Appraised Value is TOO HIGH!

[Mile High Trout]

But I feel for the buyers. On my purchase I crossed my fingers and lost sleep hoping the appraiser would come back lower so I could catch an additional break. It was all dependent on a questionable less clearly defined market area, so there was room for doubt there. I know, I'm an appraiser myself who looked at this market.

But the appraiser was a good boy and rang in super high. Love him and hate him at the same time, but that's what happened.

A Realtor who properly represents the interests of the buyers tells them to not offer more than they can afford. And from that certain threshold number, the Realtors job is to try and find the buyers a discount if that is the buyers wish. Realtors job might also be to let the buyers pay more to get their dream home if there is competition and the buyers must have it. It's all about proper representation based on buyer interest. Why would the Realtor play the high offer game in a heated market, expecting to discount after the fact? That's poor representation. You throw the offer up, and then wait for the result. You never offer with an expectation for anything but an acceptance, rejection, or immediate counter. All this after the first round stuff is purely speculative. It's the first round that matters, that's it. That's the whole Realtor game; learning how to make successful offers on the first round.

The Realtor was apparently successful in his first offer. If the inspection is bringing unknowns to light they must rescind based on the inspection rejection deadlines, in relationship with their financial ability to carry the burden of immediate repairs.

Help them see the bright side of it next time, that the repairs won't be financed in and cost 3x more than their actual todays cost due to amortized interest. So the buyers can ask the seller to repair, inquire if future home owners insurance may help the distribute cost, or pay for it themselves. Check this language out: RESEARCH, ANALYSIS, INSPECTION, AND ASSUMPTION DISCLOSURES: The appraiser may have utilized web based resources, best of ability estimations, or direct opinion of professionals in the given market, to obtain cost estimates, valuation opinions, condition opinions, etc.
The appraiser is not a professional home inspector, and the term appraisal inspection is not synonymous with a professional home inspection.
The appraiser does not closely inspect systems in the same way a professional home inspector does. One of the appraisers duties is to report
on observable conditions, and make assumptions regarding potentially concealed conditions, or lack there of. The appraiser usually does not
have the opportunity to review the professional home inspectors' reports, Any concerns potentially brought about by a home inspector (if utilized in a sale scenario or similarly
applicable) should be directly handled between the buyer / seller / and real estate agents involved with any given transaction.

 

[J Grant]

Appraisal Contingency clause has any effect on the offer or on the final sales price. I don't know if there was an Appraisal Contingency clause in the transaction we're discussing but it sure seems like this appraisal is turning into my worst nightmare, where appraisers don't merely analyze values, they knowingly determine prices. (And incur all the liability that comes with that role.)

Why is an appraisal contingency clause your worst nightmare? I don't get it and think it is an outlandish fear.

Our appraisal is used by the lender, our client, but they share the results with the buyer. The buyer signs an appraisal contingency before they submit the package to the lender, and the lender forwards us the contract. If an appraisal contingency in a contract upsets you that much, don't take on assignments with an appraisal contingency clause in the contract!

It makes no difference to me... I opine my unbiased MVO the same way, whether an appraisal contingency clause is in the contract or not.

 

[KD247]

... The buyer's agent calls me direct and on the verge of tears, she says I appraised the home too high. Her clients were counting on me to "come in lower" and then renegotiate with Fannie. ...

Ironically, the agent would have been better off by telling you that initially. She should have emphasized that it was a bidding situation and that all of the buyers were more interested in getting into escrow than they were in the price. She could have told you that the asking price was also irrelevant; the sellers just had to start somewhere. She could have even taken the opportunity to tell you that the house is in far worse condition than it looks, that there are risks involved in buying "As-Is" and the value should reflect the appropriate discount, etc., etc.

The circumstances, the opposite of the normal haggling for a higher value, might have taken her head out of the game and now she's trying to recover.

(MHT just posted. Interesting thought on the agent not only getting confused but perhaps failing to do her duty as a buyer's agent. I wouldn't want to be a part of that argument!)

 

[J Grant]

How about this for a novel approach...appraisers merely need do what they sign on the cert... opine an unbiased independent MVO!!!! What a concept! (I know many do this, being sarcastic).

If appraisers do their job, life is easy.

Sure, consider the SC, but then go your job, develop an independent value opinion based on ALL the relevant market data. This means your MVO is more tied in to predominate market data , and not so vested in the individual contract. The purpose of the report is to derive a MVO that stands apart from the flaws ,influence of terms, and possibly off market price that may be present in the contract.

And, when the MVO and SC price are the same or equivalent, then the MVO is solid, supported by being developed from the avail relevant market data, apart from the SC /offer on subject.

 

[KD247]

...It makes no difference to me... I opine my unbiased MVO the same way, whether an appraisal contingency clause is in the contract or not.

Think about the contradictions in what you're saying - that in your striving to produce to produce an unbiased analysis, you are going to essentially ignore potentially pertinent data and then disregard the fact that your analysis directly influences the data.

Even Jane Goodall eventually realized that you can't become an integral part of the system you're researching. Perhaps we disagree on our basic duty but I believe that the appraiser's job is to report on the market, not to correct it. I guess it's a fair question though; when it comes to residential lending, are appraisers meant to be advisers or judges?

 

[DJ Starr]

I love the discussion and feedback everyone. I'm not ignoring any direct questions, just not sure how detailed I can/should get on the Internet.

I did send written communication to the client and politely asked them to remind all parties of my role in the process and the appraiser-client relationship.

All is quiet for now. One of my main reasons for posting was to get a feel for whether or not this "selling" process of counting on the appraisal to add another round of negotiations is common or prevalent. It seems from the remarks here, hopefully I ran into a lone wolf agent...

 

[J Grant]

Think about the contradictions in what you're saying - that in your striving to produce to produce an unbiased analysis, you are going to essentially ignore potentially pertinent data and then disregard the fact that your analysis directly influences the data.

NOWHERE, did I Say to "ignore" pertinent data. I consider the SC price and terms, and sometimes it is of more significance than others as a market indicator.

But, there is a big leap from considering the terms and price of a SC and letting it drive the value development.

I have no idea of what you mean when you say that I "disregard that my analysis directly influences the data?"

I see a lot of that in your posts...convulted thinking and loops around what the SC means, what the contingency clause means, etc...just keep it simple, do your job and opine an indpendent MVO, with the caveat that you consider the contract as a piece of market data...it is really quite simple. (not easy, but simple, as in fundamental, an anchor of methodology).

Even Jane Goodall eventually realized that you can't become an integral part of the system you're researching. Perhaps we disagree on our basic duty but I believe that the appraiser's job is to report on the market, not to correct it. I guess it's a fair question though; when it comes to residential lending, are appraisers meant to be advisers or judges?

You seem conflicted as to the role of appraisers in res lending. We are valuation experts hired by lenders because they want our independent value opinions, allowing that part of the opinion includes considering a contract. Why are you complicating it by calling us judges, etc?

And we don't merely "report" on the market, we are supposed to analyze it, and if part of that analysis means our MVO differs from a SC price, then so be it...what you call a market correction.

Are you so dismissive of an appraiser's value and skill, what they bring to the table, that you refuse to accept responsibility for report results?

Imo, you make things more complicated than they need to be.

 

[J Grant]

Even Jane Goodall eventually realized that you can't become an integral part of the system you're researching

This is not field behaviour research, Goodall did not want to influence the species she was observing.

Yes,, appraisers do become part of the system they research...because lenders rely on appraiser value opinions as part of lending decision process. Why do you have a problem with that?

The appraisers are going to play an integral role whether they slant their practice to supporting SC prices ( "reporting the market") or whether they do their designated job, opine indpendent value opinions ,( even though those opinions include considering sales contracts as part of the data. )

 

[J Grant]

I love the discussion and feedback everyone. I'm not ignoring any direct questions, just not sure how detailed I can/should get on the Internet.

I did send written communication to the client and politely asked them to remind all parties of my role in the process and the appraiser-client relationship.

All is quiet for now. One of my main reasons for posting was to get a feel for whether or not this "selling" process of counting on the appraisal to add another round of negotiations is common or prevalent. It seems from the remarks here, hopefully I ran into a lone wolf agent...

Sounds like you are handling it well and the buyer's agent sounds incompetent, and maniuplative.

 

[KD247]

... Yes,, appraisers do become part of the system they research...because lenders rely on appraiser value opinions as part of lending decision process. Why do you have a problem with that?...

Because I see a shift towards increasing the role of the lender's appraiser in the buyer's/seller's decision making. Ten years ago, we hardly saw any examples of the situation that DJ's portraying.

The latest example of how this corrupts the market (although certainly not the first time it occurred) was during the boom, when buyers were almost universally paying exactly as much for a property as the maximum mortgage would allow. I'm certainly not angry or full of regrets (I did okay, personally) but appraisers had a hand in that process and dropped the ball when we didn't realize what was happening and how it would affect our whole economy.

Now, the real estate industry is overcompensating in a fruitless direction, with lenders imposing stricter but less rational rules and appraisers going along for the ride. I don't have an answer for the big picture but there are little things we can do to prevent misconceptions regarding what an opinion of value really is, and what it isn't. Making it clear that buyers/sellers shouldn't rely upon appraisals for their pricing decisions is an important first step. That said, if I were an agent, I'd be perfectly happy to shift a good portion of my responsibilities and liability onto the appraiser's shoulders.

I love the discussion and feedback everyone. I'm not ignoring any direct questions, just not sure how detailed I can/should get on the Internet. ... It seems from the remarks here, hopefully I ran into a lone wolf agent...

This might be a case of a lone wolf agent, or perhaps a lone wolf appraiser. And I mean that in a good way! My questions were meant to be rhetorical. It would be entirely inappropriate to discuss the deal's details here - this stuff gets onto Google almost instantaneously.