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Another AVM Mess

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Tim Hicks (Texas)

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Texas
Appraisal Assignment today:

We have an AVM for $224,000, but the customer insists it is worth $242,000. I inspect the property and the owner proudly states that his home is worth more because of his large lot (it backs to rail road tracks :) ). I have three current sales, one same plan across the street a whole 1,000 SF smaller corner lot with no railroad tracks, one 400 SF larger home on a smaller corner lot with no railroad tracks, one smaller home on a larger lot backing to the railroad tracks like the subject. They all are the same age, interchangeable homes with pools. The one home sale with a larger lot backing to rr tracks supports no adjustment for external obsolescence (good for them). My report that needed basically no adjustments comes to a big $214,000. No wonder the lender's are embracing the AVM's. The last time this happened (that I know of), the borrower wanted to throw my appraisal out and use the AVM value. There are no listings, old sales or current sales that support $224,000, much less $242,000, but somehow I will probably be blamed for not beating the AVM. Oh, the AVM has several custom home sales from better additions, but a computer can not tell a tract home on paper. :) :( :eek: 8O
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
(Sigh) yeap, I understand. :roll:
 

Mike Simpson

Senior Member
Joined
Jan 30, 2002
The day computers are able to do a better job than an educated, unbiased, appraiser is far off in the future. There are those who are attempting to make AVM's appear more reliable--they're the same individuals attacking appraisers--they need us out of the way.

Very similar to the housing bubble theorists who've been pushing this theory since last July. No evidence at the time...but if you plant a seed it just might grow. They need a new crises to sell thier product.

I've never seen a computer inspect a home. Never seen a computer call buyers, sellers, or Realtors to ask about the why's & wherefore's regarding the sale. Haven't seen a computer spit out a reasonable, competitive market value yet, but there are those signing the praises of the almighty AVM. Hope their jobs next!

-Mike
 

BarbaraNJ

Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
New Jersey
Tim---

Absolutely agree with your post.

This may be a bit off-topic, but here's how I explain rear yard depth (in suburban areas) to applicants who complain that their home is worth more because they have a bigger lot or bigger rear yard than one or more of the comp sales:

"Imagine that two homes are for sale. They are Identical, built the same time, by the same builder, with the same number and size of bedrooms and baths and in the exact same condition. Both have the same front yard size. One has a rear yard that is 100' deep and one has a rear yard 180' deep. The owner of the 100' deep yard is asking $350,000. The owner of the 175' yard is asking $400,000.

Would you be willing to pay $50,000 for the additional 80' ???

Of course, the answer is always "no". Then I ask "would you pay $40,000 more?" Again "no". We go back and forth until the applicant agrees that probably about $5,000 would be fair.

So I conclude that even with a rear yard almost twice as large, the fair market adjustment is always what the "typical" buyer is willing to pay, not what the seller thinks the value is.

After putting the applicant in the "shoes" of a buyer, they usualy calm right down. :oops:
 

Blue1

Elite Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
California
Tim,

We haven't seen any AVM's in great numbers in my market but what we DO see are homeowners basing their "estimate of value" on active (not closed) LISTINGS in thier neighborhood and their cost. The logic goes something like this: "Joe (across the street) has his home up for sale at $200,000. However, I have a pool that cost me $50,000 so.......my home must be worth $250,000" I can just imagine them telling a LO their house is worth $250,000 and then.......SHAZAM!.......The LO comes up with an AVM at $250,000! Will wonders never cease!!!! :roll:

Barbara,

How right you are......site usage is always a consideration as well as the general configuration of the neighbhorhood. I find (in my area) in subdivisions there is often a good reason for a parcel to be larger. (sloping terrain, fronting a busy street, etc.) I remember one where the site was 1 acre and was surrounded by other parcels of .25 acre. The 1 acre site sloped steeply down to a ravine and the only level area was about .25 of an acre. The rest was basically unusable (unless you're a mountain goat). Had to explain that to the homeowner.......(didn't mention the mountain goat thing though)
 

BarbaraNJ

Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
New Jersey
Blue1,

If I didn't see your location is 3,000+/- miles from me, I would guess by your comments that you were speaking from the next town !!!

Have also had your AVM experience of "adding on" reasoning using, of course, the cost to construct (the pool, addition, etc) and not the contribution to market value.

The "mountain goat" subject has also come up where there is a subdivision and the builder has to give one lot a larger than "average" area because of steep topography (I call it unuseable land area) or because the additional land serves as a buffer from the adjacent 200' water tower, or nearby industrial use.

My observation: the same guy (or woman) who told the builder or seller that the bigger lot wasn't worth sh** because of the detrimental 8O conditions when they made the purchase will tell YOU two years later during a refinance that their larger lot makes their home so much more valuable than the surrounding homes!!!

'Round here, we keep real high boots in the trunk for when the "BS" gets this deep :!:
 

Steve Owen

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Missouri
Barbara, I like your method of explaining it to the home owner. But, what if you get a dummy who says, "Yeah, I'd pay that much more." What would you do then? Just curious.

I am usually much more short with borrowers. I tell them something like this "The unit of comparison for sites of properties in this price range is per building site, not per square foot." That usually shuts them up even if they can figure out what I'm talking about. In those cases where they say "You mean someone would not pay more for my large lot?" I reply "My job is to look at the entire market and base my opinion of value on that information. In this market there are some people who might pay more for a large lot and others who would prefer not to have the extra work of maintaining a large lawn. In general, however, your large lot would be worth more only if you could build another house on it. In other words, if you could cut it off and sell part of it, then you would have something that could have a major effect on value." (Of course, that isn't always true, it depends on the specific property, and in those instances when it is not true and larger lot is probably going to have an effect on value, I don't use these statements.)

Concerning AVM's. We don't see them too often in our market because there is usually not enough data available for them. However, in those cases where I have seen them in operation, I have never seen a case where they were accurate. Of course, I've seen a few appraisers be pretty inaccurate, too.

I think the key is this. When you get an appraisal, you are getting a disinterested, personal, professional, opinion of value. As of yet, they have not designed computer capable of rendering a personal opinion based on intelligence (those fill-in-the blanks and get a best case scenario programs don't count). I suspect that there will be a place for AVM, MRA, and in a few cases, even LRA, use in the appraisal business. In fact, that day has already come in some areas and some circumstances. However, I doubt if computer analysis will replace an appraiser's opinion within my life time. (No, I'm not going to tell you how old I am.)
 

Ross (CO)

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Barbara's example for explaining differing backyards and their adjustments is certainly easy to remember for when I may be posed with a similar confused reader. We certainly have a fair amount of topographic differences throughout our many neighborhoods here and varied lot sizes do not necessarily warrant adjustment. As the surveyors parceled up many a subdivision it may have been quite clear that only one house would fit and occasionally some lots may be larger than others. I have my own criterion for expressing the better utility of a lot. Some have it, and others may not be any where close. I call it the "volleyball net test". If they can set one up, and have the level area to sufficiently play the game, then perhaps they have a lot worthy of recognition. Many do not. Take down the net and at least an infant can run around, or the dog can play fetch or two can pass a football without having to go to some park down the street. I also give a little more credence to a better view of our mountains if such a view is considerably un-obstructed from the rear, or recreational side of the home. Most folks do not sit outside their front door, or on chairs in their front yard, if that be the better (only) side to experience the view. They relax and do their B-B-Q'ing on the back yard's patio or deck. You get a view there, or you don't, a prime buyer's appeal factor when shopping the market.
 

xmrdfghap

Senior Member
Joined
Jan 15, 2002
Professional Status
General Public
State
Florida
I think one of the important items in the intial story is the railroad tracks. The noise, stigma, whatever accompanies railroads, piplelines etc, is always a factor. I recall one subdivison where the realtors assured me that there was no stigma attached to a pipeline. The lots adjacent to the pipeline sold for exactly the same as lots across the street. The fact that across the street lots are 75 x 100 and the lots adjacent to the pipeline are 75 x 125 never occured to them.....and yet, graphing the sales over time and comparing it to the square footage of the lots indicate that there is a 20% loss of value in the land simply because they are adjacent to the pipeline. So you can increase the value of the land due to size, and adjust it back again due to stigma.......
 
B

Bemis Pownall

Guest
Ross(CO)

Are you talking about regulation volleyball?
What about Badmitten is there a "badmitten net test" as well?
Would viewing your mountians while playing volleyball be destracting??


Just a question..

:icecream:
 
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