Final Opinion Matching Sales Approach

[Lee Lansford]

Is it just me or does anyone else get the request to change my Final Opinion of Value to match, exactly, the Sales Approach....QUOTE]


Just to be certain that I am completely understanding your situation, are you stating that in your opinions of market value (communicated via a current Fannie form) that you are NOT weighting the Sales Comparison Approach as having "#1" weighting and, further, that your opinions of MV may be outside of the range of adjusted sales prices?

Please advise.

 

[AnonApprsr]

In most markets in the South Shore and surrounding area the Income Approach isn't applicable (for SF in most areas), and the cost approach is not developed, or developed and given no weight. Rarely do I put much weight into a cost approach, unless the property is <10years.

 

[Cowgirl]

MC, thanks that is exactly my point. And I do understand the other point made regarding today's market. We are required by USPAP to consider the cost approach and any other value influence. BOA does also requrie the cost approach in the report as well as comments regarding, as they should. The Final Opinion of Value will typically be rounded off where as the others are not. And in today's market most weight is applied to the Sales Approach. example: SA=$251,035 FOV=$251,000

They attempt to demand that those two be identical even though I have comments regarding which approach is N/A, which is given most weight and why the other would differ considerably if that is the case, and the one below:

The Three Approaches to Value are tools or indicators used in the Final Opinion of Value. As noted in the statement below they are not the only factors considered by the appraiser, nor are they meant to be individual determinations of value. All though one Approach to Value may carry more weight in the Final Opinion of Value they are never the only determining factor. Those Approaches combined with the Visual Inspection, Scope of Work, Statement of Assumptions, Limiting Conditions and the Appraiser's Knowledge of the Market are all evaluated to determine the Appraiser's Final Opinion of Market Value.

Thanks for all the input and links.

 

[Cowgirl]

Response

Sorry, not to get back before now.

My point is that regardless of the Sales Approach carrying the most weight. We are required to make a complete evaluation, even in today's market.
The lender should not require the Sales Approach and the Final Opinion of Value Match excatly to the penny. It is typical for the Final Opinion of Value to rounded to the nearest $1000, some appraisers to the nearest $100, not to match any approach exactly.

Also,even if the home is not intended for income/rental it is our job to be sure that area of approach is considered if it has any market or highest & Best use effect on our subject property.

USPAP and FIRREA require that we consider ALL approaches to value to determine a Fair Final Opinion of Value. I agree that today's market specially weights toward the Sales Approach but that does not releave us of our duties as appraisers. Nor does it give the lender the authority to dictate our duties. Although this is a minuet example it is still an example of the lenders trying to minipulate and control the whole process.

Thank you all for your help. I think I will stand my ground.

 

[Don Clark]

I have to agree with PE and the other posters. For an appraisal of residential property, the secondary market and others have come to the conclusion that the "Market Data Approach"(Former name), and not called the "Sales Comparison Approach" is the best indicator of market value. This is what I state in the reconcilliation section:

I CONSIDER THE SALES COMPARISON APPROACH TO BE THE MOST RELIABLE APPROACH TO VALUE, SUPPORTED BY COST APPROACH TO VALUE. THE NOTED APPROACHES TO VALUE ARE UTILIZED BASED ON THE SCOPE OF WORK.

And, if you are using the 2005 era forms, Certification #4 makes it clear as to the basis of the opinion of value.

That does not mean that all appraisals will use the sales comparison approach to value as the indicator of market value, but for residential it will over 99% of the time. There may be a circumstance where some other approach is the best indicator of value such as in a case where the property has only demolition value, or some other value. But market value for residential propertys is based on the "Market" or sales comparison approach to value. Otherwise it is not market value.

 

[Don Clark]

Sorry, not to get back before now.

My point is that regardless of the Sales Approach carrying the most weight. We are required to make a complete evaluation, even in today's market.

USPAP and FIRREA require that we consider ALL approaches to value to determine a Fair Final Opinion of Value.

We consider the approaches to value, not necessarily use them. That is determined by the Scope of Work and by communication with the client....at the time of the assignment.

I don't understand what you mean by "matching penny for penny". Match what. It would be a rare occurence if all the adusted comps would equal the same amount. So, what are you matching?

 

[Mike Kennedy]

Remember whan the first test 1004 were sent out they did not have the cost approach section included.

That didnt last long.

.........they remembered they NEED insurable value and don't have to pay an extra fee to an Insurance Company Appraiser for it. :new_smile-l:

 

[Cowgirl]

What I mean by matching is that the Box/Blank for the Sales Comparison Approach match exactly the Box/Blank for the Final Opinion of Value.

 

[Artemis Fowl]

What if the SFR rental market is significant? Would you weight Income then?
What about contract price if it falls within adjusted value range of the Sales Comparison Approach? Would you weight that?

 

[JENIFFERW]

What I mean by matching is that the Box/Blank for the Sales Comparison Approach match exactly the Box/Blank for the Final Opinion of Value.

Maybe I'm missing something, but if your dilemma is $251,035 vs. $251,000, why wouldn't they both be rounded off and match?