Considering filing complaint for lack of market conditions adjustment on stale comps

[Mejappz]

Then I would say file a complaint against the Lender. They are the ones responsible for vetting their appraisers.

 

[TMG]

As the buyer, why do you want it appraised higher? Wouldn't a lower value (maybe the most accurate value) potentially get you a better price?

Also "Nothing other than the 1004MC was included as support for market conditions". We are not required to provide anything else, unless specified in the assignment guidelines. Which I'm sure it wasn't.

 

[Terrel L. Shields]

should a market conditions adjustment be applied or should it be assumed that the FMV is exactly the same as it was 8-10 months ago?

determining that in my very rural market would depend upon sufficient similar properties to make a clear case for such. I for one am reluctant to include offers above listing prices....the agent should recommend pricing a property at market. Why? Well, one gets into the Zen of auctions and most appraisers hate "auction" pricing. Yet inciting a bidding war is exactly that. The high bid wins (or the most favorable offer as a proxy for "high bid".) OTOH, working a very rural market, rural property with over 20 acres land, I had exactly 271 sales over a three year period in the entire MLS (Northeast Oklahoma) for Delaware County...Plotting those does give a slow steady increase slightly accelerating in 2020 (Covid response?) Yet if I extract single sales out of that 271, it is far more difficult to justify an adjustment with the possibility that the differences of the chosen comps only reflect a statistical "noise". It would be a judgment call. Clearly the above trend sales of 2020 speak of increased market, but there are at least as many sales below the mean as above during the year. Which is the "most probable"?

 

[throwaway12345]

As the buyer, why do you want it appraised higher? Wouldn't a lower value (maybe the most accurate value) potentially get you a better price?

Also "Nothing other than the 1004MC was included as support for market conditions". We are not required to provide anything else, unless specified in the assignment guidelines. Which I'm sure it wasn't.

Analytically, I want the most accurate value. My understanding is the most accurate value would be one supported by data, not just the same price as three comps from 8-10 months ago. If it really is the most accurate value, then fair point, I'm the irrational buyer that everyone seems to be talking about nowadays.

With a lower appraised value, I luckily was able to get the sellers to give me a better price. In the long run, I am better off, so my motivation for inquiring about the appraised value isn't for my own selfish benefit.

To salvage the deal I had to come up with more cash (a non-trivial amount) up front to close the gap. I was lucky to have the cash on hand, but I recognize that isn't always the case for many first time homebuyers in my market. If the lower value isn't the most accurate price, it's harmful to the parties involved and can crush a lot of deals unnecessarily.

Regarding the 1004MC, I get that additional support isn't required and as the buyer I'm not owed anything. But is "my grid says prices are going up but I couldn't find enough data to make a conclusion, so my conclusion is that the market is stable" considered acceptable support in your view? Nothing beyond that is required but is that the standard appraisers want to set as acceptable?

 

[Terrel L. Shields]

But is "my grid says prices are going up but I couldn't find enough data to make a conclusion, so my conclusion is that the market is stable" considered acceptable support in your view?

The alternative is to speculate based upon the euphemistic assessment of a Realtor? "Land always goes up!" "It'll will be worth more next year." (heard that a lot in 2007)..."they don't make houses like this anymore." " You know the market is going great guns. What could stop it?" ... The market varies with the interest rate which creates the final factor all buyers face. What's the payment per month? Again, it is tough to speculate without seeing the comps, but obviously someone thought they were more proximate and similar rather than recent as a deciding factor, and this is the judgment of the appraiser. Inadequate data forces the appraiser to use their judgment and it sounds like their judgment was to protect the bank rather than speculate upon what the market "should be" in the future.

 

[throwaway12345]

determining that in my very rural market would depend upon sufficient similar properties to make a clear case for such. I for one am reluctant to include offers above listing prices....the agent should recommend pricing a property at market. Why? Well, one gets into the Zen of auctions and most appraisers hate "auction" pricing. Yet inciting a bidding war is exactly that. The high bid wins (or the most favorable offer as a proxy for "high bid".) OTOH, working a very rural market, rural property with over 20 acres land, I had exactly 271 sales over a three year period in the entire MLS (Northeast Oklahoma) for Delaware County...Plotting those does give a slow steady increase slightly accelerating in 2020 (Covid response?) Yet if I extract single sales out of that 271, it is far more difficult to justify an adjustment with the possibility that the differences of the chosen comps only reflect a statistical "noise". It would be a judgment call. Clearly the above trend sales of 2020 speak of increased market, but there are at least as many sales below the mean as above during the year. Which is the "most probable"?View attachment 52193

See, this depth of analysis is what I was expecting from the appraiser to counter my questions. And for all I know maybe it exists and I just haven't seen it.

I would argue, as I believe you have, that none of the data / analysis when presented in isolation is enough to conclude any trend. Not the long term price chart, not a handful of paired sales, and not offers above listing. An interesting question is, does the combination of all three constitute sufficient support?

Offer prices are probably the weakest of the bunch, and should probably be tossed from consideration. Too much variability and the deals aren't even closed yet. Long term price chart shows that yes, median prices are increasing over time, but is that spurious? Maybe more expensive properties are selling more recently. Paired sales gives you a small sample size but a clear directional trend.

Now, let's say offers are coming in above list, the long term trend is >0% and paired sales show an increase. Then, what would you conclude about the market as the most probable case?

 

[Fernando]

I understand that too regarding "my grid says...."
When my 1004MC is inconclusive, I feel like saying since no proof of going up then it should be stable.
But that's not good enough for me. I have to expand my data criteria and eventually, I get a trend usually stable.
People and media saying prices have increased 10% over last year and assume everything is going up.
I considered last year was rather stable especially with the Covid thing.
Now prices are starting to show increasing trend but not all markets are that evident and I hold off calling that until I'm convince with the numbers.

 

[Elliott]

Lenders aren't oriented or expect an appraisals to support contract price resulting from multiple offers over list. They expect a selection of previously sold properties with typical exposure to the market which are are similar to the subject in age, condition, location, living area, and other amenities.

 

[throwaway12345]

The alternative is to speculate based upon the euphemistic assessment of a Realtor? "Land always goes up!" "It'll will be worth more next year." (heard that a lot in 2007)..."they don't make houses like this anymore." " You know the market is going great guns. What could stop it?" ... The market varies with the interest rate which creates the final factor all buyers face. What's the payment per month? Again, it is tough to speculate without seeing the comps, but obviously someone thought they were more proximate and similar rather than recent as a deciding factor, and this is the judgment of the appraiser. Inadequate data forces the appraiser to use their judgment and it sounds like their judgment was to protect the bank rather than speculate upon what the market "should be" in the future.

I don't believe speculating based on realtor assessments is the only alternative, that would be silly. What I asked the appraiser for was consideration of data outside of the grid like what you presented in post #53 and my response in post #56 to get an indication of a change in market conditions. I don't believe, and maybe I'm wrong, that appraisers get to substitute imperfect market data (that alone aren't sufficient to conclude anything but together give you an indication of differences in market conditions) for judgement. But I'm not sure where the boundary for "sufficient" is.

I agree that it isn't the appraiser's job to speculate where the market should be in the future, that would seem to fall outside of the scope of "FMV as of". If it's a jump ball and the appraiser erred on the side of protecting the bank, sure, that's probably how I'd call it if I were in their shoes.

 

[throwaway12345]

I understand that too regarding "my grid says...."
When my 1004MC is inconclusive, I feel like saying since no proof of going up then it should be stable.
But that's not good enough for me. I have to expand my data criteria and eventually, I get a trend usually stable.
People and media saying prices have increased 10% over last year and assume everything is going up.
I considered last year was rather stable especially with the Covid thing.
Now prices are starting to show increasing trend but not all markets are that evident and I hold off calling that until I'm convince with the numbers.

I am happy to that your standard for acceptability is higher than that of the appraiser I dealt with.

My amateur analysis based on expanded data criteria including a) similar substitutable product and time wise, not geographically, and then b) geographically, all indicate an increasing trend. Maybe that isn't evident enough or there's something I missed, but I didn't even get a response to look at.