"Quantifiable Market-Derived Methods" for adjustments required by FNMA/USPAP

[Fernando]

You wouldn't expect that kind of range for anything kind of typical.

Depending on what the subject is, a 20% difference between two appraisals might not be an unreasonable expectation.

It would be unreasonable from two knowledgeable appraisers.

 

[J Grant]

Even a quantified and supported adjustment is a model, not a fact—different buyers pay different amounts for positive features ( and will penalize adverse features in different amounts). Sometimes, a variance between properties does not warrant an adjustment—it might be considered qualified, though.

 

[Joe Flacco]

It would be unreasonable from two knowledgeable appraisers.

I disagree with you. It depends on what it is and what you have to work with.

 

[Fernando]

I disagree with you. It depends on what it is and what you have to work with.

20% difference is too wide and significant to be "reasonable".

 

[alebrewer]

I am sticking to the topic. You just want to exclude content that makes you uncomfortable. If you got two appraisals with a huge value variance on a complex/high value property, one of them is a poorly supported or skewed value - unless someone BPTJH reports stink. I commented that if an appraiser has a pattern of turning in bad work, why are they continually engaged? (For example, if one of those reports stinks, why would you use that appraiser again?) Letting the AMC pick an appraiser largely by fee limits the pool of appraisers -

You forgot this comment:
Of course, if one is picking appraisers by low fee /letting an AMC do that, the choices are more limited

Not that I owe you any explanation at all, but we do not use AMC's and we do not shop fees. Again - stick to the topic, which does NOT include AMC's and low fee shopping.

 

[Joe Flacco]

20% difference is too wide and significant to be "reasonable".

Then you are inexperienced at the high-end.

 

[alebrewer]

You wouldn't expect that kind of range for anything kind of typical.

Depending on what the subject is, a 20% difference between two appraisals might not be an unreasonable expectation.

I can't think of a scenario where 20% would be reasonable, but maybe. It's been my experience that anchor bias has a tremendous impact on these variances. One appraiser gets fixated on a sale they think is really comparable and then try to make the data 'fit'. In this particular instance, the 'real' value is somewhere between $3.3M and $3.5M.

 

[J Grant]

I always considered paired sales to be great in theory - but how exactly do you eliminate the influence of multiple differences between two properties to confirm the value of a single item such as a fireplace, ig pool, finished basement, etc.?

You adjust for all the other key items, and what is left over (extracted ) is the approximate adjustment for the X feature.

Most appraisers do not adjust for petty low $ features like fireplaces unless it is a high-value item in an area. Trying to extract a 2k or such adjustment for a fireplace or other low-value feature makes no sense. Mention if it adds appeal and factor it in qualitatively.

In the above, if you were trying to get the contribution value of a pool, adjust for the SF, the upgrades, etc, and the pool is last. Enter an adjustment - 15k or 20k, etc ( you can always change it ). The entered adjustment should narrow the adjusted value of the comps. The adjusted values of the comps will never line up exactly, of course, and we don't need them to. The point is to create a narrower range of values among the comps to make each sale property more closely resemble the subject .

 

[J Grant]

I can't think of a scenario where 20% would be reasonable, but maybe. It's been my experience that anchor bias has a tremendous impact on these variances. One appraiser gets fixated on a sale they think is really comparable and then try to make the data 'fit'. In this particular instance, the 'real' value is somewhere between $3.3M and $3.5M.

If you have reason to believe the "real " value /best supported MVO is between 3.3 M and 3.5 M, why would you use again the appraiser who came in at 4 M?

 

[Fernando]

We've been looking at absolute terms.
Each appraisers have their way of adjusting. Some are more conservative like me and the adjustments would be conservative throughout the differences.
The final value from different appraisers should be in more narrow range.
Lenders and GSEs don't understand this and looking at us to quantify like a computer.