry out of college. And then I worked in manufacturing. And as a lot,a lot of companies in the United States, the company I worked for got purchased by a larger company, and so forth and so on. So, I decided to get into something where I had a little bit more control, and in control of my own time. So I've been doing appraising for about 16 years, and started out doing nothing but commercial. And, and kind of went through an evolution with some partners and so forth. And, and got into doing primarily single family, I still do some commercial, I'm licensed to do commercial, but my focus is single family residential. And so, here we are 16 years later.
Joey Romero:Is, is there a specialty that you that you appraise? Or is it just any kind of single family residency?
Bob King:Um, well, I do primarily single family, but my focus is more geographical in the Inland Empire. And I do some pretty specialty high end, relative to the Inland Empire, for instance, tomorrow, I'm going to do 12,000 square foot house down into loose, many houses over 10,000. And there aren't that many in the Inland Empire. But I've done quite a few of them in the Riverside and Temecula area. So, it breaks up the monotony, I guess, of doing those little track houses.
Joey Romero:Over the course of the last 16 years. How has the appraisal industry changed just in the in the course of your career?
Bob King:Well, when I when I got into, like I said, I was originally just doing commercial, but I caught in, jumped into the single family in around 2004, 2005 when the market was just screaming upward, kind of like it is right now. And then of course, you know, we all know what happened in 2006, and seven, and so forth. I hope we're not going to see that again. It's very reminiscent of those times where people are bidding and kind of panic buying. So, I've written the wave up and down. I'm just a little cautious of what's going on right now.
Joey Romero:Yeah, I'm gonna get into what the market looks like in a little bit.
Bob King:Sure.
Joey Romero:Now, how much has technology changed in even that short, short span...
Bob King:A tremendous amount of technology changing for the individual appraiser, a lot of the software. I mean, when I go out and inspect a subject, I've got my iPad and I'm doing the sketch right on my iPad, and I can do it right into the report where, you know, 7, 8 ,9 years ago, I had a piece of graphic paper and sketched it out, and then if I, hopefully I didn't make a mistake. This morning, I was doing an inspection I typed in, dimension to feet but by the time I got around to the other end of the house, I knew it right then I didn't have to scratch my head and go, where did I make a mistake. So, that's one aspect of it. The access to photograph, aerials, street views, the technology is wonderful now, which means you can get a lot more precise on what you're doing. But on the other hand, the clients expect a lot more too show the amount of time it takes if you're doing a proper job. Some of the technology saves time, but the requirements have increased, which consumed time. So it's a balance.
Joey Romero:I'm gonna ask you a tough question.
Bob King:Sure.
Joey Romero:Is technology a threat to the industry overall?
Bob King:I've been hearing that from the beginning. I used to go to these lunch meetings and so forth. And everyone's saying that the residential appraiser was going to be replaced by technology. And it has to a point with appraisal waivers and so forth. But still the eyes and ears to go look at a property physically and then to compare it. I, I don't know. I don't have that answer. I know everyone keeps talking about like I said for the last 15 years people have been talking about it, but here we are. We're still here.
Joey Romero:Yep.
Bob King:You know, the requirements change. And we'll talk about that later, I think but yeah, so I, you know, maybe the long run, but not in the short term.
Joey Romero:Yeah, that's like a, you know, keep hearing about these self driving cars. And even as far as like, we have the technology to have pilotless airplanes now who's gonna get into one? Right? That's, that's part of that.
Bob King:Yeah, it's, it's the normal stuff isn't where you need us. It's when it's the abnormal the things that, you know, the computer algorithm doesn't see. That's really what we're getting paid to do. And, you know...
Joey Romero:Because the AI is only as good as the data that's been put into them.
Bob King:Exactly. And, you know, I think the, with the UAD. I think that's what they're trying to do is collect as much data as possible. But I still think we're, we provide a lot of value in the industry, especially in markets that we're in right now, where people are kind of getting panic buying is for lack of a better term.
Joey Romero:Sure. Now, we just, we're, we're coming to what we hope is the end of the, probably the craziest year on record, with this pandemic. How did, how did the pandemic change the industry? And what kind of adjustments did you have to make to do these appraisals in the last year? Can you walk us through the last year of appraising?
Bob King:Yeah, it I think the, the think HUD and Fannie Mae and everybody, I think they did a pretty good job allowing exterior only appraisal, so we would do it on a regular 1004 form. And in the map reference spot, we put exterior, so we wouldn't go inside. Some of the clients would allow the homeowners to take photos interior, so I wasn't going in a whole lot of houses and the houses I was going into were vacant, you know, whether somebody already moved out or whatever. And I think that helped a lot of us get through the, the fear, because we didn't know what was going on just in the homeowners didn't want strangers going into their homes. And so I think that helped quite a bit. And I think it's things kind of leveled out, and safety precautions and so forth, were implemented. It's a lot more relaxed. I still do my safety precautions. Were the booties were the face masks and sanitizer, and so forth, I still do that. But I think I think we're past it and pretty much beyond it. That's kind of my take on it.
Joey Romero:In what we're hearing about everything, you know, restaurants, you know, retail, there's a lot of changes that happened, especially in real estate too, what changes that came about do you think will stick you know that maybe they're gonna stick around, they found out 'Oh, well, we could do that a little bit better'. Or maybe that works a little bit, you know, better? Is there anything that is gonna stay past this pandemic?
Bob King:I don't think anything. I don't see it on a permanent basis. There are still some homeowners in fact, I had one this past week, where they want they didn't want anybody coming into their home is a refinance. And so there again, I did an exterior the bank was okay with it apparently has to do with you know how much equity they have in their home and so forth. But we did a drive by and the homeowner sent me photos and comparing them to previous MLS photos and so forth, you can verify that, in fact, it is their home. And I did an exterior, but again, we did it on the 1004 form, and done one of those in a few months. But so I think there's still some individual preferences of people being safe and so forth. But most of the appraisers I know, they're just, they're just doing their job going in, you know, keeping the the face mask and the, you know, the sanitizer and those precautions.
Joey Romero:I'm going to switch gears a little bit now, the way I met you, and I'm sure you know, it's It was a long standing relationship before that was at the market trends seminar for the Appraisal Institute of Southern California. Can you tell me what your involvement with with that institution has been in, and how do you get started with them?
Bob King:Sure. I've been involved since early on, when the appraisal Institute kind of alluded that I had a business partner early on, and kind of learned about the Institute. Personally, I believe in education. So, I got involved because they have really good in education opportunities, whether it's from the national level, continuing education, and the way I met you is through the Inland Empire market trends seminar, which we held, hold once a year, I've been on that committee for, I think, 12 years now that we do this seminar. One day a year, we bring in real estate professionals, Bruce has been our keynote speaker, a lunchtime speaker for many, many years, and continues to help us out. And then we have a lot of commercial based, industrial apartments, retail, and so forth. I volunteer a lot for the Appraisal Institute, it's really given back to me, I believe in constantly learning, attending their seminars, their education, and I'm networking, I've networked with people, it's brought me business. And that's why I went ahead and got my residential designation of SRA had to take multiple classes and, and testing and so forth. So, it's above and beyond the ordinary, or not ordinary, but traditional appraisal. So, the Appraisal Institute has been really good to me. And so I feel I need to get back. Again, we appreciate Mr. Norris participating and you being his right hand man in this scenario.
Joey Romero:Now, along with what happened with the pandemic, there's been a lot of focus on on equality and things like that at the national level from all kinds of industries, you know, so I know that the Appraisal Institute on a national level is focusing on you know, DE&I so Diversity, Equity and Inclusion, how much does that is going to filter down to the, to the local level into like, let's say, the Southern California Appraisal Institute?
Bob King:Well, I know it's something that everyone's looking at right now. And as you know, it should be looked at, as you mentioned, the Appraisal Institute national is definitely looking at it. It's coming in through our newsletters and so forth and responding. The local chapter, we have set up committees and personnel to make sure that we're doing the right thing. appraisers overall, I mean, when we sign an appraisal, we're already saying that we're third party independent. It's, you know, not relative to religion, race, you know, all the protected classes, so to speak, but I think it's something that needs to be looked at. I know, there had been some articles that have come out that has gotten the attention. And even President Biden has mentioned that he wants to make sure that the appraisal industry is doing what we're supposed to be doing.
Joey Romero:Yeah. Valuation, Fairness and Improvement Act, right?
Bob King:Exactly. What's the ramifications? You got me on that one? I don't know.
Joey Romero:Yeah, you know, I was I was, you know, looking at some stuff on the national level and the, you know, the 2021 President, Rodman, he says, you know, he thinks that the whole profession has a lot of stake with this issue. And they they're taking a hard look at unconscious bias that is existed in the you know, appraisal industry. Let's talk about the current market. How tough is it appraising with everything that you alluded to it you know, what this panic buying and things like that, but you know, the shortage of inventory, the, the increased demand, how, how, how much pressure has it put on the appraisers?
Bob King:It makes it tough. I mean, because we go by data, that's what we care about is what the data tells us. And you know, when, when these agents put a sale price, when they put a listing price, I presume they most of time, put it where they think they can sell it. And what's happening is people are paying over what the last asking prices, multiple bids, very much like 2004 and 2005, they've got equity in their homes that they're selling, you know, their move up buyers. So, they'll pay an extra 40 or $50,000. over what the asking is. The problem is, is we can't always appraise it at that. And we do look at pending sales, I tried to call all the pending sales to figure out what the contract price is, some agents will tell you and some agents won't. We're looking at active listings, because essentially, the sales comparison approach is based on the principle of substitution. If you've got, you know, multiple houses to choose from, you're going to pick the best price the best deal. Well, in this case, inventory is super low. So, when something comes on the market, people are jumping on it, and they're out bidding each other. The other thing I'm seeing a lot of is waiving the, the appraisal contingency because they do have so much money in their pocket, they'll say, 'Okay, if the houses 500,000, I'm going to bid or go contract for 550'. Because I've got that extra $50,000 to put down if the appraisal doesn't come in. And this is very much what was happening as the market increase in 2004, and five, and at least in my perspective. So, we can only go by what's there, what the data tells us. We're I think every appraiser I know is looking really strongly at the pending sales, because that's the most recent market deal. There's, I do regression analysis on what the micro market is doing, like the neighborhood, so to speak, and also a bigger like, a bigger area. So, I'm doing multiple regression analysis, to try to figure out the rate of increase. So, if I have a sale, that's a month and a half old, I might make a time adjustment upward. And it should coincide with the pending sales. So, we're not always at the most recent highest sale doesn't always mean that's the limit of the market.
Joey Romero:How much you have to play with it?
Bob King:As much as the data tells us, if you're doing the data analysis, you know, whether it's a regression or combination, and verifying with the agents that are involved in these transaction, some things that are really helpful, for instance, if I'm doing a purchase, and the purchase price is high, and then the agent says, 'Well, I had eight offers,' I'm like, give me copies of the offers or at least a cover sheet. You know, so I can put that in the report and say are not necessarily those pages, but I can comment, say,'Look, they had eight offers over, you know, 550,' they took the 550. So, this is, you know, it helps me conclude to make sure that there's nothing you know, to make sure it is what it is.
Joey Romero:Does, is the only thing that really makes a difference is when it's a you know you're protecting the lender? If somebody is a cash buyer, like does that matter?
Bob King:Cash buyer doesn't have an appraisal.
Joey Romero:But not all.
Bob King:Typically not. I mean, there's some, sometimes there's two private parties that agree on something that's not an arm's length transaction. I got a call this morning from somebody selling some land in Temecula. And it's two buyers, and it's a cash buyer. But they still want to have an appraisal just to make sure that they're paying what they at the market value. But those are not arm's length deals and deals like that I won't even use them for a comparable because how do I know they're not related, you know, wasn't exposed to the market. If you go by the depth definition, it's in the form of, of market value, because there's multiple definitions of market value, depending on which which government entity you're working for, or if it's private, then it's different.
Joey Romero:How long take to arrive at the number?
Bob King:Depends on, it totally depends on the property. Like I said, I'm working on a nearly 12,000 square foot house. And I just finished up a 1700 square foot tract house very, very different. Appraisers get paid, I get, I either bid or negotiate my prices based on how much time it's going to spend me. And it also depends on the appraiser and how technology savvy they are. Some people are old school and take a long time and some people are, you know, I've got a colleague is totally paperless. He does his measurements and everything he uses his iPhone. I'm kind of me, I'm kind of somewhere in between.
Joey Romero:You're, you're a little not not totally late to adopt, but a little later.
Bob King:Exactly. You know, and I spend spend the appropriate time and there's times where, you know, we go out to measure a house for several reasons. We're trying to verify that it matches public records to make sure there's no non permitted room additions or even permitted room additions that didn't get recorded. So, we're just trying to verify what the subject is. And there's been many cases, you get out there, and the subject is not what you think it is, then you already ran all the comparables and so forth. And guess what, you got to start over now because there's an extra 1000 square foot you couldn't account for. So, there's, there's reasons why we have to do what we do.
Joey Romero:So, being California, the affordable housing crisis, you know, one of the things that a lot of people are looking at was, or is ADUs or Accessory Dwelling Units. How does, how does an appraiser take into account the ADU?
Bob King:Well, you try to find comparables with ADUs, you try to compare it to something similar similar, like, like solar, if a solar system is paid for you try to find comparables that have solar, and he tried to derive what the market will pay for it. They call it match period analysis. Similar to any amenity like a swimming pool, maybe an additional garage, you're trying to derive the adjustments from other properties, can't always find them. And sometimes you can do what they call contributory cost, say, okay, it costs, you know, $100,000 to build that ADU, and we haven't got into the level yet where they're renting them, where you can use income. But there's there's different techniques. And these are some of the things that I learned with my advanced classes when I with the Appraisal Institute. But generally, you can find some other properties that in your request, question about ADUs.
Joey Romero:Are they always attached to the the main house?
Bob King:Well, each municipality has different definitions. Does it have a kitchen? Does it not have a kitchen? Is it attached? You really have to dig in, can it be rented? Can it not be rented? Because, you know, they used to call them in the old days mother-in-law quarters or in-law quarters, or guest houses. There's a lot of lot of terms. And you got to figure out which with the municipality, how they see it. They're allowing them to, in this case, with the ad use with the state of California, like you said, they're allowing, they're trying to allow a lot more, which would be rentable. So, you're they're changing zoning laws, where you don't normally have that, so they would be rentable. So, now your density becomes a little higher. I don't see a huge effect on that yet, but I think it's coming.
Joey Romero:Yeah, I agree. We have many investors in our, in our, you know, our network that are, that's where the deal is right now for them is, you know, buying these properties that maybe have a little bit extra land are zoned correctly, and they're going to put an ADU there and you know, get a little more rent.
Bob King:Exactly.
Joey Romero:That is some of the focus. Now, one of the last questions I'll ask, Is it all regular purchases that you're doing these appraisals for now, because we've seen in California overall, you know, the REO deals or, or the investor deals aren't, you know, are just like, like it was in you know, 9, 10, 11 do you get to go on a lot of, you know, investor appraisals?
Bob King:No, not so much. The moratoriums for that, go back to your earlier question about what's gone on in the industry relative to COVID the moratoriums have kept people from paying rent but they can't be evicted. Some people don't have to pay their mortgages, and they can't be evicted. I actually do work for Fannie Mae, I was doing all the foreclosures and short sales. They had put a moratorium and I hadn't done anything for them in over a year. I just did one a week or two ago. It's a Home Equity Conversion Mortgage, a HECM, which is essentially a reverse mortgage. And the person passes away and there's no heirs or whatever and they they end up with the house. I did one of those but it had been over a year since I did one of those. I, is as long as the markets hot, I don't see a lot of vailable investment properties unless you're really really astute. No, I was doing him back in the back in the days I have personal friends that are brokers that they've been flipping houses for, you know, 30 years. And I think they're sitting on the sidelines right now waiting for these moratoriums to be lifted and, and so forth.
Joey Romero:Are they still on vacation from how well they didn't you know, 10, 11 and 12?
Bob King:Yeah, no, they're still doing... and they're brokers so they're doing very well right now. And yeah, so it's it's, I think the market, depending on what happens with these moratoriums that are going to be lifted this year, I think. And then we'll see if people, if the government intervenes to modify loans or things like that, which they've already been talking about, to help people so they don't lose their homes. I don't think we're gonna get as dramatic as we did in, you know, 2008 and 2009. I just don't see that. But I do think there is going to be a hit, and which will increase the inventory, once all the legal stuff gets done. And so, I figure a couple years from now, the market will, you know, get a little bit extra inventory, and slow down, or cool down a little bit.
Joey Romero:What is the weirdest thing that you've ever had to appraise?
Bob King:That's some pretty complex properties with, with full blown, almost commercial style horse facilities, completely covered riding arena, like you'd see like in a rodeo, with labor dormitories, apartments for the workers, you know, just huge, huge property. Very complex. Sometimes, as an appraiser, you know, I don't feel very wealthy, when you go into some of these huge, beautiful mansions I actually appraise the house that was 400 square feet, also the size of a two car garage.
Joey Romero:Yeah.
Bob King:And in that case, I feel very blessed and wealthy at that point in time, so everything's relative. I've got colleagues that do nothing but the high end stuff in like, Hollywood, Malibu and so forth. So, you know, there's a bunch of us out here, and everyone has their own market. I just take in the IE, that's what I like.
Joey Romero:Sure. What What did you do for, as a witness for the, for the courts?
Bob King:Well, it was actually a civil case. That the primary one that I I've worked on multiple litigation, but actually only testified to one time, and it was a foreign investors had, had some land and property for commercial flower growing and the foreign and the the, the domestic people on this side, basically, frauded the foreign investors, and they were, it was a lawsuit. And yeah, that people, they cheated. It was, it was pretty obvious. I think the judge didn't have to, or the jury didn't have to difficult, difficult at the time. But that's a whole different world, litigation. It's, it's, it's interesting. I've done some stuff for damages when the house burned down. In fact, I've done a couple of those. So, the insurance company hires you, but it's a litigation, it's a lawsuit and so forth. So and a lot of that's done on income and potential, loss of use and loss of rent and things like that.
Joey Romero:Now, if somebody wanted to get a hold of you wanted to hire you for an appraisal or something like that, how can they get hold of you?
Bob King:Yeah, I mean, I'm on the Appraisal Institute website. Just I am live in Marina Valley. And it's Robert King is my name, my legal name. And so they could search on the Appraisal Institute website, finding an appraiser and Marina Valley.
Joey Romero:You know what we'll link your LinkedIn too.
Bob King:Yeah, do that. That's probably the best way to do it.
Joey Romero:Bob, I really appreciate you doing this for us. Being my rookie, my rookie podcast. I've actually been on the radio before. But that was when I was working for the nonprofit sector. I was on I was on Spanish radio, well...
Bob King:Perfect. Yeah. I appreciate it and appreciate what the Norris group does for, for us on our seminar every year and, and appreciate, Bruce and what he's brought to this industry for Southern California.
Joey Romero:I know he's looking forward to being live again, you know, so, hopefully, you know, but I'm sure by next year, you know, we'll be all you know, getting together again, and, and he's looking, he's really looking forward to that.
Bob King:Now, we appreciate it. And we got the feedback from the seminar, which we just actually had. It was it last week, week before, and a lot of people said they loved the seminar, but it's so much better live.
Joey Romero:Thank you, Bob. You enjoy your weekend and we'll talk soon.
Bob King:All right Joey. Take care.
Joey Romero:Bye now.
Narrator:For more information on hard money, loans and upcoming events with the Norris group, check out the Norris group.com. For information on passive investing with trust deeds, visit gng trust deeds calm.
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