Awful Appraisal Article

[George Hatch]

What do you mean by the lender decides what they will and won't accept in an appraisal?

Did I stutter? How much of your report content is aimed SQUARELY at your users additional expectations (aka assignment conditions) that exceed the minimums in USPAP?

If a lender directed their appraisers in their engagement terms to report the sale/list ratios for their closed sales and to identify whether overbids were common among those sales would appraisers respond accordingly or not?

 

[J Grant]

Joe we are not giving price opinions, we are giving market value opinions, we are not hired to be a cutting edge market leader of the pack for price . RE agents may not like it but the MVO definition is most probable price, not highest probable price...though are times of course when a high price is supported as the market value opinion.

Appraisers don't tell a borrower what to pay, they can pay cash above our opinion and pay their full contract price. If they cant afford to do so or don't want to that is not our problem. The lender/client hires us, not the borrower and not the RE agent. The market value definition references a buyer acting prudently...is a low cash down buyer bidding the highest acting prudently? Fact is most appraisers are very generous with their opinions, which Re agents don't seem to realize.

 

[Joe Flacco]

Did I stutter? How much of your report content is aimed SQUARELY at your users additional expectations (aka assignment conditions) that exceed the minimums in USPAP?

If a lender directed their appraisers in their engagement terms to report the sale/list ratios for their closed sales and to identify whether overbids were common among those sales would appraisers respond accordingly or not?

That has nothing to do with the development of the appraisal. That is content or commentary they require in the report. You made it sound as if the lender decides how to develop the appraisal.

 

[George Hatch]

1) We need to figure out a better way to deal with market conditions. 1% per month or whatever is not reflective of market behavior or market reaction. On the way up or on the way down. It is not a easy problem to solve but we must address this issue.

2) Cash offer > offer with financing or appraisal contingencies. That is just fact. It is not different than buyers preferring standard transaction over short sale transactions that require third party approval.

3) No disrespect to our more experienced appraisers but we need to get younger. We need to be more like other professions with typical careers going from 22 to 65. Stakeholders need to help us with that by realizing that we need more money.

This situation is nothing new. We've already been there and done that. In my case this makes the 3rd time I've already been there and done that. You?

See above. If all your comps are selling in excess of their respective listing prices (say 5% over just for discussion) then what do you think the most probable outcome will be for your subject as of today when your listings are currently listed at $300k? They'll probably close at $315k, right? Same thing when comparing all cash purchases to financed purchases - aka the cash equivalency factor. I don't think you need to be under the age of 40 to understand that, particularly when considering the point that I just explained it to you.

 

[George Hatch]

That has nothing to do with the development of the appraisal. That is content or commentary they require in the report. You made it sound as if the lender decides how to develop the appraisal.

OMG

Do you realize that the lenders have *always* had expectations relating to comp selection and analysis, and that appraisers have always responded accordingly to those expectations?

 

[J Grant]

Is multiple bidding/warring offers a form of undue stimulus? Is a low cash down buyer over paying in a bid war acting prudently? So many appraisers are generous in trying to make a deal happen and don't apply what we are supposed to do in analysis that the MV definition references , yet these appraisers will bleat about undue stimulus as a reason not to use an REO sale comp ( which might turn out to be the same house that was over valued in a hot market ).

 

[Joe Flacco]

This situation is nothing new. We've already been there and done that. In my case this makes the 3rd time I've already been there and done that. You?

See above. If all your comps are selling in excess of their respective listing prices (say 5% over just for discussion) then what do you think the most probable outcome will be for your subject as of today when your listings are currently listed at $300k? They'll probably close at $315k, right? I don't think you need to be under the age of 40 to understand that, particularly when considering the point that I just explained it to you.

I am not saying that how we handle market conditions has anything to do with age. They are different issues.

 

[Michael S]

So sign in and add a response. The article has been up since yesterday and all of 6 people have commented, most of them about the photo of the house depicted in the article.

Bad deals are made during good times. It is the lenders who decide what they will and won't accept in an appraisal, and the appraisers respond accordingly. If lenders don't want to get out in front of the market then that's on them and the appraiser has little to do with it.

Comments are limited to digital subscribers. I wasted about 10 minutes writing a lengthy response only to find that out.

 

[J Grant]

This situation is nothing new. We've already been there and done that. In my case this makes the 3rd time I've already been there and done that. You?

See above. If all your comps are selling in excess of their respective listing prices (say 5% over just for discussion) then what do you think the most probable outcome will be for your subject as of today when your listings are currently listed at $300k? They'll probably close at $315k, right? I don't think you need to be under the age of 40 to understand that, particularly when considering the point that I just explained it to you.

That is the catch 22...are these sales closing above list prices as financed deals because of skippy appraisers pushing the price forward? Or are they closing due to buyers paying cash or a $ above a lower value opinion in cash? Are these deals closing about market value with listings under priced as a strategy, or are they closing above market value?

Appraisers can distort markets up when one or more takes it upon themselves to number hit in an area. A sale closing above list price / over prevailing prices due to a cash buyer or buying putting a cash down overage has different motivations and implications than a price inflated by a number hitter appraiser...who may not even realize they are number hitting, so intent are they are not being seen to be "behind the market " ( as a RE agent would say)

 

[Joe Flacco]

OMG

Do you realize that the lenders have *always* had expectations relating to comp selection and analysis, and that appraisers have always responded accordingly to those expectations?

The only lender expectations I have seen with comp section and analysis is comment required when outside of the expectations. I don't have to tell you that.