Verifying Sales

[residentialguy]

It's interesting that you say we both whittle down our comps in the same way. We both decide, before calling agents, what are the best comps based, in part, by the info on the listing sheets. When I do it I'm relying sole on "an ad" as my "only source" and that I "have not a clue". But when you decide which are the best 8+ sales, prior to calling agents, aren't you doing the same thing?

Yes, you're correct. It's a whittle process. I start with an initial broad search of all sales within the past 12 months and expanding ~1 mile, including properties with large variances from the subject, then systematically narrowed to the most similar, most recent and closest in proximity to the subject with similar neighborhood surroundings. My last step is to verify. (unless smells off, then I verify earlier). The key is that final required step so that I don't submit a one rose colored sourced, non-verified report.

You maybe correct in your assessment, but until you make your calls and hopefully get an agent to tell you the "truth" you are doing the same thing as me. And you believe, hook line and sinker, that their verbal information is 100% correct and accurate. If you don't get a call back from the agents, do you not use a "good" sale because you couldn't verify?

Talking to both sides of the transaction helps bring out the whole truth. Obviously this final step takes time. I just sent in a message to a lender saying that I need additional time for verification that's required of me. It's never a 3 hr appraisal.

As far as not getting a call back, I'm inline with Denis' post. Read it...tired of typing.

 

[ucbruin]

Again, my hat's off to you Dennis. You're a breath of fresh air in this do it fast & cheap age where common sense seems to be getting less and less common. The ax is coming down and they are planning to burn up the chaff in the appraisal profession. That's fine, it needs a good weeding anyway...we can get our fees back up where they should be. The ones like you and Mich will survive; That's why I like to keep you guys as a friend...so you can throw me a rope

UCB...Denis and I have given you enough to chew on. It's clear what they want. Appraisers are already getting disciplinary action for not verifying sales. If you want to go ahead and refuse, knock yourself out. No skin off our nose.

I wouldn't be surprised that on some other appraisal topics we would agree more than disagree. And yes it does take me about 2-3 hours to complete a 1004 non-complex report. Plus it takes me about another 2-3 hours, depending on drive time, to search sales data, inspect property, perform field work and verify sales (what I consider verification). From start to finish it may take me about 5-6 hours per report.

If you've every watched the movie "Big Fish" you may better understand my reluctance to believe the picture you have painted. Up to 40 potential comps, whittle down to 7-9 sales, all 7-9 sales verified with agents and sellers/buyers (why you don't verify prior to selecting the 7-9 prior to property inspection is beyond me based upon your belief that this form of verification is what makes you believe you are better appraiser than the masses. If you verified prior to inspection you may have already found out that buyer/seller motivations skewed the validity of the comps and you would waste any more time on them, such as photograph them or verify physical characteristics with assessors and/or public record). If you don't get a call back from the agent the sale becomes a "throw-away". And for 100% of your assignments, I'm sure. But then again, I'm just an appraiser with no common sense who usually appraises cut-cutter homes. I make no apologies and I also don't make up big fish stories either. It's the big fish story that I have an issue with.

 

[DMZwerg]

One of my biggest issues is that appraisers rely on MLS and public record for their verification process. Nobody contacts a broker, a buyer, or a seller to get any further understanding about the sale that wasn't in the MLS. There may be issues surrounding a sale that are not in the MLS that influence the sale price and require attention in the sales grid.

As an example, I am reviewing an appraisal on a duplex. The appraiser provides three sales ($215k, $270k, $280k). My first reaction is why the one sale is so low compared to the others.

I often look at 12-15 sales initially (expanding my search if I only find significantly fewer) then I go though and "rate" the comparability of each property by location, size, style, age, ..., and terms of sale, then type in the most comparable (usually 6+ sales). I then start adjusting to see what pops up and after that is typically when I inspect the comps.

So, one day I am inspecting some comps from the street and as I had one that seemed low by 20% I had that in mind while inspecting said property. Sure enough I noticed light shining from between the bricks. As is typical when I get back from such I start my verification calls, with that odd-ball as the first on my list of calls. I inquire about condition and the RE agent says it is in "good" condition. I inform him I noticed it seemed to have sold for a bit below other comps and he informs me it was actually an estate sale. I mention seeing light between the bricks and get a long list of deferred maintenance.

That response is also my argument for calling rather than emailing, because I can "read" a person over the phone and listen to their hesitations to the questions I ask and thus what I may want to ask next.

Yep, I call agents. I ask them about specific properties, if they know of others that sold about the same time that they may have showed (especially buyer agents), and may even conduct impromptu polls about how much they believe a certain feature may contribute to value (not just cost, but contribution). I also ask about buyer & seller motivations (and will ask each agent in a transaction as to how motivated they think the other party was. Can't tell you how many times I found out the odd high sale was a person from out of state (who knew EXACTLY what they wanted) or was the neighbor buying for their kid or even the local power plant, or that the odd low sale was a hidden REO, estate sales, odd conditions, functional obsolescence, or that the owner's son was hit by a car and the rental tenant made unforgivable remarks to the owner about his son and he just wanted to be rid of the property.

So, "everyone" does not include many of the excellent appraisers out there, and when hiring the "fastest & cheapest", well, they don't have an extra 2 days to wait for agents to get back to them.

 

[ucbruin]

I often look at 12-15 sales initially (expanding my search if I only find significantly fewer) then I go though and "rate" the comparability of each property by location, size, style, age, ..., and terms of sale, then type in the most comparable (usually 6+ sales). I then start adjusting to see what pops up and after that is typically when I inspect the comps.

So, one day I am inspecting some comps from the street and as I had one that seemed low by 20% I had that in mind while inspecting said property. Sure enough I noticed light shining from between the bricks. As is typical when I get back from such I start my verification calls, with that odd-ball as the first on my list of calls. I inquire about condition and the RE agent says it is in "good" condition. I inform him I noticed it seemed to have sold for a bit below other comps and he informs me it was actually an estate sale. I mention seeing light between the bricks and get a long list of deferred maintenance.

That response is also my argument for calling rather than emailing, because I can "read" a person over the phone and listen to their hesitations to the questions I ask and thus what I may want to ask next.

Yep, I call agents. I ask them about specific properties, if they know of others that sold about the same time that they may have showed (especially buyer agents), and may even conduct impromptu polls about how much they believe a certain feature may contribute to value (not just cost, but contribution). I also ask about buyer & seller motivations (and will ask each agent in a transaction as to how motivated they think the other party was. Can't tell you how many times I found out the odd high sale was a person from out of state (who knew EXACTLY what they wanted) or was the neighbor buying for their kid or even the local power plant, or that the odd low sale was a hidden REO, estate sales, odd conditions, functional obsolescence, or that the owner's son was hit by a car and the rental tenant made unforgivable remarks to the owner about his son and he just wanted to be rid of the property.

So, "everyone" does not include many of the excellent appraisers out there, and when hiring the "fastest & cheapest", well, they don't have an extra 2 days to wait for agents to get back to them.

Your point is a good one. Its the "odd" sale that prompts a phone call.

 

[DMZwerg]

I guess I never understood why you need to call a listing agent for a sales price, when they are the ones that imput the sales price into the MLS. If I called an agent to confirm a sales price, I'd expect them to tell me to read the GD MLS listing, the sales prices is listed right there. If public records confirms it, then you have a good sale.

Doesn't seem terribly complicated.

Are there any seller paids?
(if so) Was the "seller paid" part of the offer or did it come afterwards such as after an appraisal or home inspection?

It can make a difference when this happened.


Then there is GLA ... what was their source and did it include below ground areas (basements) or detached structures (I have seen duplexes that were actually 2 buildings on the same lot).

Then there is quality, condition, and other things I mentioned in my last post.

One other thought. Realtors are by mandate advocates. I find it amazing that the same appraisers that complain that realtors lie, exagerate and push appraisers for values when the appraiser is doing the purchase inspection. . .believe every word that the realtors tell them when they call them on the comps.

Believe every word they tell me??? Hardly!
There is a reason to call both listing & selling agents and even ask them about other comps you have as the ones who give compare & contrast info are often the best sources for condition/quality (otherwise "good" is the most often word used ... everything is "good", unless you are appraising a gut job in which the agents who were hemming and hawing 2 seconds ago are more than willing to detail everything wrote so fast you need to know shorthand to keep up! ).

Actually, the best source I ever had on one local lake was the town clerk as she lived on that last and had been in better than 25% of the local properties

 

[ucbruin]

Are there any seller paids?
(if so) Was the "seller paid" part of the offer or did it come afterwards such as after an appraisal or home inspection?

It can make a difference when this happened.


Then there is GLA ... what was their source and did it include below ground areas (basements) or detached structures (I have seen duplexes that were actually 2 buildings on the same lot).

Then there is quality, condition, and other things I mentioned in my last post.

I don't know how it is in Wisconsin but here in MA you have options to help verify physical characteristics. You can go to the town assessor's office and look at their field cards and if the town is a bit progressive you can go online and check the field cards. Sometimes agents include finished basement area in the total GLA section and then in remarks section they indicate the GLA includes finished basement. So you check assessor data including the sketches. Here in MA most appraisers don't just use the GLA found on the listing sheet. We check it against the assessor records.

 

[DMZwerg]

As long as you guys realize you are costing yourselves hundreds of thousands and more likely over a million dollars in lost productivity over the course of a career due to unnecessary paranoia that one day you will need to answer to someone in regards to a report and they won't accept MLS and tax records as verification. As you said, it's your business decision.

You make a great point which I will use as a segue into what I've said numerous times.

The appraisal profession is continuing to go through a bifurcation process, and there are emerging two types of appraisers, which I call "The Technician" and "The Analyst". Both are necessary, and both can be profitable.

The Technician is where most of the GSE-type mortgage lending is beginning to migrate to. Minimum requirements as far as inspection and verification, relatively simple or easy homes (tracts), relatively good credit scores (low credit risk).

The problem with "The Technician" is often he does not know that he does not know what he does not know.

For example, why look at plat map (GIS, etc) rather than look at the property via Google maps?
Because when you see a fence on Google maps you may just think that is the edge of the property, and that is very dangerous, because the back half of the property could be a salvage yard!
​

That is where "The Technician" fails and "The Analyst" is necessary, those odd-ball properties. "The Technician" would treat a property as another cookie-cutter SFR when it is not so. There could be a 2nd property in back that the owner states "has no value" (then why are all the permits for the last 2 years for the rear building as well as all recent work?) and thus the SFR be a "stealth duplex". The list goes on and many a reviewer could add a litany of horror stories to the two I just mentioned.

"The Technician" may be able to finish an appraisal in 45min to 4 hrs,
but "The Analyst" will average much longer (and has trouble doing less than 7hrs on a cookie-cutter SFR).

So, why "waste" so much time? Because you don't know what you don't know, and you won't unless you put the time & effort into it.

 

[Eli]

The thing that stands out in the last several posts to me is this. Calling agents verifies or discovers atypical motivations in many instance as well as other information that influences value. I am bold enough to proclaim that there are more atypical motivations in the single family housing market in the U.S. over the past few years than there have ever been in history. Calling agents or somebody is a productive way of discovering motivations and important info?

The definition of market value in the 1004 states:

(1) buyer and seller are typically motivated.

In general, it is a lot harder to appraise single family housing than it has ever been in my professional appraisal career due to market conditions being such that appraisers have never seen before. And the textbook appraisers don't have a clue. Even in a cookie cutter world, motivations are erratic and atypical frequently due to market conditions in most markets. If there are markets where atypical motivations are not frequent, it may be the recent new housing markets which are few and far between, but then it has always been more common to call somebody in those appraisals due to seller concessions on new construction, and a sales contract is also available for analysis on a sales transaction.

Trust me that appraisers working for AMC's understand clearly the impact of atypical motivations in more ways than one.

 

[DMZwerg]

I beg to differ. I understand in your case you may not be, but the guy in this thread or another that indicates it takes him an average of 12 hours to do an appraisal did not mention receiving higher fees.

I have mentioned averaging 12+ hours per appraisal ... actually my average last year was around 17hrs.

Let's say he works 48 hours in a given week and makes $400/per, that means he maxes out at $1600/wk. I average more than twice that, and generally work 6:30 AM to 4 PM. That's more than $80,000/yr in lost productivity (as long as the additional work is there for you, if not, time to market for more full fee clients). <snip> Your business model dictates you take high fee complex assignments, I prefer easier assignments within ~15-20 miles from my house and that is mostly what I happen to get from my clients.

That can work ONLY if you can get 8+ cookie-cutter assignments per week within 15-20 miles of your house. Given the number of sales in the city I live in during the last 5 years such an appraiser would have to appraised over 66% of all SFR properties sold in said 5 years. Now figure what, double that for refis and once again for legal work and that would be 1/6th the total local appraisal market. In other words, some markets don't have as much cookie-cutter work available as other markets. See, why I mentioned the CITY I live in is yeah, there is areas outside the city within 15-20 miles, but then that expands into <drum roll> non-cookie-cutter assignments (ponds, rural, and so forth).

Also, what makes you assume an appraiser asks for only cookie-cutter pay on more complex assignments?

I understand this is not a one size fits all but by and large these people are in essence paying for damn expensive insurance against someone that won't accept MLS and Tax Records as data verification.
<snip>
more for complex, however complex assignments are rare for me, think less than 3%.

Complex assignments make up 80%+ of my work as locally the cookie-cutters get snapped up by appraisers working for AMCs or charging under $300/appraisal.

I would rather spend 17+ hours on a more complex report than have to do THREE cookie-cutters to make the money as I have done the math and make more per hour avoiding the cookie-cutters (and low fees, and gas, liability, etc). Just FYI.

 

[residentialguy]

why you don't verify prior to selecting the 7-9 prior to property inspection is beyond me

LOL...I haven't even inspected the subject! How can I possibly narrow it down to the 8 most similar properties prior to inspection of something I've never even seen??? I'm good, but I'm not clairvoyant. Even if the subject is a sale with listings, I often find variances that makes me choose different comps than the ones I intentionally thought would be the best. And please don't suggest I call them right after the subject inspection. It often takes 24-48 to get a hold of them...I don't bring an over-night bag to inspections.

If you've every watched the movie "Big Fish" you may better understand my reluctance to believe the picture you have painted. Up to 40 potential comps, whittle down to 7-9 sales, all 7-9 sales verified with agents and sellers/buyers (why you don't verify prior to selecting the 7-9 prior to property inspection is beyond me based upon your belief that this form of verification is what makes you believe you are better appraiser than the masses.

I run a search of the subject's area (more if necessary) and narrow it to similar properties with variances so that I cover my bases...usually around 20 on a cookie cutter, sometimes up to 40 or more, depending on how solid my subject info is and the complexity. (More complexity = more variances = more comps needed to cover those). I print full listings of all of the pre-selects. I print out a map of all of them so I can see the proximity. Yes, I could pdf them and take my lap top (much more cost efficient), but I like paper, as I can arrange them all in front of me. After I inspect the subject, I now know the exact GLA, condition/quality/site, etc...so now I can choose my best 6+ comps since my subject is no longer variable that makes it impossible to know which comps are most similar.

perform field work and verify sales (what I consider verification).

What you consider verification is irrelevant. It's not your rules, it's their rules for you to follow. What you consider verification is unacceptable and appraisers with your mindset are getting sanctioned.

I gotta give you this...your performance has been award winning. You'd be neck n neck with Mel Gibson in his last scene of Braveheart. :laugh:

Trying to make this end on a positive
Peace