Across The Board Time Adjustments?

[DARREN GODFREY]

Look no further. I started appraising in 1997.

When the markets were collapsing of course because they were loosing money. You see because we got in the habit of being driven by what lenders wanted...as a matter of fact ...THEY OWNED US. Sure don't hit that value and you phone is gonna be quiet...then the market crashed and we were exposed as puppets. So then they went through the next step..prove that you are not just hitting numbers.

 

[hastalavista]

Look this every increasing market trend of 5,8,10% year over year is something new. Historically real estate gains were at a much lower pace...then we had a boom where appraisers and everyone else got into forecasting ...and guess what ...it crashed . So take all that crap and keep it to yourself . The other thing that we choose to ignore is the cost approach and income approach, because guess what ...it won't support your ever artificially increasing sales approach.
Take a step back and look at what we are actually doing and it makes no sense to perpetuate something as ever increasing without any real reason.

Check List
1)Competition for the property?
2) Can I rent a property for less?
3)Did the cost to buy the land and build the property go up?

These are all 3 approaches in different language.

This post has me thinking that we will be replaced with robotics that have no need for hitting numbers...soon.

What do you think is going to happen to OUR industry if another crash takes place kids?

I am not going to change your mind, but I would ask you to consider the following:
We are supposed to report what the market is doing based on what the market is doing.
When we value properties based on market value definition, then we are supposed to value them based on how the market values them.

We are not the judges of the market. We are the reporters of the market.
We don't confer market value on a property at a point that we think it should be.
We provide an opinion of market value based on the analysis of the market data; whether it is higher or lower than what we would like it to be or might be comfortable with, it is what it is.

You are imposing your judgment as to what should be, not what is. Why you are doing that, I don't know.

But in your first two posts, you conveyed the same characteristic:

Ok , I am engaged in a review appraisal and the OA used a time adjustment on every single closed sale . I feel like that is predicting the future in that, should not the market speak for itself.
​

It is not predicting the future, it is analyzing the data and concluding a point-value now. And, if you really considered market analysis and what it means, you'd know that for anything more comprehensive than a Level B market analysis, we do forecast the future to determine demand. This is what appraisers do (or, at least those who are competent will do so).

Yeah, It seems he is hitting a number. I agree that it is an increasing market , however the sales should tell the story.​

In your Level B market analysis that I presume you do for your assignments, the sales are telling the story. But not just the sales in your grid. And, without knowing anything else, I'd probably consider the 1004mc market trend analysis more reliable than a single matched-sale paring in regard to market conditions.

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.​

That is a problem. I will bet you any odds that there are things you do in your appraisal that I would never do. But just because I wouldn't do it doesn't mean it cannot be done. Again, you are putting your personal standard on what you think should be occurring rather than what is or what the recognized methodologies say should be done. You say the market is increasing but you don't accept in a rising market that the value of the subject can be higher than the unadjusted sale prices of the comparables; such a conclusion would be misleading and create an inflated value.

OK, fine. Put in your report that you don't consider that an acceptable methodology and don't make any market condition adjustments and value the property as you see fit in your review because that would be the honest reason for your value disagreement, and I presume you are required to state the reason for any value disagreement. I mean if you are right, then you should be comfortable citing that as your rationale.
Send it off to your client and move on to the next one. Stand your ground on this one; your client will appreciate, especially as a reviewer, that you are ensuring the collateral valuations they will ultimately rely upon are credible. That is what we do in the review function.

Good luck!

 

[DARREN GODFREY]

Look no further. I started appraising in 1997.

When the markets were collapsing of course because they were loosing money. You see because we got in the habit of being driven by what lenders wanted...as a matter of fact ...THEY OWNED US. Sure don't hit that value and you phone is gonna be quiet...then the market crashed and we were exposed as puppets. So then they went through the next step..prove that you are not just hitting numbers.

https://www.fanniemae.com/content/guide/selling/b4/1.1/01.html

Definition of Market Value
Market value is the most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

• buyer and seller are typically motivated;
  
  
• both parties are well informed or well advised, and each acting in what he or she considers his/her own best interest;
  
  
• a reasonable time is allowed for exposure in the open market;
  
  
• payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and
  
  
• the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

You see ...

• the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

[/QUOTE] Where do we derive the normal consideration from? A made up number or sales of comps? It's history...

 

[residentialguy]

https://www.fanniemae.com/content/announcement/0830.pdf
Time Adjustments on the Appraisal Report Selling Guide, Part XI, Section 406.05D: Date of sale/time adjustment
The following is being added to Section 406.05D of the Selling Guide: If in the analysis and completion of the sales comparison approach the appraiser determines that time adjustments are required, the adjustments may be either positive or negative. The adjustments, however, must reflect the difference in market conditions between the date of sale of the comparable and the effective date of appraisal for the subject property.

Ouch! That's gotta hurt.

 

[DARREN GODFREY]

I am not going to change your mind, but I would ask you to consider the following:
We are supposed to report what the market is doing based on what the market is doing.
When we value properties based on market value definition, then we are supposed to value them based on how the market values them.

We are not the judges of the market. We are the reporters of the market.
We don't confer market value on a property at a point that we think it should be.
We provide an opinion of market value based on the analysis of the market data; whether we think it is right, wrong, or something in-between.

You are imposing your judgment as to what should be, not what is. Why you are doing that, I don't know.

But in your first two posts, you conveyed the same characteristic:

Ok , I am engaged in a review appraisal and the OA used a time adjustment on every single closed sale . I feel like that is predicting the future in that, should not the market speak for itself.
​

It is not predicting the future, it is analyzing the data and concluding a point-value now. And, if you really considered market analysis and what it means, you'd know that for anything more comprehensive than a Level B market analysis, we do forecast the future to determine demand. This is what appraisers do (or, at least those who are competent will do so).

Yeah, It seems he is hitting a number. I agree that it is an increasing market , however the sales should tell the story.​

In your Level B market analysis that I presume you do for your assignments, the sales are telling the story. But not just the sales in your grid. And, without knowing anything else, I'd probably consider the 1004mc market trend analysis more reliable than a single matched-sale paring in regard to market conditions.

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.​

That is a problem. I will bet you any odds that there are things you do in your appraisal that I would never do. But just because I wouldn't do it doesn't mean it cannot be done. Again, you are putting your personal standard on what you think should be occurring in rather than what is or what the recognized methodologies say should be done. You say the market is increasing but you don't accept in a rising market that the value of the subject can be higher than the unadjusted sale prices of the comparables; such a conclusion would be misleading and create an inflated value.

OK, fine. Put in your report that you don't consider that an acceptable methodology and don't make any market condition adjustments and value the property as you see fit in your review because that would be the honest reason for your value disagreement, and I presume you are required to state the reason for any value disagreement. I mean if you are right, then you should be comfortable citing that as your rationale.
Send it off to your client and move on to the next one. Stand your ground on this one; your client will appreciate, especially as a reviewer, that you are ensuring the collateral valuations they will ultimately rely upon are credible. That is what we do in the review function.

Good luck!

Thanks Denise...Sorry I came on in battle mode, but that is exactly what I planned on doing. I have reviewed a number of appraisals.. and look if it is anywhere close to what it should be I don't really get into nit picking...but an across the board adjustment for a value that can't be found on any comp....is just speculation.

 

[residentialguy]

You see because we got in the habit of being driven by what lenders wanted...as a matter of fact ...THEY OWNED US. Sure don't hit that value and you phone is gonna be quiet...then the market crashed and we were exposed as puppets. So then they went through the next step..prove that you are not just hitting numbers

I'm not suggesting to inflate value, so don't try to pin that on me. I agree that some did. That was wrong...but no more wrong that you coming in below value. Both are wrong and misleading.
I do agree that appraisers need to support their adjustments. Never suggested otherwise.

 

[residentialguy]

..but an across the board adjustment for a value that can't be found on any comp....is just speculation.

maybe...or that's it may be an increasing market where all sales prior to the effective date need to be adjusted.

 

[DARREN GODFREY]

https://www.fanniemae.com/content/announcement/0830.pdf
Time Adjustments on the Appraisal Report Selling Guide, Part XI, Section 406.05D: Date of sale/time adjustment
The following is being added to Section 406.05D of the Selling Guide: If in the analysis and completion of the sales comparison approach the appraiser determines that time adjustments are required, the adjustments may be either positive or negative. The adjustments, however, must reflect the difference in market conditions between the date of sale of the comparable and the effective date of appraisal for the subject property.

Ouch! That's gotta hurt.

No it doesn't because the analytical data was flawed.... so again in this case ...i doesn't hold weight. This appraiser would have needed to have one closed sale to prove that his analysis was correct . He didn't , he had no closed sales to prove his point.
If it was a case of 1/16@515k 6/16@525 and 12/16@535 ...I wouldn't have started this thread ...what we have is 509, 510,510 and then opinion of value 523

 

[DARREN GODFREY]

maybe...or that's it may be an increasing market where all sales prior to the effective date need to be adjusted.

That is cool we all have butts and opinions so where is the comp that supports this...plenty of comps. Actually he could have used a comp from last year...it's allowed. Guess what...it didn't exist. So he made up an adjustment based on skewed data , due to a foreclosure in a market that had over 20 sales and one foreclosure...and that's not a link. And you can do whatever you want, but then you get reviewed and someone call bull****.
Get it , got it , good.

 

[DARREN GODFREY]

I'm not suggesting to inflate value, so don't try to pin that on me. I agree that some did. That was wrong...but no more wrong that you coming in below value. Both are wrong and misleading.
I do agree that appraisers need to support their adjustments. Never suggested otherwise.

What is below the value and who sets the value?