Three days in a row. Different GLA than advertised.

[RCA]

..so a client would review various what-if scenarios and select the option that is compatable with their willingness to be exposed to risk, i.e., to make an unprofitable decision, relative to the potential profit??? [And once the program is established the datadude would have little to do except count the money!!!!]

I am giving a fixed set of scenarios as an example. If the software developer is clever, they should set up a more flexible interface - and there are many ways to do it. I would think this would result in several graphs, and for a report, you would want to limit the print to show only the most useful. But hard to predict what the eventual client would prefer. Therefore, the safest approach is to provide a flexible interface that is not overly complicated.

You want a report that is realistic. Current appraisal reports show the MV as of some date. That has use if say the buyer wants to be sure he got a reasonable deal. But for a collateral analyst, collateral value is probably what is important - and that is something that changes with the future. The first 8-10 years is the most important, because that is when the LTV is highest and the lender stands to lose the most on default. After 10 years, the LTV goes down (hopefully) - and this is kind of where a big risk factor starts to emerge: Some owners are not very good at maintaining their homes, or the home could be in a flood zone, a hurricane, tornado, earthquake or landslide zone.

What we have now is typically 80% of MV for collateral value. But in some cases, of course, the loan can be as much as 100% LTV, although with higher insurance rates until the LTV drops to 80%. Are home values going go up or down as we move into the future, with an aging population? What do you think?

 

[sputnam]

How have you held a credential as long as you have and still believe point values do exist?

Of course, point values exist. We see them. Whether point values are subjective (they are) is a different question. Since a point value is more subjective than a range, most appraisers would prefer to not deliver a point value however, a point value is usually the job. If you don't want to provide point values... don't. Be prepared to have fewer clients.

 

[ZZGAMAZZ]

I am giving a fixed set of scenarios as an example. If the software developer is clever, they should set up a more flexible interface - and there are many ways to do it. I would think this would result in several graphs, and for a report, you would want to limit the print to show only the most useful. But hard to predict what the eventual client would prefer. Therefore, the safest approach is to provide a flexible interface that is not overly complicated.

You want a report that is realistic. Current appraisal reports show the MV as of some date. That has use if say the buyer wants to be sure he got a reasonable deal. But for a collateral analyst, collateral value is probably what is important - and that is something that changes with the future. The first 8-10 years is the most important, because that is when the LTV is highest and the lender stands to lose the most on default. After 10 years, the LTV goes down (hopefully) - and this is kind of where a big risk factor starts to emerge: Some owners are not very good at maintaining their homes, or the home could be in a flood zone, a hurricane, tornado, earthquake or landslide zone.

What we have now is typically 80% of MV for collateral value. But in some cases, of course, the loan can be as much as 100% LTV, although with higher insurance rates until the LTV drops to 80%. Are home values going go up or down as we move into the future, with an aging population? What do you think?

The subject of this morning's assignment is the purchase of a "Next-Gen" home that includes a distinct studio-type guest unit that is integral to the GLA, with a secured interior access and independent exterior egress; and coincidentally [like the strong R value so often experienced between the AF and reality] I'm searching for published info the addresses the potential future value of the Next-Gen configuration attributed to the aging population--and/or the impact of increasing prices on the need for young adults to move back into the family home. Hoping to avoid builder fluff but hard data probably is readily available.

Regarding your prognosis above, a time in the future when values typically increase because of renovation probably could be deduced from the current age and condition of a property. That factor and the overall, anticipated market growth seem to be the obvious significant factors in determining future value????????

 

[ZZGAMAZZ]

Of course, point values exist. We see them. Whether point values are subjective (they are) is a different question. Since a point value is more subjective than a range, most appraisers would prefer to not deliver a point value however, a point value is usually the job. If you don't want to provide point values... don't. Be prepared to have fewer clients.

I don't understand why a point value would be more subjective than a range.

 

[alebrewer]

Of course, point values exist. We see them. Whether point values are subjective (they are) is a different question. Since a point value is more subjective than a range, most appraisers would prefer to not deliver a point value however, a point value is usually the job. If you don't want to provide point values... don't. Be prepared to have fewer clients.

They exist insofar as appraisers can make them up. A bit like the Easter Bunny - he (or she, depending on your preference) exists as a thought or idea, but nothing more substantial. Same with point values. They exist, but are not real. They are spurious. They are a construct we created to accommodate client needs. No piece of real property interest will ever exhibit a point value as the true value of said interest - it will always exhibit a range - within which any 'point value' is no more, or less, meaningful than any other point value within said range. As you may (or may not) know, the reason real property interests always exhibit a range of value is because of the inefficient nature of the real estate market.

As to whether or not I will provide point values - my clients typically like to see the point value estimated to the nearest penny. I'm happy to accommodate.

 

[J Grant]

Of course, point values exist. We see them. Whether point values are subjective (they are) is a different question. Since a point value is more subjective than a range, most appraisers would prefer to not deliver a point value however, a point value is usually the job. If you don't want to provide point values... don't. Be prepared to have fewer clients.

I don't agree that it is necessarily more subjective, I would suggest that there should be more reasoning behind it than rote math - the reasoning should not be personal, it should be based n the evidence right there in the appraisal - the subject is more like comp 1 then the other comps, or comps 1 and 2 received the fewest ajdustments so they were weihted more heavily, or the market is declining so the lower end of the value range was weighted more, etc.

Imo, a problem some appraisers have with point values is that it causes them to make a decision. Thus, they default to value should be a range. I have said this for years on the board, if appraisers refuse to do their job and man up ( even if female ) and choose a point value, with a credible reasoning behind it, then someone else will do it for them - which is what happened with the WAIVER - the AVM develops a range, and the lender decides the point value as long as it is in the range ( or the sale contract is the point value ).

There is no decision to make in a range - here is the range, developed from the comps. Easy peasy. Well, most clients are not going to pay for that since they can run ranges themselves from a plethora of programs- and most clients need a point value.

 

[Zoe]

Obviously I'm way out of my league in this thread, but I often wonder how appraisers define the word "consider." Like the comment "all comparables were given equal consideration." Lot of appraisers feel the appraiser thinks that they are all similar/identical, but to me it means that "equal consideration" means "equal thought" was given to each comparable, with a forthcoming decision pending, not that they are "considered" to be identical. [Maybe a downright friviolous issue...]

You have to either see one more similar for various reasons or you have made quantitative adjustments or missed an adjustment somewhere. Nothing wrong with weighting after you do quantitative adjustments. Weighting is qualitative analysis which is fine.

If you have a real wide spread on indicated values after quantitative adjustments, you need another comp or more work on the quantitative and/or qualitative narrative (summary).

I don't think they like over a 10% variance in indicated values after quantitative adjustments applied. If you are within 10% on indicated values, then qualitative analysis is fine to give weight to one or more comp for this/these reasons....................

Comp 1 is closer, more recent, more similar in design, etc.etc. The list goes on.

 

[J Grant]

They exist insofar as appraisers can make them up. A bit like the Easter Bunny - he (or she, depending on your preference) exists as a thought or idea, but nothing more substantial. Same with point values. They exist, but are not real. They are spurious. They are a construct we created to accommodate client needs. No piece of real property interest will ever exhibit a point value as the true value of said interest - it will always exhibit a range - within which any 'point value' is no more, or less, meaningful than any other point value within said range. As you may (or may not) know, the reason real property interests always exhibit a range of value is because of the inefficient nature of the real estate market.

As to whether or not I will provide point values - my clients typically like to see the point value estimated to the nearest penny. I'm happy to accommodate.

It is misleading imo to accommodate for the $ yet believe that your own product is spurious. I suppose it is spurious, if there is no reasoning for why you chose X $- if the claim is that any number is as good as another number in the range, or X$ was the sale price.

Of course, a point value is a model of value that appraises "make up". That is our profession - hypothetical value development as a MODEL. You are not the only appraiser to scorn it for that reason. But it is not like the Easter bunny; it has standards of appraisal development and logic behind it.

No piece of real property interest will ever exhibit a true value of said interest. Nobody claims their appraisal opinion of a point value is a "true value" - whatever the bleep that is.
Your statement is false, relative to appraising, that any point value is no more or less meaningful than any other point value within said range.

Do you disclose that as a reconciliation comment on your appraisals that any point value is no more or less meaningful, so I picked X$?

 

[Terrel L. Shields]

Offer a range in report. Client will then want the highest value in your range.

The highest value does not always benefit the client. Many heirs in an estate prefer a lower value so they can buy it from the estate...as an example. Each situation is different, and I do not want to know which benefits who.

most appraisers would prefer to not deliver a point value however, a point value is usually the job. If you don't want to provide point values... don't. Be prepared to have fewer clients.

Only if your client base is bank lenders as they are required by bank law. But some clients understand the purpose of a range value. Never mind that providing a point value and a range (confidence circle) around that point value is a measure of uncertainty. Again, USPAP requires we assess the "quantity and quality" of the available data. The tighter the range, the better quality is the data and the point value. Say you have some small rural county in the high plains and only 3 land properties have sold in the previous 3 years. One is 150 acres, one is 300 acres, and one is 560 acres. Obviously, the quality of the data could be good- you know everything about the sales, but the quantity of data is so limited as to make any estimate far less reliable than if 30 such sales existed.

I don't understand why a point value would be more subjective than a range.

A range can be calculated from the available data mathematically. But to simply choose one point within a range as "the value" requires the appraiser to make that decision. (The subject was most similar to X, was the most recent sale, was the proximate sale, has the same room count, age or size...etc.)

 

[Zoe]

Being more than 10% variance in unadjusted sales prices is fine most of the time. The problem rises when the adjusted indicated values vary more than 10%. If they are within 10% on indicated values and I cannot see a qualitative reason like atypical motivated seller or any other element of comparison, I have no problem going with avg of indicated values. That's me.

Median would work too.

If underwriter or anybody comes back and says can't you go to upper end for this reason? Or can't you go to lower end of indicated value range for this reason? I might reconsider for my client.

New revised report and new signature date for my client. Summary or reason for change. Fine.