Acceptable Differences In Appraisals

[jeff samolinski]

FWIW, Jeff, some of what I think has been my best work was dont for buy-sell. Last year, I correctly predicted that a buyer wouuld be quite willing to pay at least 45% over his own appraiser's market value apprasisal (and 40% over my market value estimate). His frist offer was 25% over his own appraisal and three days later his second offer was 45% over. That led to a wee bit fo after consulting, since the offer matched what the seller "wanted," but was still 20% short of the ask, the wanted to know if they should hold firm, lower the ask or take the money. I gave them spiel about risk tolerance: theirs and the buyer's. I feel sorry for other appraisers who use this sale as a comp.

So what was the definition of value for this client-what type of value did you provide that provided for your prediction. Was it price? If so then we have the running debate again on the difference in market value and price and the whole definition of market value being most probable price. There is a conondrum going on in the appraisal profession imho in terms of a market that is increasing so fast.

 

[Fred]

Three types of value.

 

[xm39hnu]

I agree with Steven's characterization of appraisers who are wedded to a form. On appraisals purposed to assist the owner in setting a selling price, I report a range as well as a point value as "market value." Consistent with the scope of work in such an appraisal, we then recommend setting the offering price somewhat higher than the point value, considering current listings' asking price as well as recent market activity. A typical reconciliation might look like this:

The sales comparison analysis shows a supported value range betwen 165,000 and 172,000. In that approach, we considered that comp #2 presented the best evidence of value, and concluded a point value estimate of $168,000 giving most weight to comp #2. The cost approach seldom provides a good indication of actual market value, but it shows that an informed buyer should not be expected to pay more than $175,000 for the subject, if he could build a suitable replacement in a reasonable amount of time.

We conclude that the most probable selling price of the subject under the conditions stated in the definition of market value should be $168,000 as of the effective date of the appraisal, and subject to the limitations and assumptions set forth in this report.

We noted in the report that there were three very comparable listings being offered for prices ranging from $178,000 to $185,000. Our analysis of the market shows six sales of homes somewhat similar to the subject over the past year (the three most similar, proximate, and recent are shown in the sales comparison grid). Considering the small number of sales, and the relatively high asking prices for similar property, we suggest that the client offer the property for $180,000. The client should be prepared to accept offers less than that price, down to our concluded point value of $168,000. The client should also expect to experience a market time of between three and six months to achieve his sale. In giving this advice, we assume that the conditions in the local market will not change between the date of this report and the time of sale.

I know there's liability in doing this, but I'm getting paid to assume it. The client wants to sell his house. Use your knowledge to help him do it.

 

[Tim Hicks (Texas)]

So, why dig up a five month old thread?

 

[Mike Boyd]

Its possible that your low appraiser made an adjustment for an incetive...that being you were not paying a brokerage fee while with all his comps, the seller WAS paying the brokerage fee. I don't think I would have done that but neither do I think it would be unethical for him to do so.

As far as his $50 fee to "re-address" the report, it is likely he was attempting to simplify for you, the rules we work under. In reality, a different lender can use the old report without changing the name of the original client. I understand appraisers charge much less for their work in your part of the country but I would have charge twice that amount. For even a two week time spread, we have to look for any new comps or listings, re-write his "scope of work," make a new file and either email or deliver the report to the new lender. Time is money, Jen, and the work to be done would easily take an hour or more. $100 per hour is about the minimum a fully licensed and equipped appraiser will charge.