Real Estate Bubble & Holding Realtors Accountable For Listing Prices

[George Hatch]

While it is not our place to moralize what the value "should be", it is our professional place to opine what the value "should be" (.according to our appraisal)

I'm not going to quibble with your wording.

What I'm going to do is simply restate my opinion - "most probable" (appraisal definition of MV) has a meaning that is separate and apart from "one willing buyer + one willing seller" (broker definition of MV). If all my comparables are selling at 10% over the list and I've got actives that are listed at X then AFAICT what's most probable is X+10%.

I believe its a grievous mistake to conflate what's an appropriate perspective on MV for an appraiser with what's appropriate for a broker - that mistake commonly being made by both appraisers and brokers. These are two very different perspectives that have arisen - by necessity - from two very different roles. Each being both legitimate and necessary in the market.

I will never criticize a broker for acting like a broker, and I will defend myself against anyone who attempts to criticize me for acting like an appraiser.

 

[gregb]

I'm not going to quibble with your wording.

What I'm going to do is simply restate my opinion - "most probable" (appraisal definition of MV) has a meaning that is separate and apart from "one willing buyer + one willing seller" (broker definition of MV). If all my comparables are selling at 10% over the list and I've got actives that are listed at X then AFAICT what's most probable is X+10%.

I believe its a grievous mistake to conflate what's an appropriate perspective on MV for an appraiser with what's appropriate for a broker - that mistake commonly being made by both appraisers and brokers. These are two very different perspectives that have arisen - by necessity - from two very different roles. Each being both legitimate and necessary in the market.

I will never criticize a broker for acting like a broker, and I will defend myself against anyone who attempts to criticize me for acting like an appraiser.

I would prefer the wording "I will accept anyone who attempts to criticize me for acting like an appraiser" and wear it as a badge of honor.

 

[J Grant]

I agree there...broker/RE agent function and that of appraiser is completely different. The sales person RE agent or broker has no obligation to list, sell, or negotiate at our concept of market value.

However, appraisers don't tell RE agents what the market value should be on their properties in a lending assignment, appraisers tell the lender clients what the MV should be for client evaluation purpose.

I could go ahead to define more our above about the most probable but have work to do and am limited in time.

 

[George Hatch]

My opinion of MV is just that. It's not a prediction of the future and it isn't advice to the buyer what they should or shouldn't pay. Not even when the buyer is the client or an intended user.

I'm still not the eyes/ears of the lender and it's still not my job to protect the market from excess or speculation.

 

[KenAZ]

When I see higher than typical sales price it is typically an out of town buyer that thinks they are getting a good deal because they are not familiar with actual house prices.

 

[EddieB]

I'm not saying the Realtors' are right but we know their answer is that we're holding values down.

I remember the arguments I had with builders in 2007 who were selling model matches at a 10+ percent increase month to month. I lost a lot of business by not playing along

 

[residentialguy]

I'm not saying the Realtors' are right but we know their answer is that we're holding values down

They often are right. How many times do we see "I don't have supporting closed sales" in an increasing market. Then we come to find out the date of sale line is left blank, as if changing market conditions is a rumor.

 

[J Grant]

I'm not saying the Realtors' are right but we know their answer is that we're holding values down.

I remember the arguments I had with builders in 2007 who were selling model matches at a 10+ percent increase month to month. I lost a lot of business by not playing along

At least you still have your license, unlike some who played along...It's not the appraisers job to prop up prices, nor hold them down . The RE agents have no business saying stuff like that, it does not stop them though.

Appraisal methodology result is that appraisals are not designed to be a front runner of pricing, be it upward or downward. The market is supposed to lead the way, not us helping it happen. by bending appraisal methodology or "thinking outside the box."

If RE agents want to lob appraisers are "behind the market", let them. News Flash, appraisals by their nature are a slight lag behind the market. That is because credible support for value is based on what HAPPENED as of the effective date, now what MIGHT HAPPEN after the effective date.

We do use listings and pendings and other indicators to factor in direction market is heading, but still, for MV purpose appraisal, especially on a URAR form where we certify how we arrived at value, the greatest support is supposed to come from closed sale comps ( comps means similar to subject, not dragging in a dis similar superior sale to bracket a high price). We make a time adjustment to bring older sale dates equivalent to current to market conditions, but after we do that, if the market value opinion still falls short of a sales contract price, then it does. RE agents should be more professional about it rather than throwing tantrums.

 

[J Grant]

"4. I developed my opinion of the market value of the real property that is the subject of this report based on the sales comparison approach to value. I have adequate comparable market data to develop a reliable sales comparison approach for this appraisal assignment. I further certify that I considered the cost and income approaches to value but did not develop them, unless otherwise indicated in this report."

The above from cert page URAR.

Note the terms adequate (enough sales) and reliable ( sales similar enough to subject to be relied on as credible support)

I've seen posted "lack of sales does not mean lack of value". aka value may be there despite lack of sales to prove it.

That may be true. But we are tasked with "proving it", (not really proving, but credibly supporting) . And if we cant' do so, we can only opine the amount of value on the appraisal we can support in a credible manner.

Indeed value may be "there", in the eyes of the buyer, but appraiser can not adequately support the value in our appraisal per above cert 4.,

If a buyer perceives more value in a property and is willing to pay more fir it than the appraisal could credibly support, buyer is free to put down more of his/her own cash to make it happen, or find some another way to make it happen (seller second note etc). If buyer is unable or unwilling to do that, then the deal won't go forward, or at least not at that price ( often parties will negotiate price down to the appraisal MV opinion or compromise on a mid point on price and deal proceeds)

 

[J Grant]

They often are right. How many times do we see "I don't have supporting closed sales" in an increasing market. Then we come to find out the date of sale line is left blank, as if changing market conditions is a rumor.

They are not "right, in that we are not "holding values down". The appraisal by its methodology makes it a product not designed to be a front runners for prices. So yes, closed sales to credibly support a value in order to satisfy cert 4 ). If those sales have not happened yet, if there is a gap between our OMV and a SC price, let the buyer close the gap with their own funds , which means buyer participation is generating the next higher price , vs appraisal facilitation .