Opinion of Value Below Comparables

[J Grant]

Exactly why we should be reporting a range of value, instead of a point value...

Except that reporting a range of value would be the death knell of a large part of our profession,

Clients and mortgage lenders need a point value. They understand a range of value exists , but they need a point value. If the appraiser will not provide the point value, then they engage another party for it, or a computer will do it.,

What would solve the lender dilemma about a SC price or a needed refi value, is making it easier for the lender to assign a point value either higher than or lower than by up to 3% -5% from the appraisal value opinion. The lender can decide it based on a set of criteria such as quality of the subject property, amount of down payment, market conditions.

I believe they are allowed to do something like that now, but it is not normally done because it is not easy wrt they would assume more liability.

 

[alebrewer]

Except that reporting a range of value would be the death knell of a large part of our profession,

Clients and mortgage lenders need a point value. They understand a range of value exists , but they need a point value. If the appraiser will not provide the point value, then they engage another party for it, or a computer will do it.,

What would solve the lender dilemma about a SC price or a needed refi value, is making it easier for the lender to assign a point value either higher than or lower than by up to 3% -5% from the appraisal value opinion. The lender can decide it based on a set of criteria such as quality of the subject property, amount of down payment, market conditions.

I believe they are allowed to do something like that now, but it is not normally done because it is not easy wrt they would assume more liability.

ok

 

[Ariba]

So, what I have gathered from the posts, is that if you have three identical properties, year and quality of construction, and functional utility that all sold recently for $650,000 your opinion of value would be $650,000. However, because of the market conditions and interest rates, the builder has reduced the price of the properties to $600,000. Would it be your opinion that the property is worth $650,00 even though no informed buyer would buy the property at that price? What about the definition of value?

 

[J Grant]

So, what I have gathered from the posts, is that if you have three identical properties, year and quality of construction, and functional utility that all sold recently for $650,000 your opinion of value would be $650,000. However, because of the market conditions and interest rates, the builder has reduced the price of the properties to $600,000. Would it be your opinion that the property is worth $650,00 even though no informed buyer would buy the property at that price? What about the definition of value?

??-if the market conditions and interest rates and same model matches were reduced to 600k , the OMV might be 600k. Though if recent sales closed at 650k, then i'd be making some big downward time adjustments to my comps !

PS if your subject was new construction, good practice is to also include resales and/or sales outside the new home subdivision. Using only3 comps is risky and using only 3 builder sales even more so - if those are the only comps and especially in a million $ plus home

 

[Ariba]

??-if the market conditions and interest rates and same model matches were reduced to 600k , the OMV might be 600k. Though if recent sales closed at 650k, then i'd be making some big downward time adjustments to my comps !

All 3-comparables sold in the past 2-months so there is no market support for a declining market. So now it appears that you agree that the OMV could be less than the 3-comparables in the appraisal report. I'm I wrong?

 

[alebrewer]

Look at it from the opposite direction - if your 3 sales are within 2 months in a strongly appreciating market, would your OMV be ABOVE the adjusted values of the three sales?

 

[Ariba]

Look at it from the opposite direction - if your 3 sales are within 2 months in a strongly appreciating market, would your OMV be ABOVE the adjusted values of the three sales?

Yes. Every time. What do you do?

 

[J Grant]

All 3-comparables sold in the past 2-months so there is no market support for a declining market. So now it appears that you agree that the OMV could be less than the 3-comparables in the appraisal report. I'm I wrong?

I can't agree or disagree with an appraisal I never saw in a market I know nothing about !! I'd need to see the other area sales you did not use, not just the 3 you used.

If there is no declining market though, then maybe your subject should have appraised at an opinion of market value higher than it's SC price, despite the fact it was on market 60 days. Maybe the first list price was off, idk. That is why 3 comps are really lightweight, there is no other context and putting additional sales as well as listings and pending's on a report adds context

 

[Ariba]

I can't agree or disagree with an appraisal I never saw in a market I know nothing about !! I'd need to see the other area sales you did not use, not just the 3 you used.

Look at it as a textbook exercise. This is what you are given, everything is equal you don't need to know the market or other sales. What is your answer? Don't muddy the waters and it depends is not an answer and you have failed the exam.

 

[alebrewer]

Yes. Every time. What do you do?

I will never reconcile to a value that is outside my adjusted sales range. That said, if I've applied my market adjustments correctly, there would be no reason to reconcile outside the adjusted range.

With respect to you reconciling 'above' the adjusted range in an appreciating market - you're either being intentionally deceptive, or you're in the VAST minority (a minority of 1, I'd guess).