Real Estate Appraisal – Real Estate Matters
Browsing Tag

Real Estate Appraisal

Affordable Housing, Appraisal, Economics, Home Prices, Housing, Housing Trends, Industry News, Minneapolis / St. Paul Housing, Real Estate Trends, Residential Real Estate, Residential Real Estate Index, Twin Cities Real Estate

University of St. Thomas Housing Market Analysis for November 2018

Will A Computer Tell You How Much Your House Is Worth?

Lower Mortgage Rates for Energy Efficient Homes?

Market Update – Is the Twin Cities one of the top markets in the country where you should buy this winter?

 

Will A Computer Tell You How Much Your House Is Worth?

Federal regulators have proposed loosening real-estate appraisal requirements to enable a majority of U.S. homes to be bought and sold without being evaluated by a licensed human appraiser. That potentially opens the door for cheaper, faster, but largely untested property valuations based on computer algorithms.

Appraisals help lenders ensure that the estimated value of the property supports the purchase price and the mortgage amount. An appraisal that is off by a few percent could leave a homeowner owing more than their house is worth or lenders with insufficient collateral to cover defaulted loans.

Will this automated approach work? It is hard to see how an appraisal can be done without a human appraiser involved. There is so much variation in condition and functionally that cannot be assessed by a computer algorithm. There’s still no computer that can see, hear, taste, smell and touch the property. Until that happens appraisals with humans involved will continue be necessary to do accurate appraisals.

Lower Mortgage Rates for Energy-Efficient Homes?

Mortgage guarantors, insurers, underwriters, and security owners have recently observed that home buyers with lower monthly utility costs default less. Do these lower-risk home buyers deserve a lower interest rate? Lenders are starting to consider the idea of offering a lower interest rate for mortgages on energy efficient homes. Energy efficient mortgages (EEMs) encourage energy efficiency by giving buyers a better rate or more borrowing capacity to buy an energy efficient house or to cover the cost of new energy improvements.

There are several types of EEM products in use today; however, adoption remains limited. Developing programs in several states inject capital into traditional mortgage products to “buy down” the interest rate that is charged to borrowers as an incentive to finance energy retrofits. A third structure being tested assumes that the energy savings and reduced exposure to energy costs reduce the risk profile of the loan and on average should lead to better loan performance. The reduced risk justifies a lower interest rate, which in turn improves the loan pricing for borrowers, while leaving underwriting criteria unchanged.

There are now quantitative standards available to measure a home’s efficiency. The HERS Index is the industry standard by which a home’s energy efficiency is measured. The HERS or Home Energy Rating System was developed by RESNET and is the nationally recognized system for inspecting and calculating a home’s energy performance. Certified RESNET Home Energy Raters conduct inspections to verify a home’s energy performance and determine what improvements can be made to increase it. Home buyers will be attracted to buy homes that are not only more efficient, saving utility costs, but also being able to qualify for lower mortgage rates.

November Market Update

According to a recent Zillow report the Twin Cities was one of the top ten markets in the country where it makes the most sense to buy this winter. This ranking is based on an index they developed using the factors below. For potential buyers looking to make a move before rents and mortgage payments rise further, the report indicates our market compares favorably to most other markets in the country.

Here are the three factors that went into the index:

  • The share of price cuts compared to a year ago: (In the Twin Cities the year over year over year actual selling price compared to the asking price has been declining since June indicating that sellers are beginning to cut prices.)
  • Rent appreciation forecast: Metros where rents are expected to rise more over the next year are ranked higher on the index, because they offer the greatest opportunity for buyers to save money by picking up a mortgage rather than continuing to pay rising rents. (Year over year rents in the Twin Cities continue to increase modestly and are expected to continue to do so, although the rate of increase is expected to moderate.)                      
  • Mortgage affordability: Metros that already have bad mortgage affordability will become harder for buyers as mortgage rates rise, so they are prioritized on this index. (Relative to other markets in the country the Twin Cities does not already have “bad” mortgage affordability. In our market mortgage rates have increased and median sale prices continue increase faster than income making mortgage affordability more difficult.)

The median sale price increased .4% between October and November, however the median sale price of homes sold in the Twin Cities has increased by 8.6% in the past year to $266,000. In comparison, the average annual increase for the previous 12 months has been 7.8%.

The number of closed sales decreased .2% between November of 2017 and November of 2018, continuing a trend of decreasing year over year sales that has been observed for 10 of the last 12 months. The combination of the low number of homes available for sale and higher interest rates continues to take its toll on the number of homes sold. The number of pending sales decreased by 5.7% however the number of new listings increased 11.8% compared to the same period last year. The increase in new listings is a hopeful sign that will be more homes available for sale in the coming few months and that the slide in the year over year sales volume will begin to reverse itself.

For more information, visit the Shenehon Center’s complete report for November 2018 at http://www.stthomas.edu/business/centers/shenehon/research/. The report is also available for free via email from Tousley at hwtousley1@stthomas.edu

 

   

 

 

 

 

 

Minnesota Real Estate Hall of Fame

Minnesota Hall of Fame Inductees Announced!!!

The time has come, the 2017 Hall of Fame inductees have been announced. Congratulations to Ralph Burnet, Jack Rice, and Howard Shenehon!

Join in the recognition of the accomplishments Burnet, Rice and Shenehon have done for Minnesota real estate. Members of the Minnesota Real Estate Hall of Fame are chosen for their outstanding business performance, high standards of ethics and community activities. The three new members are:

 

Register Today

Ralph Burnet

Ralph began his real estate career at Bermel Smaby Realtors. After leaving Bermel Smaby Realtors, he started his own realty company, Burnet Gagner Realty and built it to the largest in the Twin Cities. In 1983, Burnet merged his company with Merrill Lynch and for the next 7 years Burnet served as its Eastern Regional President. But when Merrill Lynch Real Estate was sold to Prudential in 1990, Burnet and his partner Dar Reedy bought back the Minnesota-based company. In 1996, Burnet expanded into the Chicago market, merging with Prudential Preferred Properties of Chicago. By 1998, Burnet Realty had grown to the 4th largest residential brokerage in the United States, and expanded though merging with the Coldwell Banker name. Today, Coldwell Banker Burnet is one of Continue Reading

Business Valuation, Development, Investment Real Estate

Do you need some leisure time?

Last week the Minnesota Business Journal reported, Lutsen Resort, a staple of Minnesota tourism for over 125 years, went on the market for just under 10 million dollars. However, it is not the first resort in the Great North to go on the market recently. The Star Tribune reports Gunflint Lodge sold for over 6 million dollars and Superior Shores and Resort, just south of Lutsen, in Two Harbors is also currently on the market.

Is this a trend? Why are resorts going on the market? Should consumers be worried about their options for North Shore leisure?

Herb Tousley, of the University of St. Thomas’ Shenehon Center for Real Estate, commented that these resorts often times require a “hands-on”  approach to management of the site. He also noted, “due to this approach, many owners see the opportunity to sell, in what they perceive to be, a high value market in order to exit the business.”

Statistics from the U.S. Travel Association show that domestic leisure travel is up from 2 billion trips in 2007 to 2.28 billion trips reported in 2016. More specifically, the Minnesota average household income has returned to pre-recession levels at $79,893. The private sector employment numbers (FRED) also seem to indicate the economy is in relatively good health. These indicators are great for resorts and the hospitality industry in general. Even with the ominous question of, “are we due for an economic adjustment?” It is not a predictable event. From general market signs, a resort may be an investment for some leisure.

 

Shenehon Center for Real Estate has been enabled Graduate level Business and an Undergraduate Major program in real estate for more than 15 years. The University of St. Thomas is dedicated to creating leaders who are morally responsible, think critically, act wisely, and work skillfully to advance the common good. 

 

 

Appraisal, Executive Insight Series

Rob Lunz Shares Insights on Real Estate Appraisal

The Real Estate Executive Insights Series is presented by the Opus College of Business MSRE program. This series invites speakers from the real estate industry to provide valuable information and discussion about hot topics and current trends. This program is free and open to the public. To view the full upcoming schedule, click here.

Rob Lunz, CRE, MAI

At the most recent UST Executive Insights event, Rob Lunz, principal at Nicollet Parnters shared insight gained over the course of several decades as a real estate appraiser. Nicollet Partners is a full-service appraisal, brokerage, and consulting firm headquartered in downtown Minneapolis. At the event, Rob introduced MSRE and MBA students to some the fundamentals of real estate appraisal. The standard definition of an appraisal is simply an analysis or opinion of value. Rob defines appraisal a little more broadly, and considers it to be the mission of appraisers to help ensure that real estate assets are employed to the best use possible.

Rob also shared some interesting situations he has come across over the course of his career in appraisal. One instance involved the appraisal of a lakeside residential property after the purchaser found a bald eagle’s nest in a tree over their deck. One might not think that a bird’s nest in a tree could significantly impact the value of a property, but they’d be wrong. Bald eagles are of course given protected status as an endangered species,  but their diet of small animals, the associated odors, and habit of throwing any leftovers out of the nest all make them unideal neighbors to have at a vacation home.

This unique case had Rob approaching wildlife biologists and the Department of Natural Resources in an attempt to determine what the owners could do about the eagles (nothing) and to evaluate what that might mean for the property owners. The impacts which Rob had to quantify included significant cleaning services expenses, reduced enjoyment of the property, and limitations on what future improvements the owners could make to the property. A prevalent theme in this and other stories Rob shared was the need for appraisers to be able to quickly learn about things they might previously have known little about, in order to accurately appraise real estate value.

Rob also provided insight into current trends in real estate. Nicollet Partners tracks development trends closely, including the current hot multifamily market. Rob noted that there are currently about 12,600 units of apartments either recently completed, under construction, or proposed in the Twin Cities, 55% percent of which are in the core cities of Minneapolis and St. Paul. He also sees improvement in the industrial market since the Great Recession, but believes that retail and office remain soft.
Appraisal, Real Estate Matters - Interview, Real Estate Programs, Uncategorized, UST Student Profile

Student Profile- Lane Thor

DSC_5428“The (best part of the UST MSRE program is the…) whole package; having industry experts as guest speakers, hearing their stories, and learning, first hand, their opinion’s on the major issues facing the real estate industry.  Furthermore, the overall connection to the real estate community as a whole is superb.  These connections will set me up for success in any endeavor I choose. I have had an excellent experience in the program and would recommend it to others in the real estate industry.  The UST and MSRE program’s reputation in the industry is top of the line.”

Real Estate Matters has had the opportunity to sit down with several MSRE students in the graduating class of 2011 and get their impressions of the program, their plans for the future, and their advice to perspective students as their time in the MSRE program draws to a close. The first 2011 graduate, Lane Thor, has been working at the Ramsey County Assessors Office as an Appraiser. Lane was kind enough to take a few minutes out of his busy schedule to answer a few questions for us.

What is your background and experience?

I grew up in St. Paul, and have lived in Lino Lakes since 2006. I earned my undergraduate degree at Hamline University in St. Paul, where I majored in Political Science. I was fortunate enough to play football for Hamline while I was a student there, which provided a great opportunity to learn valuable lessons about life, responsibility, and leadership.

So who do you route for in the MIAC?

I have to route for Hamline.  But I promise, I alway route for St. Thomas to win.  If they play Hamline I just hope for a tie…

Where have you worked since earning your undergraduate degree?

I am fortunate, in that my first job out of school is one I have really enjoyed. I began working at the Ramsey County Assessors Office in 2006.  My day-to-day duties involve the appraisal of real estate for tax purposes. I specialize in residential property and am currently one of 52 appraisers working for Ramsey County. The thing I like most about the job is the unique nature of each property.  Each property presents new challenges and opportunities for me every day. As an undergrad I was interested in getting into business law, but after a few law classes I changed my mind.  My passion for public sector work, especially the parts of the government that support the real estate industry, has remained which makes my current position a great fit for me. Also, my job affords me the opportunity to keep a healthy work-life balance, which is something that is very important to me.

Why did you decide to get an MSRE, and how did you choose UST?

I wanted to strengthen my skill set and knowledge of real estate issues to compliment my current background, with the goal of having more opportunities  in the field of real estate. Looking back on my time in the program I can definitely say that I have broadened my skill set and given myself many new and exciting options. Furthermore, my sophistication in real estate has increased two fold, (1) I have learned more about the theoretical aspects of the real estate industry than I ever imagined, and (2) I was pleasantly surprised at the amount of practical knowledge I gained, with regard to the different aspects of real estate. I am certain that this experience will benefit me in any area of real estate that I get into.

I chose St. Thomas, because the program and the school is regarded in the Twin Cities, as the gold standard in real estate education. UST has an extensive professional network, including the real estate advisory board, which is basically all the heavy hitters in the Twin Cities real estate industry. I looked at a few other programs but ultimately chose UST because I wanted to have classroom experience – that personal level, face-to-face contact with my professors and peers is important for me. Because of this I have built life long friendships.  The small class sizes have allowed me to meet everyone and make valuable connections. The classroom experience and the relationships that stem from this structure is what brought me to UST.

What is the best part of the program?

The whole package – having industry experts as guest speakers, hearing their stories, and getting first hand opinion’s on the major issues facing the real estate industry.  Furthermore, the overall connection to the real estate community as a whole is superb and will set me up for success in any endeavor I choose. I have had an excellent experience in the program and would recommend it to others in the real estate industry.  The UST and MSRE program’s reputation in the industry is top of the line.

Do you have some advice for perspective students?

If you have a passion for real estate, this will be a great opportunity.  As with any graduate degree program, the workload gets heavy at times.  But, if you have taken the time to prepare for the program, taken the GMAT, etc. you will find a way to manage the out of classroom work. This program is great for people who love real estate.

What are your career goals?

Right now, I am working on a couple of ideas that I have been formulating for a long time. I wanted to wait until I graduate before I really focused on one plan, as I needed to really see what was involved in each part of the industry, and where my passions really were. I think for the long-term, I would like to go into business for myself. . For the time being, I will continue to pursue high level positions in the public sector dealing with real estate or real estate related issues. After I get settled in, I would like to begin my own business, doing both at the same time, public sector and private. My private business will consist of a full service real estate company focusing solely on  niche markets that  have not been tapped. With good marketing and perseverance there is a lot of upside to  some areas that  remain untouched.

What is the best advice you have ever received?

At Hamline, my football coach told me to be successful you need to surround yourself with the right people. That means making the right connections, having the right network, as well as putting good people near you. At UST you get that, professors who are helping you and working so you succeed. My new network is due in large part to UST.  This alone has made my decision to enter the MSRE program a great one and makes me very excited as I look forward to my future career.

Real Estate Matters would like to thank Lane Thor for taking the time to share his insight and experience in the MSRE program. We would also like to congratulate him on his graduation and look forward to keeping track of his promising career. To find out more information about the UST MSRE program, please visit our website.

Commercial Real Estate, Development, Executive Insight Series, Industry News, Real Estate Trends, Residential Real Estate, Retail Real Estate

Executive Insight Series- Dennis Doyle

Dennis-Doyle“My life is lived from the inside out. My principle values, experience and leadership come from the inside, and guide my life on the outside. It’s an inside job. It seems that everyone is wired differently. Some of us want to make a lot of money, while others want to save the world and help people. You CAN do both! Everyone needs to figure it out. Work is a huge part of it. If you find the right work and path, life can be a real joy and blessing.”

Dennis Doyle, Executive Chairman of the Welsh Property Trust, started his career in real estate as an adolescent who spent his summers working construction for his neighbor, George Welsh. During that period, Mr. Doyle’s passion for construction and development grew exponentially, part of the credit, according to Mr. Doyle, belongs to his older brothers who forced him to work harder to keep up. He left real estate briefly to attend college on a football scholarship, with the intention of becoming a coach, however Mr. Doyle soon realized that this was not his true goal, and returned home to continue his career developing and constructing buildings. In 1977, Mr. Doyle and Mr. Welsh (same childhood neighbor) entered into a handshake agreement, that formed the Welsh Companies, and has shaped the last 30 years of Mr. Doyle’s life. Reflecting on this story, and on his subsequent career, Mr. Doyle lamented,  “I love being able to put my personal touch on buildings, and am very fortunate to have found my life’s passions and being able to continue working in this field.”

Continue Reading

Business Valuation, Commercial Real Estate, Development, Industry News, Real Estate Trends

News Brief: CoStar Study Wins Top Academic Honor from American Real Estate Society

$11,000,000,000,000

How does one comprehend the above figure? It is a very large number with many zero’s, in fact, it’s so large even a fancy BAII+ financial calculator has to express the number as a exponent of the 10th power (11 * e^12). The name for this sum can vary depending on which country you are in, and unfortunately since the US and Britain saw fit to simply swap the names around, a trillion is 10^12 in the US, and in old english it is considered a billion (a trillion in the old system is 10^18, or a quintillion in the US). Since the definition of this figure does little to aide in the quantification of this figure, it is necessary to use tangible comparisons. 11 trillion dollar bills stacked on top of each other would be 737,000 miles high, in relation the moon is approximately 240,000 miles. Besides the United States and the European Union, 11 trillion dollars surpasses the GDP of every other nation in the world (according to the CIA fact book).

The attempt at quantifying this figure was done in the hopes of imparting the sheer magnitude of this number as well as the mind-boggling size of it, constructing a model that represents data and economic factors that are able to compute the necessary macro and micro forces affecting this figure is simply amazing. This is precisely what researchers at CoStar did in their comprehensive study of the United States commercial real estate market, with their findings and analysis published in the Journal of Real Estate Portfolio Management (JREPM). While this is undoubtably a very exciting study, there has never been a comprehensive valuation of the entire countries real estate, the data collected is far from novel. Having the ability to quantify and value one of the largest asset classes in the world (the only one larger that comes to mind is the US stock exchange at 16 trillion) will allow investors, developers, the government, and anyone else involved in commercial real estate a powerful new model for analyzing the macro effects of economic shifts on the entirety of the asset class. In recognition for their outstanding work, the authors received the best paper of 2010 by The American Real Estate Society (ARES).

The press release from CoStar is below, including a link to read the paper as published in the JREPM.

Continue Reading

Development, Real Estate Trends

Real Estate Insights: Russ Nelson and the Triple Bottom Line

speaker_RussNelson “My brand is defined by my involvement in community organizations and the service + value adding work that I engage in to improve the community that I am a part of. Being involved has benefited me a great deal in my own career, both in making connections and preserving relationships, as well as encouraging the development of all members of the community. Giving back to the community is essential, its who I am and part of my values, I strive to add value to every board I’m on, as it is my responsibility to do so.”

On Tuesday evening Russ Nelson, Principal and President of Nelson, Tietz & Hoye, stopped by UST to share some of the wisdom he has accumulated over his 30+ year career in commercial real estate. Russ’s lecture took the format of a question and answer session, in which the audience asked Mr. Nelson questions ranging from market valuations to predictions about the Vikings future. Throughout the presentation several things were clear regarding Mr. Nelsons’s perspective and experience:

Thanks to ECO BROOKLYN INC. – Green Design/Build Firm for the image

Thanks to ECO BROOKLYN INC. – Green Design/Build Firm for the image

    1. Mr. Nelson thoroughly enjoys his job, and displays a fatherly pride when speaking about the projects his firm has worked on.
    2. Mr. Nelson is a big picture guy, he possess an uncanny grasp on the market forces that underly each of his transactions, and the trends that form the overall ethos of commercial real estate.
    3. As Thoreau so aptly put it, “To know that we know what we know, and that we do not know what we do not know, that is true knowledge.” Mr. Nelson has a keen awareness of the expertise of others and is quick to give credit to those who have helped him along the way.
    4. Mr. Nelson is an exemplar of the idea of the “triple bottom line”.
    5.Russ has an amazing amount of energy and is committed to the development of the community, as shown by his seat on the board of 10 community organizations.
    Mr. Nelson’s career and achievements span far beyond the world of corporate real estate, and his attitude towards business and its role in the community serves as a sign of optimism, in a time when many executives are more interested in personal wealth and the stock price of their firm only. His accomplishments are a testament to the idea that success can be measured across a broad range of categories, and by any audit method, he has enjoyed a great deal of professional and personal triumphs.
Appraisal, Business Valuation, Industry News, Real Estate Matters - Interview

Real Estate Matters to: Robert Strachota

th-Bob-Strachota2

“My favorite part of the job is helping others at Shenehon succeed, by providing them the tools and support that gives them the best opportunities possible. Seeing those around me at Shenehon have success is the most rewarding aspect of my work, in the same way that a coach shares in the success of his team when they are playing to the best of their abilities.”

This is the first in a series of interviews with the movers and shakers in the real estate industry. Our first interview is with Mr. Robert Strachota, President of Shenehon Company and Co-Chair of the Real Estate advisor board at University of St. Thomas. With almost four decades of experience, Mr. Strachota was gracious enough to share some of his ideas and lessons learned over the course of his career. As the president of Shenehon Mr. Strachota has had an incredible career, here is his work bio (From Shenehon’s website):

Bob is the President of Shenehon Company. He holds both the MAI and CBA designations and has over 30 years of appraisal experience in the commercial real estate and business enterprise valuations. During that time, he has successfully completed thousands of appraisals, including some very unusual assignments such as: railroads, riverboats, ranches, resorts, etc. Bob serves as an expert witness in Federal, State, and District Courts, as well as for commission hearings and special government proceedings. He is an ad hoc professor for three degree-accredited universities and is frequently invited to speak at valuation seminars and extension courses. He acts as a court-approved arbitrator, commissioner, and magistrate in real estate and business valuation disputes. Bob holds the highest designations from the Institute of Business Appraisers and the Appraisal Institute and he publishes in both local and national trade journals.

Continue Reading