Question about condo vs. attached SFR

[Bohemiana]

So, here is what has happened since I first posted...the appraisal was reviewed and it was SIGNIFICANTLY REDUCED in value. Unbelievable. The reviewer took out the two highest comps because they were located too far away and that left only 2 condo comps. (By the way, the property is in Long Beach/Lakewood, CA.) The seller had offered some additional comps but the bank (?) did not use them. Here's the lesson--in my market there is no difference between a condo and an attached SFR regardless of what the ownership says on title, FHA-approved or not, etc.

I had another deal go south today from a much lower second appraisal. First appraisal easily came in at the purchase price but the second was significantly lower. The appraisers used the same properties and came up with vastly different opinions of value.

I never realized how subjective the appraisal business is until now--one appraiser can value a pool at $15k and another one values the same pool at $25k; forced air heating is valued at $5k for one and $10k for the other, condition of the same properties were valued $40k different!!

I know it is what it is and we have to deal with it.

 

[Calvin the Airedale]

Perhaps the lesson should be that your sales job does not end with the buyer, or the buyer's parents, but should extend to the appraiser, and the review appraisers. The LOs are out of the loop now and I don't see them coming back anytime soon.

If you spend enough time on this forum, you'll find that there are effective and ineffective ways to influence appraisers.

In any case, you seem to have a pretty good attitude in the face of what must seem like overwhelming odds, and the armies of idiots that now populate the lending community.

 

[Bohemiana]

Perhaps the lesson should be that your sales job does not end with the buyer, or the buyer's parents, but should extend to the appraiser, and the review appraisers. The LOs are out of the loop now and I don't see them coming back anytime soon.

If you spend enough time on this forum, you'll find that there are effective and ineffective ways to influence appraisers.

In any case, you seem to have a pretty good attitude in the face of what must seem like overwhelming odds, and the armies of idiots that now populate the lending community.

Idiots is a mild term but there's no changing the how the banks operate.

I would love your opinion of how I can effectively influence the appraisers. I usually meet them at the property, tell them how the home inspection went (honestly), provide them 5-6 comparable properties (usually I've shown the buyer these properties and they decided not to by those and go for the subject), and I try not to be pushy or desperate. (Maybe I should start a new threat--How Should RE Agents Deal with Appraisers?"

 

[Calvin the Airedale]

Idiots is a mild term but there's no changing the how the banks operate.

I would love your opinion of how I can effectively influence the appraisers. I usually meet them at the property, tell them how the home inspection went (honestly), provide them 5-6 comparable properties (usually I've shown the buyer these properties and they decided not to by those and go for the subject), and I try not to be pushy or desperate. (Maybe I should start a new threat--How Should RE Agents Deal with Appraisers?"

That would be a good topic for a thread.

Show the appraiser those sales, listings, and pendings which would appeal to the same buyers as the subject. Don't selectively omit data which hurts your argument. Face such data head on and explain why they may not be pertinent. Try to illustrate how the market prices important differences between the available data and your subject.

It so often happens that agents present sales that are much superior to the subject. Don't be afraid to use lesser priced housing to make your point. But in both cased, honestly point out the differences, good and bad.

Go out of your way to illustrate seller paid concessions in the data you present, don't leave any feature for which the adjustments would be negative for the appraiser to discover. Point them out.

In short, present both the argument for your price plus the counter argument. Presenting both builds your credibility.

 

[Motown Matt]

Whenever a realtor gives me comps, I am almost certain it will come in under value, and they know it. Even if you give us comps, we MUST do the research ourselves, and we may or may not decide to use them. Not to say it's a bad idea to look at comps, as it will help you build a case against a bad appraisal (if you understand the appraisal process). I'm sure being burned by poor appraisals have brought you to do this (meeting appraisers at the house and giving comps). It's almost comical, though, how 9 times out of 10, the comps that are suggested are far superior in updates, in a different school district (or even city!), much further distance away than more comparable sales, much higher GLA, 9+ months ago, etc, etc.

Giving an appraiser comps at the inspection is probably the ultimate insult to an appraiser, in my opinion. It's like saying "you probably won't do it right, so I will do it for you". Or worse, it's like asking me to commit fraud by using your bad comps and ignoring ones I should be using, but hey, it's not your license on the line, right? But I am nice, and smile and say "thanks" and put them under my inspection sheet.

 

[Calvin the Airedale]

Whenever a realtor gives me comps, I am almost certain it will come in under value, and they know it. Even if you give us comps, we MUST do the research ourselves, and we may or may not decide to use them. Not to say it's a bad idea to look at comps, as it will help you build a case against a bad appraisal (if you understand the appraisal process). I'm sure being burned by poor appraisals have brought you to do this (meeting appraisers at the house and giving comps). It's almost comical, though, how 9 times out of 10, the comps that are suggested are far superior in updates, in a different school district (or even city!), much further distance away than more comparable sales, much higher GLA, 9+ months ago, etc, etc.

Giving an appraiser comps at the inspection is probably the ultimate insult to an appraiser, in my opinion. It's like saying "you probably won't do it right, so I will do it for you". Or worse, it's like asking me to commit fraud by using your bad comps and ignoring ones I should be using, but hey, it's not your license on the line, right? But I am nice, and smile and say "thanks" and put them under my inspection sheet.

I'm sure your experience is not an isolated observation. Agents often attempt to steer the analysis toward what they feel will be more favorable comparisons without actually thinking about the differences that most of us adjust for on a routine basis.

If it happens often enough, and I concede it happens all too frequently, it can be the foundation for a powerful bias on the part of the appraiser, and as illustrated by your post.

Bias finds its way into our analyses in all sorts of ways. As professionals, the best we can do to overcome such bias is to be aware of its existence.

I am seldom met by any of the agents upon inspection. On the occasions when my valuation affects the sale, an agent often files an appeal with the lender to consider more comps. The comps they provide often make my case as well as the ones used in my reports (sometimes they are even the same properties). Why does this happen?

I think because agents think and act differently than appraisers in that appraisers continually attempt to quantify differences with which they are aware while agents do not. They too may be aware of the differences, but do not reconcile them in the same way that we do.

Anyone, therefore, wishing to influence appraisers, should attempt to reconcile comparable property differences in a way that is credible to analysts (as opposed to consumers). Appraisers don't operate with the level of emotion possessed by most buyers. Appeals to them must be more rational and grounded in facts, therefore.

 

[Motown Matt]

I'm sure your experience is not an isolated observation. Agents often attempt to steer the analysis toward what they feel will be more favorable comparisons without actually thinking about the differences that most of us adjust for on a routine basis.

If it happens often enough, and I concede it happens all too frequently, it can be the foundation for a powerful bias on the part of the appraiser, and as illustrated by your post.

Bias finds its way into our analyses in all sorts of ways. As professionals, the best we can do to overcome such bias is to be aware of its existence.

I am seldom met by any of the agents upon inspection. On the occasions when my valuation affects the sale, an agent often files an appeal with the lender to consider more comps. The comps they provide often make my case as well as the ones used in my reports (sometimes they are even the same properties). Why does this happen?

I think because agents think and act differently than appraisers in that appraisers continually attempt to quantify differences with which they are aware while agents do not. They too may be aware of the differences, but do not reconcile them in the same way that we do.

Anyone, therefore, wishing to influence appraisers, should attempt to reconcile comparable property differences in a way that is credible to analysts (as opposed to consumers). Appraisers don't operate with the level of emotion possessed by most buyers. Appeals to them must be more rational and grounded in facts, therefore.

Salespersons are paid to advocate and be biased for their client. Appraisers are paid to do exactly the opposite. When one, or both sides, fail to realize this, it can get ugly. The better a realtor understands the appraisal process, the better the realtor will be at listing properties, as well.

 

[Couch Potato]

Whenever a realtor gives me comps, I am almost certain it will come in under value, and they know it. Even if you give us comps, we MUST do the research ourselves, and we may or may not decide to use them. Not to say it's a bad idea to look at comps, as it will help you build a case against a bad appraisal (if you understand the appraisal process). I'm sure being burned by poor appraisals have brought you to do this (meeting appraisers at the house and giving comps). It's almost comical, though, how 9 times out of 10, the comps that are suggested are far superior in updates, in a different school district (or even city!), much further distance away than more comparable sales, much higher GLA, 9+ months ago, etc, etc.

Giving an appraiser comps at the inspection is probably the ultimate insult to an appraiser, in my opinion. It's like saying "you probably won't do it right, so I will do it for you". Or worse, it's like asking me to commit fraud by using your bad comps and ignoring ones I should be using, but hey, it's not your license on the line, right? But I am nice, and smile and say "thanks" and put them under my inspection sheet.

You need to work on your objectivity and stop taking things personally. Providing comparable sales is part of the agent's job and you can save yourself a lot of hassle by taking a few moment to discus them with the agent and how they compare with what you already found in your research. Sure some agents think that rundown bungalow in Watts is comparable to that mansion in Beverly Hills, but even they deserve courteous treatment and should not influence your expectations in regards to the contract price and your opinion of value.

 

[hglenbetts]

...
Giving an appraiser comps at the inspection is probably the ultimate insult to an appraiser, in my opinion. It's like saying "you probably won't do it right, so I will do it for you". Or worse, it's like asking me to commit fraud by using your bad comps and ignoring ones I should be using, but hey, it's not your license on the line, right? But I am nice, and smile and say "thanks" and put them under my inspection sheet.

Matt, When set my appointments, I invite the Realtor to share any information (comps) they may have that supports their opinion. First, it's showing them that I have respect for another profession, and also implies that I'll consider all data, being thorough in my job. Doesn't mean I have to use them.. Yes, I've gotten the 2 year old sales from two towns over and expired listings from Realtors. Maybe it's a good opportunity to offer your expertise and give a talk at their sales meeting about comp selection. When does it hurt to show off your knowledge to others in the field.

 

[Motown Matt]

You guys are right. I think I have been swayed to have a disdain for realtors from my supervising appraiser for a couple years. I do, however, understand where his attitude comes from. But not every realtor is "trying to make me commit fraud" as I put it, just as not every appraiser is "insert cynical realtor remark". I generally enjoy conversation and opportunities to teach, so I will make the most of times to meet with realtors. Thanks for the attitude check, guys...