Appraisal on Same Property for different client

[George Hatch]

Let me ask you this…If a new appraiser is reviewing the same property and features, then shouldn’t the evaluation be close in proximity?​

If the answer to that is no, then that seems to a problem with the profession. Not me.​

When you say "close in proximity" are you referring to the value conclusions? If so then the answer is usually yes. But with that said, how similar the value conclusions are is virtually always dependent on the availability of the really comparable data. By which I am referring to comparability to your property's dominant attributes.

If I'm appraising a home that's part of the 400 unit residential subdivision consisting of 4 floorplans and there have been 8 model matches that have sold in the last 60 days then those sale prices will probably be tightly clustered overall. Most buyers are going to be operating within that range and as a result most appraisers will also be operating in that range.

But if I'm appraising a property that is unique for its area and there are NO sales of really similar properties then I'm going to have to scratch to come up with enough sales to make a meaningful comparison and I will be forced - by the lack of homogeneity - to bridge the gap between these various differences via use of my subjective judgment. I'm not doing that because I want to do it, but because I have no other choice but to do it.

That problem becomes compounded exponentially as the number and type of variables increase. One or two variables is relatively easy but 5 or 6 significant variables becomes a nightmare of moving parts. In that event we will see a wide range in the values buyers are paying, as as a result we'll see more variance among the appraisers who are using that data. In computer parlance we'd call it garbage in-garbage out. In no case can appraisers be more consistent with their conclusions than the data they're using.

 

[dahofman]

Let me ask you this…If a new appraiser is reviewing the same property and features, then shouldn’t the evaluation be close in proximity?​

​

If the answer to that is no, then that seems to a problem with the profession. Not me.​

When you say "close in proximity" are you referring to the value conclusions? If so then the answer is usually yes. But with that said, how similar the value conclusions are is virtually always dependent on the availability of the really comparable data. By which I am referring to comparability to your property's dominant attributes.

If I'm appraising a home that's part of the 400 unit residential subdivision consisting of 4 floorplans and there have been 8 model matches that have sold in the last 60 days then those sale prices will probably be tightly clustered overall. Most buyers are going to be operating within that range and as a result most appraisers will also be operating in that range.

But if I'm appraising a property that is unique for its area and there are NO sales of really similar properties then I'm going to have to scratch to come up with enough sales to make a meaningful comparison and I will be forced - by the lack of homogeneity - to bridge the gap between these various differences via use of my subjective judgment. I'm not doing that because I want to do it, but because I have no other choice but to do it.

That problem becomes compounded exponentially as the number and type of variables increase. One or two variables is relatively easy but 5 or 6 significant variables becomes a nightmare of moving parts. In that event we will see a wide range in the values buyers are paying, as as a result we'll see more variance among the appraisers who are using that data. In computer parlance we'd call it garbage in-garbage out. In no case can appraisers be more consistent with their conclusions than the data they're using.

Thank you for this. That makes sense. I’m sure it is a very challenging profession.

 

[dahofman]

Let’s say that my GIS info is hidden because of my profession. How would one go about pulling comparable properties? Can someone unlicensed handle that responsibility?

 

[George Hatch]

As with most occupations, ours' has it's moments. But that's also what keeps things a bit interesting.

16,000sf house on 10ac, located out in the desert 15 miles away from town. It wasn't in habitable condition at the time I appraised it.

I would not expect a high degree of consistency in the value conclusions for this one among either the buyers or the appraisers. But "just say no" isn't one of the options as far as our clients are concerned. They need an appraiser to put a value opinion on that property so some appraiser is going to have to step up and take a swing at it.

 

[Tim Hicks (Texas)]

Maybe I missed a comment somewhere, but what is the time difference between to the prior appraisal and this new one. The sales market is constantly changing and a new value may be supported by more recent sales. I keep hearing about a market correction. Honestly, there are fewer sales that three months ago in this area and prices appear to be down in some areas and not in other areas. The time frame between the two valuations could require a new value (higher or lower) depending on the market. Double dipping? Each assignment is a different assignment with a different scope of work. The appraisal could turn out identical in value (the form should not be identical), but it could be different based on market changes. The only aspect the appraiser is saving is the actual measurement of the property because he/she would still be required to inspect the property for this new client.

 

[Tim Hicks (Texas)]

Let’s say that my GIS info is hidden because of my profession. How would one go about pulling comparable properties? Can someone unlicensed handle that responsibility?

Please explain this question. Is the appraiser from your market area? Once he/she inspected your property, they have the physical characteristics of your property. The use of comparable sales is typically from MLS and public records. A secretary or trainee can print comparable sales for the appraiser, but it is the appraiser's job to select the most similar comparable sales for comparison. Are you saying the appraiser never visited your property? How would you know if he/she did not select the comparable sales?

 

[George Hatch]

Let’s say that my GIS info is hidden because of my profession. How would one go about pulling comparable properties? Can someone unlicensed handle that responsibility?

I never use GPS. Your local tax assessor will have assessor maps that lay out exactly where these properties are located, right down to the measurements of the parcels. Locating the property is a sure thing. Can't miss it.

As for pulling comparables we are supposed to start close and expand outward only to the degree necessary to come up with the sales of other properties which generally fit withing range for age, size, quality and condition. For example, if I'm appraising a property with a 1950s house of 2000sf I'm looking for other homes in proximity which are of comparable age and within maybe 500sf in size (so, 1500-2500sf). If I can't get enough of those then I'll go out further and/or expand the size range a little.

What I don't so is search for sales by price. "Price" is the answer to the question that's being asked, not a primary search parameter. We're solving for price, not searching for it.

 

[Tim Hicks (Texas)]

As far as appraising the same property more than once, it can done per USPAP as long as you disclose that you appraised the property to the new client and the confidentiality agreement did not specifically state the appraiser could not accept another assignment for the property from the original client. Everything that was confidential regarding the physical characteristics will be evident upon the new inspection. I have done more than one appraisal for the same property many times in less than three years. Typically, it is the same lender ordering a new appraisal, but sometimes it is a new lender. I have done listing appraisals in small towns and had to do the loan appraisal for the lender when sold. As long as you disclose and do your job correctly, there is no harm or foul. I have also had to do a new appraisal on a property because the physical characteristics were changed (lot size, additions, etc).

 

[dahofman]

Maybe I missed a comment somewhere, but what is the time difference between to the prior appraisal and this new one. The sales market is constantly changing and a new value may be supported by more recent sales. I keep hearing about a market correction. Honestly, there are fewer sales that three months ago in this area and prices appear to be down in some areas and not in other areas. The time frame between the two valuations could require a new value (higher or lower) depending on the market. Double dipping? Each assignment is a different assignment with a different scope of work. The appraisal could turn out identical in value (the form should not be identical), but it could be different based on market changes. The only aspect the appraiser is saving is the actual measurement of the property because he/she would still be required to inspect the property for this new client.

Great question. It’s been two weeks. I’m not sure it would change much, but maybe?

 

[Tim Hicks (Texas)]

Let’s say that my GIS info is hidden because of my profession. How would one go about pulling comparable properties? Can someone unlicensed handle that responsibility?

If the physical characteristics of your home are hidden on tax records because you are in law enforcement or somesuch, it will take a physical inspection of your property to do a proper valuation. You may have to provide your tax information to the appraiser. This is confidential information, but must be disclosed to the lender to do the loan. Sometimes, the lender obtains it from the owner for the appraiser, but most times the owner provides me the information needed (taxes, parcel number, even the lot size/survey). I don't understand the comparable sales question as most appraisers base their comparable sales selection on the physical characteristics of the subject property.