Are Appraisals Really Relevant?

[Non Sequitur]

An interesting post I ran across on LinkedIn from a CRE investor. Can't say he's flat out wrong. Thoughts?

What could be more exciting than talking appraisals on a Sunday afternoon?

"Question to the market, what value do appraisals add today?

20 years ago, massive value add. The appraisal was a collection of data that was not readily available. Local sale comps, local rent comps, local vacancy rates, etc etc

With a handful of keystrokes any and all data in an appraisal is readily available on the internet (thank you Al Gore).

If you are in the CRE business, debt or equity or intermediary, and are relying on an appraisal to determine value…get out of the CRE business.

Every appraisal was wrong in 2007, and again in 2008; they were wrong again in 2009 through 2011. Wrong again in 2021 and 2022. Probably wrong again now. As one of my mentors said, “appraisers know the price of everything and the value of nothing.”

Not an equity investor nor lender on the planet that is going to their stakeholders after sustaining losses and saying, “oh but the appraiser said…”

I get it, appraisals have been part of the process since before I was born…but given the world we live in today are they really relevant?"

 

[J Grant]

An interesting post I ran across on LinkedIn from a CRE investor. Can't say he's flat out wrong. Thoughts?

What could be more exciting than talking appraisals on a Sunday afternoon?

"Question to the market, what value do appraisals add today?

20 years ago, massive value add. The appraisal was a collection of data that was not readily available. Local sale comps, local rent comps, local vacancy rates, etc etc

With a handful of keystrokes any and all data in an appraisal is readily available on the internet (thank you Al Gore).

If you are in the CRE business, debt or equity or intermediary, and are relying on an appraisal to determine value…get out of the CRE business.

Every appraisal was wrong in 2007, and again in 2008; they were wrong again in 2009 through 2011. Wrong again in 2021 and 2022. Probably wrong again now. As one of my mentors said, “appraisers know the price of everything and the value of nothing.”

Not an equity investor nor lender on the planet that is going to their stakeholders after sustaining losses and saying, “oh but the appraiser said…”

I get it, appraisals have been part of the process since before I was born…but given the world we live in today are they really relevant?"

So a profit player says appraisals were "wrong" in 2007/2008? F that guy, HE was wrong - we appraisers who gave real values signed a petition submitted to Congress and anyone who would listen. signed by over 10,000, if I remember correctly, and it was against the kind of value pressure, and it was ignored. I was one of the appraisers who reviewed (field reviewed ) hundreds of pushed value appraisals after the crash - we will never know how many "lower" appraisals were thrown in the trash , and then a new appraisal orderd and used if it hit value ( they could do that in those days)
Now it has come full circle with the profiteers winning becuae the GSE;s have convinced regulators that a WAIVER which circumvents the HVCC and Dodd Frank requiremetns for an appraisal, wihth the loan officer wiring in the hit value target they need ( which becomes the property value as long as it fit in the GSE AVM ( which no outsiders see )

The world is awash in data now, which is the opposite problem from 20 years ago when data was not readily available to any 10-year-old or hacker or vested party ( as well as legit parties who use it)

Because of the vulnerability of mass data and products that skirt regulation, appraisals are more relevant than ever. However, when appraisals receive no protection from value pressure, AMC fee predation, or unreasonable turn times that impact quality, their value is reduced.

Who is this arrogant jerk to say appraisals were wrong in 2011 or 2021? The market changes, an appraisal is "right" ( reflects the market ) as of the effective date. We need appraisals to protect against the horde of arrogant profiteers - wait til we are gone and see fraud and gaming the sysstem on a mass scale with no check and balance remaining. A quarter or more of res RE is now owned by investors and LLC corps. Their goal is to control the valuations and buy/sell to each other and drive prices up and drain equity from properties, then dump them and so on.

 

[CGinMN]

As one of my mentors said, “appraisers know the price of everything and the value of nothing.”

Appraisers are generally working toward market value, or the most probable price on the open market as of the effective date.

An investor with a specific risk tolerance may not value a CRE investment the same way as the most probable buyer would.

Investment value vs market value. I think the poster is maybe confused about these concepts.

 

[ZZGAMAZZ]

An interesting post I ran across on LinkedIn from a CRE investor. Can't say he's flat out wrong. Thoughts?

What could be more exciting than talking appraisals on a Sunday afternoon?

"Question to the market, what value do appraisals add today?

20 years ago, massive value add. The appraisal was a collection of data that was not readily available. Local sale comps, local rent comps, local vacancy rates, etc etc

With a handful of keystrokes any and all data in an appraisal is readily available on the internet (thank you Al Gore).

If you are in the CRE business, debt or equity or intermediary, and are relying on an appraisal to determine value…get out of the CRE business.

Every appraisal was wrong in 2007, and again in 2008; they were wrong again in 2009 through 2011. Wrong again in 2021 and 2022. Probably wrong again now. As one of my mentors said, “appraisers know the price of everything and the value of nothing.”

Not an equity investor nor lender on the planet that is going to their stakeholders after sustaining losses and saying, “oh but the appraiser said…”

I get it, appraisals have been part of the process since before I was born…but given the world we live in today are they really relevant?"

From what little I know about mortgage loans offered without the comfort of an int/ext appraisal, it seems that the relative value will be determined only by comparing accuracy of an appraisal versus loans based on AVMs, waivers, etc., if necessary by default rates or other tangible benchmarks--altough how many periods will be required to obtain enough data upon which meaningful results can be based, or who would conduct the research if the entities that favor alternatives presumably wouldn't be objective. The comments above about the availability of data is compelling although very rarely is the critical "condition" factor mentioned that is missing from values that are not based upon an appraisal; a vast majority of my residential reports reveal that condition is that primary adjustment factor. I still think there must be a champion for the appraisal industry who's waiting to be crowned.

 

[Non Sequitur]

Appraisers are generally working toward market value, or the most probable price on the open market as of the effective date.

An investor with a specific risk tolerance may not value a CRE investment the same way as the most probable buyer would.

Investment value vs market value. I think the poster is maybe confused about these concepts.

Isn't there an old saying in in CRE; "No one buys a hotel (or insert X), they buy the cash flow."

 

[Carnivore]

Interesting and very important topic.

Investment value is the value of an asset to a particular investor, based on their specific requirements, expectations, and investment criteria.
I
think I have that right.

So would mark Spain fall into investment value. Mark Spain’s business model aligns more closely with investment value, not market.

value
by t
So I recall a long time ago an assignment in a cookie cutter hood and it was a refi by the owner. I am old school and I always get everything I can for the subject property and potential sale for my work file. There were a lot of transfers. BUT none of them were in MLS. All of them were purchased by a corporation. I don't recall the name of the corporation.

Mark Spain on TV buys houses ... He buys them for their Investment value.

 

[Bobby Bucks]

Sounds like a member of the disgruntled investor club who didn't get the number he needed for a cash out refi. Robert Bruss may be feeding the worms, but his type is still complaining in the media and social media. Those types are good at one thing, they can hold a grudge and not let go.

 

[Bob Ipock]

Musch less relevant than 20 years ago. Considerably less relevant than in 1991-2000. Plenty of data available out there. More frequent resale than ever before. many more vinyl villages with 5 models (who needs an appraisal on every house). With 10% or more down the risk is very low to a lender. This ain't 2008. An appraiser has no control over market crashes, big local layoffs or closings, interest rates, big new employers coming to town etc. An appraisal is good on a specific day. Appraisers are vastly less important than we think we are.

 

[Ricky LaFleur]

With a handful of keystrokes any and all data in an appraisal is readily available on the internet

I think if this were really true at present, realtors and appraisers would be less in demand, at least in part. Why, in 2025, do people still use realtors? They don't hold the keys to market exposure anymore. If the data eventually becomes very public and available, sellers and buyers would likely be more informed/knowledgeable in their market. NAR doesn't want that. MLS doesn't want that. CoStar doesn't want that.

 

[jay trotta]

Isn't there an old saying in in CRE; "No one buys a hotel (or insert X), they buy the cash flow."

True, but wouldn't they be interested in the Condition of the property also?