Appropriate Or Inappropraite Review Question?

[hastalavista]

In another folder, a forumite posted a question regarding the opinion of value and the unadjusted and adjusted range of the comparables.

The question asked, was, "Have you ever encountered a situation where your opinion of value for the property was above the comparables used in your appraisal report?"

In the discussion, it was revealed that the appraisal's opinion of value was higher than the adjusted and unadjusted sale price.
My response was, a value above the unadjusted sale price happens. Above the unadjusted sale price, not so much, and that the expectation in residential appraising is that one wouldn't see that.

The appraisal concluded a value above the adjusted and unadjusted sale price. When asked why, the reasons was based on scarcity of inventory, dated sales, historical appreciation, new employer in town, etc.

I then said the following (I'll quote myself and an bolding reviewer in this thread as my topic relates to that condition):

Those seem like good reasons (to me) why a house would be valued above the prior sales.
As a reviewer, I would ask, if such is the case, why weren't market-condition adjustments applied to the comparables to reflect this dynamic?
Doesn't mean I'd necessarily stop it; but I'd certainly question it.

Now, in my review function, I do not provide my own independent opinion of value.
But I am required to conclude if the appraisal, as presented, is credible or not. A non-credible finding means that it isn't credible as-presented; it doesn't mean the value is high, low, or right on.

It seems to me that some have posted recently that a reviewer asking a question about an adjustment constitutes the reviewer providing an opinion of value. I obviously disagree.

Therefore, given the situation above, and assuming I was the reviewer and I called the appraiser and asked,

Did you consider making a market-condition adjustment to the comparables based on your market analysis, thereby bracketing the concluded value, and if not, do you think it would be appropriate?

• Is that an inappropriate question for a reviewer, who is not concluding their own opinion of value, to ask?
• If the appraiser decides to make an adjustment and, as a consequence, brackets the value, is that directing the appraisal process?
• If the appraiser says, "I hear you, but I'm not sure how to do that..." and then I say, "Well, if it were me, I'd consider X, Y, and Z and do it this way...... but what you do is up to you." does that cross a line?

I think all of the above is well within the scope of the review and none of it creates an independence issue; and the reviewer doesn't need to conclude his/her opinion of value in order to ask these questions. But given some of the recent discussion on review SOW, I'd appreciate to hear alternative views (if they exist).

 

[BRCJR]

I agree the way indicated above is acceptable review practice.

I always end my conversation with a comment about any changes, if any, is their decision and I am only discussing the situation to have a better understanding.
I do not tell an Appraiser what to put in a report nor what to take out. Not my job to do so.
It is my job to understand what has been developed and reported and decide if it is credible and/or reasonable.

 

[bnmappraisal]

Did you consider making a market-condition adjustment to the comparables based on your market analysis, thereby bracketing the concluded value, and if not, do you think it would be appropriate?

• Is that an inappropriate question for a reviewer, who is not concluding their own opinion of value, to ask?

I don't think it's crossing a line since you are simply asking a question "Did you consider making a market..." You're not TELLING the appraiser they MUST/SHOULD make a market adjustment, etc. It's a simple Yes/No question, so no, I don't think that question crosses the line

If the appraiser decides to make an adjustment and, as a consequence, brackets the value, is that directing the appraisal process?

I also don't think this rises to the level of "directing the appraisal process" since (my response above) you simply asked a question and it seems in this case, the original appraiser made his/her own decision to make an adjustment which then brackets the value. It was their decision and not forced upon them by the reviewer
(again, if you - the reviewer - had said they MUST/SHOULD adjust, that's different)

If the appraiser says, "I hear you, but I'm not sure how to do that..." and then I say, "Well, if it were me, I'd consider X, Y, and Z and do it this way...... but what you do is up to you." does that cross a line?

IMO, that gets into a gray area. As a reviewer I would try to choose my words wisely. That could be construed as a very fine line depending on the appraiser I was talking to. I could see both sides. Personally, if a reviewer said that to me ("Well, if it were me...") I would not feel any coercion or "crossing the line" but I can see some having the opposite take ...

Good question(s) Denis! Interesting discussion

 

[Deleted member 130081]

I'm going to answer another way, avoiding your specific questions, and maybe this would have been more appropriate in the other thread...sorry.

I love watching the antiques roadshow. Its personal property appraisal and I love to see how they appraise property. For the most part, they do exactly what we do, they identify the property, then search for comparable sales to use as a basis for value, along with consulting their peers who are often also participants (investors, collectors, retailers, auctioneers, etc). At the end they provide their opinion, and this is done in usually one of three ways, either auction, retail or insurance value. Interesting to note and on-topic with appraising above the comps, it is very rare indeed that they will give a value above the highest historical value. They will verbally say things like, "I expect it to sell more than" or "this is the best example and probably would command more", etc, but even if they give a verbal value above the highest historical value, when it comes time to show the value in writing and across the tv screen, I don't think I have ever seen it valued above the highest historical value.

This presents and interesting scenario. While the appraiser is pretty confident the property would sell for higher than ever, and even though there is no dispute the particular piece of property is superior to all other examples to date, they are still very weary to actually appraise it higher. I think the reason for this is a lack of precedence. I suppose its just one of those things. Everyone and their mother knows the property is worth more than all the other comps, but the "recognized" methodology and requirements for "support" keep the appraiser from making the higher call.

I dunno...I suppose that is off-topic from the reviewer standpoint, but wanted to put my two cents in all the same.

 

[hastalavista]

IMO, that gets into a gray area. As a reviewer I would try to choose my words wisely. That could be construed as a very fine line depending on the appraiser I was talking to. I could see both sides. Personally, if a reviewer said that to me ("Well, if it were me...") I would not feel any coercion or "crossing the line" but I can see some having the opposite take ...

I hear you!

Here's something that is interesting: In commercial work (based on my experience), it is very common for the appraiser to ask the reviewer,

"I see your point; any suggestions on how to handle it?"​

That doesn't mean they'll lie down. What it means (or how I interpret it) is: "OK, valid point. Rather than me guessing, tell me what you think and then I'll tell you if I think I can do it that way. If not, I'll come up with an alternative, and you can tell me if that addresses the issue for you."

Similarly, I've been told:

"I hear you but see it differently, and here is why...."​

Ideally, I then say:

"Ok, that makes sense to me. Can you add a few sentences explaining in the report like you just did to me" (if I think it should be addressed. Most of the time I can just repeat in the review what I was told and conclude that addresses the issue as far as I'm concerned).​

The relationship between the reviewer and residential appraiser is strained and full of friction. There are some reasons for this; many times it is due to a poor review process/reviewer. As a consequence, the field appraiser's perspective gets jaundiced about the review process. On my appraiser "bucket list" is to come up with a way that reduces this tension. Likely one I won't be able to check-off before I check-out.

 

[hastalavista]

This presents and interesting scenario. While the appraiser is pretty confident the property would sell for higher than ever, and even though there is no dispute the particular piece of property is superior to all other examples to date, they are still very weary to actually appraise it higher. I think the reason for this is a lack of precedence. I suppose its just one of those things. Everyone and their mother knows the property is worth more than all the other comps, but the "recognized" methodology and requirements for "support" keep the appraiser from making the higher call.

I dunno...I suppose that is off-topic from the reviewer standpoint, but wanted to put my two cents in all the same.

Not off topic (AFAIC).
I think more emphasis on the reconciliation might solve that problem for the atypical situation where we are providing an opinion of value on the one property we are sure would sell for more than everything else (and, consequently, have no comparables that sold as high as what we think it is worth).
But that isn't likely for large-volume/standardized-loan appraisal assignments. Maybe it shouldn't be? Maybe those are unique projects that warrant a loan program that doesn't require everything to be neatly bracketed. The lender can always make an adjustment to the rate/terms to address that added risk (if they think it is there).

 

[bnmappraisal]

While the appraiser is pretty confident the property would sell for higher than ever, and even though there is no dispute the particular piece of property is superior to all other examples to date, they are still very weary to actually appraise it higher. I think the reason for this is a lack of precedence. I suppose its just one of those things. Everyone and their mother knows the property is worth more than all the other comps, but the "recognized" methodology and requirements for "support" keep the appraiser from making the higher call.

I think you bring up a good point

There's always (obviously) the "highest valued house" in any neighborhood. There's also always a "lowest" that's just life. Simple math.

Our job for said becomes slightly more difficult because we have to be able to justify (for lack of a better term) our opinions. I've definitely told some private clients (non lender/non GSE, private individuals) that their property MAY sell for more, but "at this time" all the data shows it is worth $X.

Back to Denis's questions, from a review standpoint,

Similarly, I've been told:
"I hear you but see it differently, and here is why...."Ideally, I then say:
"Ok, that makes sense to me. Can you add a few sentences explaining in the report like you just did to me"

I think the above is a reasonable request. I've had similar requests over the years. The reviewer is NOT demanding/insisting the original appraiser do something regarding the value, but simply asking for a little more explanation regarding their reconciliation or thought process about WHY they opine an OMV above the sales range(s).

 

[Deleted member 130081]

So to me, there are a couple things at play here. First, I don't think you cross the line when you approach the things you cite in your post above, so long as you in are fact presenting them in the question format, which I will add I am sure you do. As far as the last part that provides a suggestion, I don't see any issue with that either, again so long as it is a suggestion and not a my-way-or-the-highway sort of thing.

As far as how an appraiser might react/respond to such things, this would partially be a matter of maturity. I would think most appraisers would welcome sound reasoning from a peer, so long as it was delivered with respect. The reason I bring up the respect thing, and what touches on the second part of the equation, is because there are no absolutes in appraisal. Sure, we have all sorts of regulations and guidelines that could be construed as absolutes, but the process of actually developing an appraisal, is another matter entirely. To me one of the largest problems, and subsequently one of the primary sources of frustration, is that many of the methodologies, and expectations of available data, and expectations of clients specific desires, are not in alignment with reality. Support of adjustments for instance. Providing an opinion of price rather than range for another (just skimming the surface here). Both of these are frankly silly in many cases, yet much emphasis is placed on them anyways. Now add the appraiser yahoos (reviewers in many cases) who run around claiming everything is possible. Add that to those that claim the only thing wrong with the appraisal world are the "skippys" who make us all look bad. Add that to the fact we don't get paid squat. Now add the fact some reviewers have no business being reviewers. You add all that madness up, and its no surprise you will encounter some disgruntled appraisers as a reviewer. "Its just the way it is so deal with it" is something a butt-head parent would say to a child, not something an intelligent and rational adult would present as reason.

 

[jay trotta]

Dennis, it has been many years since I have directly talked with a Reviewer; that said, the ones I have with in the past, ran similar to your presentation. IMO, that is the way reviewing should be conducted, unless there is an effort to push the direction of the end result. What you described appears to be far from a "Push" and more in line with constructive criticism, to re-think the options offered/questioned.

 

[bnmappraisal]

As far as how an appraiser might react/respond to such things, this would partially be a matter of maturity. I would think most appraisers would welcome sound reasoning from a peer, so long as it was delivered with respect

I 100% agree

A few years ago I did an appraisal on a property within my immediate (same city - 10 min +/- away) market area. I know the area/market very well. It was a refi - so no "bullseye". I guess borrower took issue with my OMV. No problem, not a first, no issue. Report got sent for review. Review appraiser came back (never contacted me, but I'm pretty sure the client/AMC had policy about not contacting the OA in their reviews. Bing Bang Boom, reviewer threw terms around like "misleading" and "incompetent" ... scary things to hear as the OA. Long story short, another appraisal was ordered and I pretty much was more than vindicated. The other appraiser (I later learned from my contact at the client/AMC - a staff appraiser) actually came in slightly lower than my OMV, but within a very tight/reasonable range of my OMV.

I was so P*$$ed at the way the reviewer handled his review, especially with the comments that he used in this formal review process. I have pretty thick skin (H*ll I post on here enough, I should!) but this guy just really got to me. I really didn't feel he handled it professionally, let alone with any respect to a fellow peer.