Across The Board Time Adjustments?

[DARREN GODFREY]

Crofton, MD

What city is the subject located in?

About medium high end for the state of MD, generally stable when you get into the larger 1800+ GLA properties. Definitely not a high foreclosure area.

 

[DARREN GODFREY]

What did the paragraphs say?

It said...in summary. I am using the MC as the basis for my across the board time adjustment...then he threw in the math. It looks great , but to me it reaffirms why we shouldn't do it . I could see if you were stuck with ....an actual physical amenity but 8-15 without one recent similar sale that didn't need the adjustment puts this in the speculation spectrum and basically I guess that is why I received the request.

 

[residentialguy]

I agree the foreclosure will skew it, but there should be plenty of data. Most of the market trends from a quick google search on overall market there seems to show an increasing trend, esp since Sept. That said....I'm not trying to tell you that he's right or you're right or what your subject market is doing. I don't know. But I do know this: In order to say that an appraiser is wrong, you better have solid and substantial evidence supporting your review, because he/she will come back with a vengeance on your review.

 

[DARREN GODFREY]

What did the paragraphs say?

It said...in summary. I am using the MC as the basis for my across the board time adjustment...then he threw in the math. It looks great , but to me it reaffirms why we shouldn't do it . I could see if you were stuck with ....an actual physical amenity but 8-15 without one recent similar sale that didn't need the adjustment puts this in the speculation spectrum and basically I guess that is why I received the request.

I agree the foreclosure will skew it, but there should be plenty of data. Most of the market trends from a quick google search on overall market there seems to show an increasing trend, esp since Sept. That said....I'm not trying to tell you that he's right or you're right. I don't know. But in order to say that an appraiser is wrong, you better have substantial evidence supporting your review, because he/she will come back with a vengeance on your review.

Well, if you actually read what I am saying ...the biggest adjustment he gave is due to the data he compiled on the MC in his own words. That's where it ends and that is where it begins.
That being said if you are going to make an across the board adjustment and none of your comps actual sales price support your value , then the accuracy of the support of your biggest adjustments should be accurate. We could break it down to many factors but in all honestly if I have a report and can not find 1 closed sale to support my value...then I am probably wrong. The appraisers who have set up these forms assembled them in a way that we cross check all of our conclusions.
In addition in the current climate in MD due to the long drawn out foreclosure process , coupled with property flipping makes my MC page look crazy using the basic search parameters ..... In fact on the same MC form I am using the before and after data of flipped rehabbed properties . So when they say using general data that prices have increased by 20% year over year I KNOW that that data is skewed because MR X bought a property at 160k rehabbed it and sold it for 300K. So all this data we have is basically not accurate. You have to know this , it is your job. Most of the time when I develop my MC I will try to find a C2 property in the first 6 months and the last 6 months ...this is more of an indicator than the 20 or 50 sales that have taken place in 365 days.

 

[timd354]

Yeah, It seems he is hitting a number. I agree that it is an increasing market , however the sales should tell the story.
The OA used like 10 paragraphs to defend this adjustment...I don't personally like challenging another appraisers adjustments especially when I can see myself coming up with the same bottom line number , but the problem here is I wouldn't value a 500k range property 10k above all closed comparable sales prices. In fact the only comparable that supported his opinion of value is an active listing.

$10k on a a property in the $500K range is 2%. I am not saying what the original appraiser did was correct, but if properties can never be valued higher than the unadjusted sale price of the highest comparable sale, then you are essentially saying that property values can never rise, which obviously is incorrect. If an across the board time adjsutment is adequately supported in that market, then there is no reason that it should not be applied to the comparable sales.

 

[residentialguy]

We could break it down to many factors but in all honestly if I have a report and can not find 1 closed sale to support my value...then I am probably wrong.

I disagree. If the market is increasing...or decreasing, how can sales that occurred prior to the effective date support the effective date without adjustment to the market?

 

[residentialguy]

Tim beat me to it, lol

 

[DARREN GODFREY]

$10k on a a property in the $500K range is 2%. I am not saying what the original appraiser did was correct, but if properties can never be valued higher than the unadjusted sale price of the highest comparable sale, then you are essentially saying that property values can never rise, which obviously is incorrect. If an across the board time adjsutment is adequately supported in that market, then there is no reason that it should not be applied to the comparable sales.

No , they can easily rise and the market will show it , generally if a market is crazy hot , someone will come up with the cash needed to increase the market in order to get their home. However, what generally happens is that some weak appraiser will come in and say hey let's just increase the market through adjustments...do that 10 times over and you have an inflated market.
The bigger question in this is that we as appraisers don't want the hassle of sticking to the values we are presented with and everyone wants a bigger paycheck in this industry. If I can't pair sale from the beginning to end and say their was a market increase I am blowing smoke up everyones behinds.
Where is this mandate that things have to go up all the time coming from.
This is how we ended up with a crashed market last time.
Cash rules , you can get what you want but somewhere you actually have to use your own money.
Furthermore , if you feel that the property is so superior you should be able to look at a similar market area and find where someone paid a higher price for a similar property...given that your property exceeds the the rest of the neighborhood comps in some matter.
In other words, if we get caught up in the dogma that everything has to increase ...just because WE feel it should be that way . Then we have to consider other factors...Have wages increased , is the economy in an upswing. If the answer is yes to that question then marketing times will be low and people will come out of their pockets with hard earned cash to prove it to you . Markets can increase, but we can't say they are increasing just because we feel like it . Write it on historical data and if they can't get the financing let them come out of pocket and increase it ...not through smoke and mirrors . That indicates a truly hot market...we don't.

 

[DARREN GODFREY]

I disagree. If the market is increasing...or decreasing, how can sales that occurred prior to the effective date support the effective date without adjustment to the market?

By you writing an appraisal from the data and them paying for it....that is how. What happens when you do that? They walk away because it wasn't worth it ...it just wasn't . If it's a matter of 5k then let them decide. Generally what happens is that the person has one contract on that property and guess what , they lower there price...because it simply wasn't worth it.
I have worked hot markets and you know what I wrote the appraisal with the given data and guess what , the came out of pocket . So was I wrong ...yes and they proved it . We are using the sales comparison approach right. Meaning it is based on closed sales.
With that same token if a property is priced too high then people will make a lower offer or the owner will lower his price...and that dictates the market.

 

[residentialguy]

if a market is crazy hot , someone will come up with the cash needed to increase the market in order to get their home

BS. We are to show what the most probable price the property will sell for as of the effective date. We are not the gatekeepers of the market...we just report it. You need to take your police hat off and wear your appraiser hat. If the most probable price is greater than all other sales prior, that's what you report. Current sales shouldn't prove you wrong.

We are using the sales comparison approach right. Meaning it is based on closed sales.

Last time I looked, the SCA had a line adjustment for Date of Sale.