Appraisal Bias

[Dale Floyd]

Range of value needs to be incorporated instead of a point value. May help avoid bias.

Actually, you can point that out in your explanations of the grid results. Remind the client of your assignment parameters to provide the most probable single conclusion while pointing to the arguments that exist between the range of low to high, if applicable.

It is not our jobs to decide how a lender must use our appraisals, or what their lending policies should be. It is our task to analyze, rationalize our opinion, and communicate.

 

[J Grant]

It is ridiculous to state at appraisers should not develop a point value and that it should be a range. Nearly every client needs a point value, even non-lender work such as tax or estate or divorce. At a divorce settlement, they need to divide assets - 300,000 split between 2 people - not a range of 290,000-310,000 split between 2 people.

In a purchase, $295,000 gets an LTV of 20% down and then closing and settlement costs down to the penny on the HUD from it . How the heck are they supposed to do tat with
Ge e, $280,000-$300,000 is a value range so let's somehow divide it at closing. (sarcasm)

Obviously, the point value comes from a range so if you want to comment on the range, which is there for them to see anyway, you can.

 

[J Grant]

Waivers are Unbiased so use them and be done

Actually, they are not free from bias- a person over at the lender puts down the value estimate as the subject value - that person or entity can be charged with bias. Ditto for the data used in the AVM.

 

[George Hatch]

There's nothing stopping an appraiser from expressing their opinion both as a range (first) and then as a point value (final).

 

[Terrel L. Shields]

A lender client needs a point value and if the appraiser does not provide i

What is needed is the latitude of the banker who makes the loan to use a value that is within a range of the sale price. So if the SP overlaps within 5% or so, then they should be able to make the loan anyway and the in house banker should not be required to carry 100% reserves just because the appraisal is $1 less than the sale price (the current rules have no flex.) After all, in many loan programs they are allowed to lender closing costs etc. extra over the SP as it is.

 

[Amy Perkins]

I just received an email from one of my best lending clients that listed 77 words that will cause an appraisal to be sent back for revision if found in the report. A lot of them make sense but included in the list are:
Illegal
Good
Average
Fair
Poor
Homogenous
House of Worship (if you can't say church, mosque, temple, synagogue or house of worship, what are you supposed to say when the subject abuts one?)
Young
Mature
Old
High
Low
Strong
Weak
Rapid
Slow
Fast
Diverse
Context is VERY important. IMHO, outright banning these words is completely ridiculous. If you looked at every appraisal I've written in the last 35 years I would guess you would find one or more of these words in 99% of them but not used in a way that indicates bias. I don't want to lose the client but we're going to have a problem if they send back every report that has any of these words used in a context that has nothing to do with bias.

It called a 6 trillion dollar bill in 2021 for diversity for corporations. 6,000,000,000,000.00 Just thought I would write that out so you get the idea!

 

[J Grant]

There's nothing stopping an appraiser from expressing their opinion both as a range (first) and then as a point value (final).

we can do that, and the adjusted value range for the comps is there on the form regardless

What these posters want is the appraiser not to opine a point value , and instead just opine a range of value for the subject

Idk how they can fail to see that most clients and esp lenders need a point value. Those appraisers who keep whining they are "not that good" should have turned in their license. If an appraiser only opines a range, then somebody else will decide the point value. Which is what we see with Waivers. Ya''ll happy out there, those who kept agitating for a range? They heard you. You were too ** to realize that if you got your wish to only provide a range, they would no longer need you


They seem unable to comprehend their point value is limited to an effective date user/client limited use, and these "appraisers" act like their point value is some universal god-like value everyone out there is supposed to rely on

 

[alebrewer]

It is not 'ridiculous' to state that appraisers shouldn't conclude to a point value - at least in theoretical terms. There is no such thing as a point value for a property - it's spurious. Calling an EMV $500,000 (assuming you're a believer in point values and Santa Claus), is no more, or less, accurate than calling it $499,999 (or even $498,893). Is a 'point value estimate' supportable? Of course it is. In reality, does it exist? No. A property will always exhibit a range of value, within which any 'point value' would be supportable.

To demonstrate: Buyer A sees a property they like - property is listed at $499,999 (because that sounds cheaper than $500,000) - buyer A believes they should ALWAYS bid below the list price, so they proffer $495,000. Buyer B holds no such qualms about bidding below list, and offers full price - $500,000. Both buyers fit the definition of market value (prudent, acting in their own best interest, aware of the market, etc.). Which 'price' offering more accurately reflects the subject's value?..... (hint - neither and both)

 

[J Grant]

It is not 'ridiculous' to state that appraisers shouldn't conclude to a point value - at least in theoretical terms. There is no such thing as a point value for a property - it's spurious. Calling an EMV $500,000 (assuming you're a believer in point values and Santa Claus), is no more, or less, accurate than calling it $499,999 (or even $498,893). Is a 'point value estimate' supportable? Of course it is. In reality, does it exist? No. A property will always exhibit a range of value, within which any 'point value' would be supportable.

To demonstrate: Buyer A sees a property they like - property is listed at $499,999 (because that sounds cheaper than $500,000) - buyer A believes they should ALWAYS bid below the list price, so they proffer $495,000. Buyer B holds no such qualms about bidding below list, and offers full price - $500,000. Both buyers fit the definition of market value (prudent, acting in their own best interest, aware of the market, etc.). Which 'price' offering more accurately reflects the subject's value?..... (hint - neither and both)

Regarding the below in bold, did you , or did you not sign your name next to a point value on appraisals?

there is no such thing as a point value for a property - it's spurious

 

[J Grant]

It is not 'ridiculous' to state that appraisers shouldn't conclude to a point value - at least in theoretical terms. There is no such thing as a point value for a property - it's spurious. Calling an EMV $500,000 (assuming you're a believer in point values and Santa Claus), is no more, or less, accurate than calling it $499,999 (or even $498,893). Is a 'point value estimate' supportable? Of course it is. In reality, does it exist? No. A property will always exhibit a range of value, within which any 'point value' would be supportable.

To demonstrate: Buyer A sees a property they like - property is listed at $499,999 (because that sounds cheaper than $500,000) - buyer A believes they should ALWAYS bid below the list price, so they proffer $495,000. Buyer B holds no such qualms about bidding below list, and offers full price - $500,000. Both buyers fit the definition of market value (prudent, acting in their own best interest, aware of the market, etc.). Which 'price' offering more accurately reflects the subject's value?..... (hint - neither and both)

You should have never been in an appraiser if you claim the above, yet you signed your name next to point values on appraisals ( which I assume you did )

this is disgusting to read. It is like a doctor saying they diagnosed patients for years but don't believe a doctor can diagnose a patient, or there is such a thing as a diagnosis

You have no idea why a point value is different from a price if you are spouting nonsense such as 500 could have been 499,999 k. Of course, it could have been 498900 or a sliver close, but s what? What level of education do you have beyond HS? Sorry to be so blunt as to ask but I can not fathom your reasoning as compatible with understanding what an appraisal is.

Yeses, a property always can exhibit a range of values, yes, but we are hired to opine a point value developed by and supported by the appraisal.

In an appraisal, we are not using an actual price from buyer A or buyer B out in the market =we are SUPPOSED to use a theoretical, hypothetical transaction of our appraisals by using the market value definition model of a typically motivated buyer. Do you understand the difference?