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Am I Missing Something???

glenn walker

Elite Member
Joined
Oct 11, 2006
Professional Status
Certified Residential Appraiser
State
California
This thread is becoming comical, the truth is people just want to know what their-property is worth. I was in a court case a years back where I was up against a guy who was a big-time appraiser, there where three appraisals involved and all at different values. It was a IRS case and the one appraiser got up and was trying to explain the difference between market value and the IRS definition of value. The Judge was a cocky little banty rooster type, and he yells at the fancy pants appraiser and says " I just want to know what the Blah, Blah property is worth, the appraiser again starts to stutter and stammer about the definition of market value, now the Judge literally screams at the guy and says why can't you just give me a number like Walker and Rangel did, because I don't care about your definition , the good part is we won the case and I believe the Judge had a bias against ( Mr Definition of Value )
 

Peter LeQuire

Elite Member
Joined
Jan 3, 2005
Professional Status
Retired Appraiser
State
Tennessee
I've been off base for more than my observations about appraisals for a long time. But, if you believe that, when you do an appraisal of a residential piece of property and that your value opinion of $X is any more valid than an opinion that its value is $X /- $1, I'd say you're just wrong.
A sales price is a price, the value opined as a MVO relative to a sale price ( lower, higher, same $ amount ).
In a review appraisal it asks do you agree with the market value opinion . It does not ask do you agree with the sale price . (if a purchase ) 1.

As far as using the next price if a buyer paid above MVO and it closes, appraiser can use it or not use it as a comp and then how much to rely on it could depend how it compares to other comps when a next appraisal is next done Prices change over time and thus value opinions change over time, unless a market is stable for a duration of time..

"The GSE definition of value has created a dilemna by demanding that "value" be reported as a single number, demanding a result that is not consistent with the nature of the properties being appraised. "
The point value as a single number ( most probable price ) is consistent with the nature of the properties being appraised because every property sells for one single number . Properties do not sell in price ranges. Yes, we get it, value can be a range - but typically and esp for lending, the client needs a point value of one number . We are not claiming that number as the one and only possible price for a property -so what is the problem ? We are not claiming everyone out there has to agree with our number. We only claim that number as our MV opinion for use by a client/intended set of users - for their purpose - as of the effective date 2.
1. An appraiser may review an apparisal and not agree with the value opined in the appraisal being reviewed. But IF the property appraised for the review appraisal closes AT THE PRICE THE REVIEWER DID NOT BELIEVE WAS CORRECT, the value OPINION expressed becomes a FACT: I would guess that the preponderant majority of appraisers would not even bother to to note that the price was not legitimate in some way even though she thought it wasn't its real value because you'd reviewed the appraisal of it for the sale .

2. Appraisers (as a group) have argued for as long as I've been around residential lending that for the preponderant number of SF residential properties, opining a range of value opinions is a better reflection of the way the market for these properties actually operates. It is an argument that is lost in its making, particularly if one's sight extends no further that GSE work. It's possible to capture some indication of the nature of the residential purchase decision by counting the number of appraisals one does over a career in which there were an adequate number of properties so similar to the properties being appraised that the analysis could be performed without it being necessary to make any adjustments.

Things must have greatly changed in the past 3 years.
 

George Hatch

Elite Member
Gold Supporting Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
California
The primary usage of an appraisal by a lender is (ostensibly) to ensure they are not grossly overencumbering a property or taking any undue risks. The conceit that appraisers can always hit the "real value" on the precise basis is just that, a conceit. And we do ourselves no favors when we assert otherwise. The first step in developing credibility is to establish reasonable expectations, such as we are capable of meeting. It is the assertion of unreasonable expectations that sets us up for the fall.

We know there are limitations to what we can assert from how often we run into actual transactions with prices which vary from what we would have appraised them for. And to a certain extent it's not even the result of a failure or deficiency on our end but is often dependent on some buyers and sellers working with less info than others.

The imperfect market adds limitations to what we're able to do. The more imperfect, the greater our limitations. GIGO. This is one reason why I think it's unethical for appraisers to indulge in the idea that we can outsmart the market.
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida

The primary usage of an appraisal by a lender is (ostensibly) to ensure they are not grossly overencumbering a property or taking any undue risks. The conceit that appraisers can always hit the "real value" on the precise basis is just that, a conceit. And we do ourselves no favors when we assert otherwise. The first step in developing credibility is to establish reasonable expectations, such as we are capable of meeting. It is the assertion of unreasonable expectations that sets us up for the fall.

We know there are limitations to what we can assert from how often we run into actual transactions with prices which vary from what we would have appraised them for. And to a certain extent it's not even the result of a failure or deficiency on our end but is often dependent on some buyers and sellers working with less info than others.

The imperfect market adds limitations to what we're able to do. The more imperfect, the greater our limitations. GIGO. This is one reason why I think it's unethical for appraisers to indulge in the idea that we can outsmart the market.
The lender use above is their use. Fine . Moving on, No appraiser says they always hit the "real value". What does that even mean? We say on an appraisal this is our OMV and the appraisal supports it.

What is the double talk mean wrt to reasonable/unreasonable expectations. We sign a cert and abide by USPAP for our OMV that we did certain things ( developed approaches/ had sufficient data etc ) and that we did not do other things ( were not misleading, did not appraise to a predetermined value etc )

We know the market is imperfect. And so are we. But what is the comment mean wrt to "outsmart the market" ? The appraisal is a valuation model, it is not a literal mirror to the market, though of course market data and trends populate the model. An OMV developed by the appraisal model is expected to have a min standard and hopefully above min level of "smart", aka competently developed /well explained/ credible support for it.
 
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J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
I've been off base for more than my observations about appraisals for a long time. But, if you believe that, when you do an appraisal of a residential piece of property and that your value opinion of $X is any more valid than an opinion that its value is $X /- $1, I'd say you're just wrong.

Now you changed the conversations to differences between OMV of different appraisers, which is not the topic but if you opine 192k and I opine 190k, if both are well supported then both fulfill client use . If I was reviweing your appraisal and you opined 190k and I personally might opine 190k, as long as the appraisal credibly supported 192k I would agree with it as a reviewer . However, if the 192k was poorly supported , I would not agree and the 2k would have nothing to do with it,
1. An appraiser may review an apparisal and not agree with the value opined in the appraisal being reviewed. But IF the property appraised for the review appraisal closes AT THE PRICE THE REVIEWER DID NOT BELIEVE WAS CORRECT, the value OPINION expressed becomes a FACT: I would guess that the preponderant majority of appraisers would not even bother to to note that the price was not legitimate in some way even though she thought it wasn't its real value because you'd reviewed the appraisal of it for the sale .
I have no idea what this means. If a reviewer is reviewing an appraisal whether the OA was for a refinance or purchase ( or any other reason) it does not matter, either the OM value was credibly supported and no major substantive errors found or not . If it was a purchase and house closed at the OMV $ amount, that FACT would not change anything about the review. as

 

Peter LeQuire

Elite Member
Joined
Jan 3, 2005
Professional Status
Retired Appraiser
State
Tennessee
Now you changed the conversations to differences between OMV of different appraisers, which is not the topic but if you opine 192k and I opine 190k, if both are well supported then both fulfill client use . If I was reviweing your appraisal and you opined 190k and I personally might opine 190k, as long as the appraisal credibly supported 192k I would agree with it as a reviewer . However, if the 192k was poorly supported , I would not agree and the 2k would have nothing to do with it,

I have no idea what this means. If a reviewer is reviewing an appraisal whether the OA was for a refinance or purchase ( or any other reason) it does not matter, either the OM value was credibly supported and no major substantive errors found or not . If it was a purchase and house closed at the OMV $ amount, that FACT would not change anything about the review. as
I just try to point out that there it is inconsistent with the limitations of appraisal methodolgy and the operation of SF residential markets to assert that an opinion of value can be "accurately" expressed as a point value. If value "$X" is "accurate", then all values "non-$X values" are not accurate. That is not the same thing as saying "any value in the range "$X +/- y%" is its value.

The other point I tried to make is that up to the moment a sale closes, the "price" of a property is aspirational (for the seller, the buyer, the Realtor, etc.) and is more an opinion than a fact: immediatlely upon the moment transfer of title occurs, that aspirational opinion of what it is worth becomes an historic fact, a fact which either confirms or disproves everyone's "aspiration" (value opinion, offer price, list price, assessed value, whatever) about the property's worth. Appraisers consider the price a fact, and treat it as such (though sometimes they have information that the price (a fact) may have been influenced by extraneous information or motivation.
 

George Hatch

Elite Member
Gold Supporting Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
California
The lender use above is their use. Fine . Moving on, No appraiser says they always hit the "real value". What does that even mean? We say on an appraisal this is our OMV and the appraisal supports it.

What is the double talk mean wrt to reasonable/unreasonable expectations. We sign a cert and abide by USPAP for our OMV that we did certain things ( developed approaches/ had sufficient data etc ) and that we did not do other things ( were not misleading, did not appraise to a predetermined value etc )

We know the market is imperfect. And so are we. But what is the comment mean wrt to "outsmart the market" ? The appraisal is a valuation model, it is not a literal mirror to the market, though of course market data and trends populate the model. An OMV developed by the appraisal model is expected to have a min standard and hopefully above min level of "smart", aka competently developed /well explained/ credible support for it.
I am referring to expectations within the context or asserting precision and accuracy for our conclusions. For example, most appraisers (which I assume includes you) engage in rounding.

I won't submit an appraisal review report in an assignment which calls for my own opinion of value without including an expression of my opinion of value in terms of a range prior to coming to the one number, or without noting where the original value conclusion is in relation to that range. That's how I can honestly express a value conclusion of $205k in one breath and in the next express the honest opinion that the value conclusion of $210k can also be considered a reasonable expression of MV.

If their value conclusion falls outside my range then I quantify by how much, and further note whether there are any outliers among the market data as a means of forming an opinion of whether or not there are indications of there being any buyers for this property at this value.
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
I just try to point out that there it is inconsistent with the limitations of appraisal methodolgy and the operation of SF residential markets to assert that an opinion of value can be "accurately" expressed as a point value. If value "$X" is "accurate", then all values "non-$X values" are not accurate. That is not the same thing as saying "any value in the range "$X +/- y%" is its value.

The other point I tried to make is that up to the moment a sale closes, the "price" of a property is aspirational (for the seller, the buyer, the Realtor, etc.) and is more an opinion than a fact: immediatlely upon the moment transfer of title occurs, that aspirational opinion of what it is worth becomes an historic fact, a fact which either confirms or disproves everyone's "aspiration" (value opinion, offer price, list price, assessed value, whatever) about the property's worth. Appraisers consider the price a fact, and treat it as such (though sometimes they have information that the price (a fact) may have been influenced by extraneous information or motivation.
This is fun to debate !

The URAR (yuck) sticks us with the burden of "accurate". But it is as a OMV as a point value of a single $ numerical amount just as a price is a single numerical amount.

Again, because you as appraiser opine 190k as of 12/01/2020 does not mean that 190k has to be agreed on by everyone or anyone else as THE one and only value (or price) . Your OMV of 190k just has to be credibly supported by appraisal methodology and data ( and accurately developed to extent we can )for its purpose and client use
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
I am referring to expectations within the context or asserting precision and accuracy for our conclusions. For example, most appraisers (which I assume includes you) engage in rounding.

I won't submit an appraisal review report in an assignment which calls for my own opinion of value without including an expression of my opinion of value in terms of a range prior to coming to the one number, or without noting where the original value conclusion is in relation to that range. That's how I can honestly express a value conclusion of $205k in one breath and in the next express the honest opinion that the value conclusion of $210k can also be considered a reasonable expression of MV.

If their value conclusion falls outside my range then I quantify by how much, and further note whether there are any outliers among the market data as a means of forming an opinion of whether or not there are indications of there being any buyers for this property at this value.
I like some of this but not all of it.

You often insert the word "reasonable" in for what purpose idk.. wrt to a "reasonable expression of MV " where does that come from as a source -
The client in lender work is not asking us for a reasonable expression of MV ( whatever that is), they are asking us for our OMV as a point value -

I agree the OMV comes from within a range, but there should be a rationale why we chose X point value from within that range instead of Y. If we chose 205k rather than 210k what was our reason? Did we flip a coin? Or is our subject more similar to the houses that sold for 205k than that sold for 210k?
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
I just try to point out that there it is inconsistent with the limitations of appraisal methodolgy and the operation of SF residential markets to assert that an opinion of value can be "accurately" expressed as a point value. If value "$X" is "accurate", then all values "non-$X values" are not accurate. That is not the same thing as saying "any value in the range "$X +/- y%" is its value.
I don't think it means this at all. Just because we say our OMV of X is accurate (per purpose and development ) DOES NOT mean we are saying any other possible value is not accurate. Accurate is in the context of intended use by client and if a client thinks our conclusion of X stinks they are welcome to get another appraisal (just pay me for mine)

All we state is X is accurate per OUR appraisal model /SOW development. Which is why the OMV signed as OUR opinion- (for specific client and Use.) We don't state that our MVO of X is fact or decree , nor that it should be used by others let alone the entire market to rely on! (. An opinion is supported by the appraisal but still it is just an opinion )
 
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