Why Are Fannie And Freddie In Such A Hurry?

[J Grant]

"Bert Craytor, post: 2856793, member: 150785"]Most of the assertions you are making take sentences of context and give them a somewhat different context.

But lets look at Fannie Mae's definition of Market Value: https://www.fanniemae.com/content/guide/selling/b4/1.1/01.html

Now, as many often state on this forum, the actual conditions for this particular definition of Market Value actually don't exist in reality, at least in many cases.

That is the the point of an appraisal...the fact that in reality, many buyers are not well informed or well/advised or acting prudently etc..i's the REASON the appraisal creates the hypothetical/presumed "sale" as of the eff date in the SC approach, where the MV opinion is predicated on a set of typically motivated buyer and seller acting per the MV definition of well informed, well advised, price not affected by undue stimulus etc. How do you not "get that" as an SRA?

For example, many on this forum believe that many buyers are in fact not "well advised" and are not "knowledgeable". It is not practical to deal with such issues. So, in fact, "market value" is an implicit hypothetical condition that is in fact so common and obvious it doesn't need explicitly stating. Look at the phrase "most probable" - and now you are in the realm of probability and statistics, which puts you in the same methodology as dealing with any kind of prediction.

In fact, your opinion of value of Fannie Mae's Market Value as of any point in time (effective date), is nothing more than a prediction, guided by "data points and support". And if you want to support the concept of "probable", then you should have some mathematics behind you.

It's not a prediction, though I suppose in one sense you can call it that, it;s an opinion ( based on the SOW of the appraisal and result of SCA presumed "sale" of the subject as off effective date and according to MV definition used.

 

[RCA]

no matter how many times you post it we are not predicting a future value of a property when doing residential appraisals for a typical mortgage transaction. period. we are simply giving an opinion of value as of the effective date we inspect the subject based on historical data. the house could catch on fire a week later and the value would be land only. someone like walmart could open a new factory in 8 months and the housing prices skyrocket due to sudden demand. a major employment center could close in 6 months and the housing values in the area will plummet. we do not know what will happen in the future which is why we don't value the subject at some point in the future.

I never said residential appraisers were predicting future values (of course they do on occasion). I said, their appraisals are used for predicting future values; in that collateral value by its very meaning is future value. This should be obvious.

 

[TRESinc]

I never said residential appraisers were predicting future values (of course they do on occasion). I said, their appraisals are used for predicting future values; in that collateral value by its very meaning is future value. This should be obvious.

you may want to re-read your own posts....

In fact, your opinion of value of Fannie Mae's Market Value as of any point in time (effective date), is nothing more than a prediction

 

[RCA]

you may want to re-read your own posts....

It doesn't say anything about future value. Like I said, prediction, as a mathematical term, can apply to past, present or future. You are predicting a market value which is itself a hypothetical condition. You assume the buyer is knowledgeable and "well advised", when in fact, in many cases, you can be pretty sure he isn't. So, in other words, I am saying that whenever you provide an estimate of market value per Fannie Mae's definition, it is effectively a prediction, with few exceptions. What should ring through is the term "most probable" as well. It's a nifty abstract concept, theoretical, doesn't really exist, you just kind of conjure it up. Try to give a very exact definition of "most probable" and then you see that it is NOT real, NOT concrete, a bit ambiguous. You could be very sarcastic about Fannie Mae's definition of "Market Value". How in the frigging hell is anybody supposed to know what a supposed "well advised" and "knowledgeable" buyer would actually pay? Maybe such a buyer wouldn't even buy the house in the first place. LOL.

 

[TRESinc]

It doesn't say anything about future value. Like I said, prediction, as a mathematical term, can apply to past, present or future. You are predicting a market value which is itself a hypothetical condition. You assume the buyer is knowledgeable and "well advised", when in fact, in many cases, you can be pretty sure he isn't. So, in other words, I am saying that whenever you provide an estimate of market value per Fannie Mae's definition, it is effectively a prediction, with few exceptions.

you can say it as many times as you like, it doesn't become true after posting it X times. as residential appraisers we do not predict anything unless that is the request the client is making. for reasons known only to you you assume the buyers are not knowledgeable or well advised, which cannot be equally applied to all buyers at all times and therefore isn't true. i never stated i assumed anything.

 

[RCA]

you can say it as many times as you like, it doesn't become true after posting it X times. as residential appraisers we do not predict anything unless that is the request the client is making. for reasons known only to you you assume the buyers are not knowledgeable or well advised, which cannot be equally applied to all buyers at all times and therefore isn't true. i never stated i assumed anything.

I never said ALL buyers are not knowledgeable nor well advised, only that many are. And many others on this forum state this as well, And further, that you do not know what a knowledgeable well-advised buyer would pay, you can only guess, or predict what they would pay, if they would pay anything at all: To wit you might have a contaminated property for which there may or may not be a knowledgeable and well advised potential buyer willing to buy. However, you might know a buyer who is not so bright and who could be convinced to buy the property, and in fact who has made an offer. But the existence of the other buyer, which presumably must exist within realms of probability for you to even come up with an opinion of market value, you simple don't know as a fact, you can only make an educated guess.

 

[TRESinc]

I never said ALL buyers are not knowledgeable nor well advised, only that many are. And many others on this forum state this as well, And further, that you do not know what a knowledgeable well-advised buyer would pay, you can only guess, or predict what they would pay, if they would pay anything at all: To wit you might have a contaminated property for which there may or may not be a knowledgeable and well advised potential buyer willing to buy. However, you might know a buyer who is not so bright and who could be convinced to buy the property, and in fact who has made an offer. But the existence of the other buyer, which presumably must exist within realms of probability for you to even come up with an opinion of market value, you simple don't know as a fact, you can only make an educated guess.

and all that can just as easily be flipped.

we still don't predict values.

 

[RCA]

and all that can just as easily be flipped.

we still don't predict values.

You provide "an opinion of value" where value is someone's definition of market value, in this case Fannie Mae's definition, which imposes hypothetical conditions and the requirement that your opinion of value is the "most probable" value, which implies that of all the knowledgeable well-advised buyers willing to buy the subject property, assuming there are any, you are providing an opinion of the average or median price they would pay (as a transaction with an "average" seller who typically accepts the highest offer) for the property under the given conditions, something you couldn't possibly know, but have provided a supportable argument that it would be such and such a value for such and such reasons, a prediction that if these buyers actually showed up and bid on the property that your golden value has support for falling somewhere near the middle of these hypothetical transactions , and so you are attempting to PREDICT the outcome of something that hasn't happened, will not, nor ever will happen.

Caveat: Fannie Mae's definition of MV talks about "... the buyer and seller, each acting prudently, ..." as if the appraiser were to focus on the actual buyer and seller, as of the effective date. As of an given effective date, there can be only one seller, the actual seller, who invariably takes the highest offer, assuming he judges the buyer to be sufficiently credit worthy. And the buyer would be the one making that offer. But then we have to make sure the buyer is acting "prudently", meaning that we believe that it is not likely he could get a better deal elsewhere. Then they throw in "the most probable price that a property should bring ...".

Of course if you are appraising for a refinance, there is no buyer - only hypothetical buyers. As of the effective date, you have a seller who isn't interested in selling. For all you know the actual seller has no intention of selling until he can sell it for a much higher value than it is worth at the effective date of appraisal.

So now, who exactly does Fannie Mae mean by "the buyer" and "the seller"? Well, you are required in general to conjure up a hypothetical seller as well. After all, the whole logic behind the sales comparison approach is to find a number of transactions with different buyers and sellers, make adjustments and average, possibly with some weighting. You are effectively defining an "average" or typical buyer and seller for this kind of transaction. And you average the adjusted values and typically give it the most weight for the final value conclusion. And this is typically your support for a transaction between a hypothetical buyer and seller for a hypothetical transaction. The whole goal is to predict what the property would sell for, if there were a typical seller interested in selling the house and some typical buyers interested in buying under the constraints of FNMAs definition of MV.

 

[TRESinc]

You provide "an opinion of value" where value is someone's definition of market value, in this case Fannie Mae's definition, which imposes hypothetical conditions and the requirement that your opinion of value is the "most probable" value, which implies that of all the knowledgeable well-advised buyers willing to buy the subject property, assuming there are any, you are providing an opinion of the average or median price they would pay for the property under the given conditions, something you couldn't possibly know, but have provided a supportable argument that it would be such and such a value for such and such reasons, a prediction that if these buyers actually showed up and bid on the property that your golden value has support for falling somewhere near the middle of these hypothetical bids, and so you are attempting to PREDICT the outcome of something that hasn't happened, will not, nor ever will happen.

keep posting, it still won't change. we do not predict values unless we are requested to by the client. as posted elsewhere:

Predict, from Merriam's dictionary: to declare or indicate in advance; especially : foretell on the basis of observation, experience, or scientific reason.

Let's at least agree on the definition. Every definition I saw carefully notes something in the future. We cannot predict current value. Its an oxymoron.

but then you would start in again on the mathematical use of the word predict, which doesn't matter as we are not professional mathematicians, we are appraisers and we follow USPAP...

Read USPAP, its pretty clear on what today, tomorrow, and yesterday mean relating to appraising.

Looking outside and stating that it is raining because you see rain drops hitting the ground is not predicting. Saying that it WILL be raining in 10 minutes based upon your observations of current conditions is PREDICTING.

Saying today is yesterday's tomorrow does not make right now the future. No more than saying today is tomorrow's yesterday makes it the past.

 

[J Grant]

I never said ALL buyers are not knowledgeable nor well advised, only that many are. And many others on this forum state this as well, And further, that you do not know what a knowledgeable well-advised buyer would pay, you can only guess, or predict what they would pay, if they would pay anything at all: To wit you might have a contaminated property for which there may or may not be a knowledgeable and well advised potential buyer willing to buy. However, you might know a buyer who is not so bright and who could be convinced to buy the property, and in fact who has made an offer. But the existence of the other buyer, which presumably must exist within realms of probability for you to even come up with an opinion of market value, you simple don't know as a fact, you can only make an educated guess.

How can you be an SRA and state some of the things you are stating?
Neither I, not any appraiser can predict, guess, or estimate what any buyer might pay or what every buyer would pay....but we can per the appraisal develop our OPINION for that ONE hypothetical transaction of what the "presumed" (model) typically motivated buyer and payer would transact at given the MV definition we are appraising to.

How does an appraiser "contaminate" a property? The appraiser , if engaged to do so, offers their opinion of value ( and other opinions, conclusions and analysis ) , and communicates it in the report to the client. The client is then free to use the results of the appraisal, or not , the client can throw it in the trash if they want.

???? We are not trying to guess or predict what a buyer and seller would transact at, even for a most probable price. We are providing our opinion of what the 'presumed " ( model) "buyer" and "seller" would transact ( what the property should bring) within the context of the appraisal.

Or what did you think you were doing all these years? Sorry but your posts on this topic leave me incredulous.