Verifying Sales

[Terrel L. Shields]

The writing is not what takes me so long.... Data selection & collection both inside and outside my office, verification, analysis, application & reconciliation is what takes me so long. I can't read this market like we could in 2005. ... These foreclosures/short sells/below market sales & above mkt sales...other abnormal transactions and other market conditions (lack of many arm's length land/lot sales has been a nightmare) have made a mess that has made market analysis from beginning to end take much longer. Another factor in general is that the number of properties that must be analyzed is generally greater and cover a wider geographical area than before the collapse

I heartily concur. "Due Diligence" that was acceptable in 2005 is not enough.

I presume Chandler is not lying and I also think if I read correctly, that limiting work to properties within 20 miles or so and avoiding the "hard" appraisals, maximized the potential income. I would say that if I was living in a metro area, that potential exists. I think it would be very easy to value property in a metro. OTOH, a lot of us are in a far less populous community and the variety of assignments is as complex as one can imagine.

When I started appraising in 1992, the population of Bentonville, AR was posted at 13,000±; Centerton, a nearby community was 600. They are now 38,829 and 9,510 respectively. Rogers population is 55,000 a 10 year increase of 52.5%.

With those demographics, the quiet duplex on the edge of town I appraised in 1992 is now a public school. The poultry farm I appraised the same year, development land in foreclosure. There was no regional airport nor $10,000 an acre land. I remember the day back when we all went to the courthouse to look up records, that someone remarked that for the first time in his career he had seen a land sale of $10,000 per acre in Rogers....that is now known as Pinnacle Subdivision and golf course, near Promenade Mall where a bank less than 10 years later paid $1.1 million for 1 acre to build their bank on.

It is nuts to try and gloss over the analysis of these properties. I did a combined pawn/flea market/car sales 2 years ago in a sleepy little town. The owner paid $40,000 or so for it about 1990. It is in a flood zone. It appraised as is for $240,000. He sold it months later when a C store decided it was a great location for a store...about $300,000. They bought out 3 parcels adjacent to it, and surrendered some land to the Hwy. Dept. to widen the street. All facts not known at the time I did the first appraisal. The C store across the street closed before they finished building it...threw in the towel and sold the entire land for a mint to the Hwy Commission...I then did an old downtown store in the same town, hardly 200 yards away. But is anything I learned about the sales before going to help me on this project? Probably not.

The easy ones? In our world they are gone. I suspect many banks are now doing those in house with evaluations. We only get the trash here. I suspect Eli is seeing much the same.

I can put more in file and reference it. The downside is they still want to see it. So I put stuff in I never thought about doing years ago. And to do that you need to have at least some kind of presentable table or graph. It takes time you otherwise never had to do before. Same with land. I "knew" sales of lots in a given subdivision because we always had land sales. Today most land sales are made by banks and "arm's length" sales are sparse but in some areas still exist.

I'm pushing my mineral business a little harder and see where this goes. If I can get some consulting, then I am kissing the banks good bye permanently. They are poor clients.

 

[ucbruin]

I'm new to the forum so please forgive me if I my question is common knowledge to most of the members. Many times when I read comments I'm confused as to whether the members is responding as a Residential appraiser or as a Commercial appraiser. My question: Is there an easy way to determine this?

 

[Michigan CG]

I'm new to the forum so please forgive me if I my question is common knowledge to most of the members. Many times when I read comments I'm confused as to whether the members is responding as a Residential appraiser or as a Commercial appraiser. My question: Is there an easy way to determine this?

Look at the top right of each person's post and you will see their license level.

 

[ucbruin]

Michigan CG, thanks for your response. I did notice the level of license of each poster but at times it seems that the CGs maybe responding to a residential topic with a commercial response. Will it become more evident to me the more I visit the forum?

 

[hastalavista]

Michigan CG, thanks for your response. I did notice the level of license of each poster but at times it seems that the CGs maybe responding to a residential topic with a commercial response. Will it become more evident to me the more I visit the forum?

Many of the CGs also complete residential assignments, or started out as residential appraisers.
I was a residential appraiser for over 20-years prior to upgrading to commercial. I do both types of assignments.

Also, quite a few of the licesed-residential appraisers also do commercial (for non-lending purposes).

 

[Roger Hudson]

I you do work for an AMC, NEVER submit a report before the due date. It only encourages them to tighten the screws further.

 

[J Grant]

I work for some AMC's as well as direct lenders and some of my base fees, unfortunately, are below $400 (because of competition here). I try not to go below $350, and lowest end of $320, which means I miss out on 80% of AMC work because the big box players here pay $225-250 a report. Sad but true. I also do about 40% high end/complex work with much better fees so that makes up for it.

Once I take an assignment though, whoever the client or whatever the fee or property type, I will take the time needed for credible research and results. I have had some small FHA property reports, little houses selling for below 100k, that ended up being more time consuming than multi million dollar waterfront homes, because of market conditions, comps, nature of improvements. I don't consider it a lesser assignment just because the purchase price is lower.

Putting fee aside, it's hard to believe that certain people reside in magical areas of the nation where every property is a "cookie cutter", and markets so stable and properties so conforming that every assignment is a breeze able to be knocked out rapidly (especially when one sees other posts or speaks with appraisers living in these same areas that indicate otherwise)

 

[Amy Perkins]

I do verify those sales with the broker, the math tells me who to call. There is usually a good reason, mold and foundational issues, unstable soil issues, or paying agents out of escrow.

 

[Alpine]

... the math tells me who to call.

This goes to the heart of the original post. (I haven't read this entire thread. I read a lot of posts, and appreciated the important tangents, but it just got too long.) Simply put, a big part of appraising is reconciling inconsistent data. During the boom years, most typical residential properties sold within relatively tight price ranges, and the variances were more easily explained, usually associated with obvious property characteristics like updating, view, amenities, etc. Since the crash-- and through the burn, the bottom, the rise-again, the stumble, and the eventual return to a semblance of "stable" in many markets-- there is often a much greater range of list/sale prices for reasonably similar properties. In many instances, there is no immediately apparent reason why something sold out of the predominant range, so it requires at least a token research to attempt to determine why.

At a minimum, appraisers need to scroll through all MLS photos. How lazy and omission-ish to not. My office does a fair amount of reviews, and my pet peeve is easily discovering very obvious contributors to value that the original appraiser has ignored in their apparent rush to opinion. (I find a direct correlation between sloppiness/omission/errors and reports completed same-as or day-after effective date. AMC deadline performance metrics, appraiser scores, etc.) Perusing MLS photos of interiors and amenities is step one, with calling an agent to sort through the "realtor speak" step two. Realtor: "The place was a total dive." Me: "But your listing described it as 'updated and charming'?" Mystery solved; cherchez l'agent...

Too many times the appraiser has mysteriously failed to include that killer shop in the appraisal grid (whoops), or simply written "shop" for anything from a 8'x10' garden shed to the 1,500 sf heated, finished 4-bay shop-of-the-decade with no adjustments. Yes, my rural market gives good return on outbuildings, and yes, some amenities are superadequate, but I'm speaking of cases wherein it is obvious that the appraiser did not research the actual amenity and its contributory value in the sale. Gee, seems the property that sold for $25,000 more had that $40,000 shop. Barn? What barn? Oh, the football field-sized one that the agent posted three pictures of? Ummm....

Sometimes there's simply no definitive reason why a property sold at either extreme of the value range, and in both cases, I make a mental note of the agent. High sales: I might list my own properties with them. Low sales: I'd never hire someone who left that much money on the table. But to the original post: Yes, some appraisers are lazy and do substandard work. What irks me is reviewing the same slop again and again by the same appraiser, but knowing the AMC/lender won't drop them from their panel because they meet fee and turn-time demands.

 

[NLCApprMgr]

Does it matter?

I'm new to the forum so please forgive me if I my question is common knowledge to most of the members. Many times when I read comments I'm confused as to whether the members is responding as a Residential appraiser or as a Commercial appraiser. My question: Is there an easy way to determine this?

For your edification, I did both. But that is not the point. If the information for a participating party to particular sale is available from MLS, CoStar, or any other place, make the call. Ask around to other brokers if the participating brokers won't return your call. Even solicit other appraisers in the market if you have to. Don't just confirm the sale price in MLS or CoStar with public record; public record knows nothing about a sale but who the parties were, how it was deeded, and what the sale price was.