Are properties really selling over market value?

[George Hatch]

That's exactly what is happening. A rational real estate market does not act the way the current market is acting. Something is causing the irrationality. I chose to call it undue stimulus. Call it whatever you want. You can even try to convince some people that the current market is historically rational; some might believe you.

Dood, if we're talking about the SFR market then "rational" doesn't usually apply; not in the manner that occurs in the non-res markets. Unlike any other property type, residential properties fill emotional needs as well as the utilitarian needs. Nobody wraps their own self-image up in where their warehouse or office or vacant lot is located, not like they do with their home. There are a lot of people who measure themselves by what they do for work, what car they drive, and where/what their home is like. Not so for the other properties they might own.

The residential brokers fully exploit these needs "A house is not a house, it's a home".

As appraisers we WANT the orderly market just like we want 3 model matches located within 100 yards and having closed within the last 30 days. But that's not how these markets actually work. Sux to B us.

 

[The Warrior Monk]

Courts define words for their purpose. ( of rendering legal decisions )

Appraisals define words for their purpose (of appraisal )

Courts use of words can be a guidance but not when they conflict with the intended use of those words in appraisal.

In the case of a lender, the lender is lending against the real property. If the lender needs to call the mortgage, that gets done in a court of law. Lenders also have attorneys that specifically deal with this.

The argument that lenders are using difference definitions of words/phrases commonly accepted by the courts, knowing full well that they will have to go to court if the loan goes back, makes no sense on its face.

 

[J Grant]

I don't buy the argument that a buyer is under pressure to buy. I have purchased property before. I am not actively pursuing the purchase of any property now. Why is anyone else under more pressure than I, except that they are childishly pursuing what they want when they want it. That is not undue stimulus...that is petulance!

That is a personal opinion of yours it is petulance.

We are not supposed to base on our personal opinions but rather on what we see in the market. And what we see are a set of buyers who are acting under pressure (bidding wars, offer soon as listed ) and their actions can affect price.

 

[J Grant]

In the case of a lender, the lender is lending against the real property. If the lender needs to call the mortgage, that gets done in a court of law. Lenders also have attorneys that specifically deal with this.

The argument that lenders are using difference definitions of words/phrases commonly accepted by the courts, knowing full well that they will have to go to court if the loan goes back, makes no sense on its face.

Agree. But lenders in a court case /taking back a mortgage are still not our purpose in a MV appraisal...we should use the definitions as they apply to a MV appraisal. Let the lender's lawyers use their legal definitions if things end up later in court.

 

[The Warrior Monk]

This thread is rapidly spiraling downward ...

I'll just state that it might be advisable for some to reread Chapter 1 of the "Appraisal of Real Estate." The concept that we appraiser property rights, and how those rights are defended, needs to be reinforced.

 

[The Warrior Monk]

Agree. But lenders in a court case /taking back a mortgage are still not our purpose in a MV appraisal...we should use the definitions as they apply to a MV appraisal. Let the lender's lawyers use their legal definitions if things end up later in court.

Why do you believe that we legal rights in land in a manner that is not legally defensible? And why would a lender want an appraiser to do that?

 

[TerryRohrer]

That is a personal opinion of yours it is petulance.

We are not supposed to base on our personal opinions but rather on what we see in the market. And what we see are a set of buyers who are acting under pressure (bidding wars, offer soon as listed ) and their actions can affect price.

They are not acting under pressure. They are choosing of their own free will. Your argument reminds of the folks I used to meet when lending, or when advising those who couldn't repay what they owed. I had one tell me that they had instructed the lender not to loan them more than they could repay. Then, when they couldn't repay, they wanted to blame the lender for making them take more money than they could repay. And, of course, the lenders were at fault for making sub-prime borrowers take money they really didn't want in the leadup to the last wreck.

 

[George Hatch]

It is not our role as appraisers to be the gatekeepers for what is and isn't a rational market. Our role is to provide transparency so as to enable our users to make an informed decision: This is what is happening in the market right now.

I have had personal opinions about the wisdom of a market and where it might go and what the likelihoods were for increase or decrease going forward. Those opinions have been sometimes been proven right and sometimes proven wrong. And the one aspect of my fortune telling that i've been the most wrong about in the past has been when I've attempted to predict when the irrational players would stop acting irrationally. A prediction, which if you think about it, is an irrational attempt to begin with.

That spotty track record has reinforced for me the virtues of strictly sticking to what is/isn't in my work and to try to keep the editorializing to as minimal as is possible.

As appraisers and whether we like it or not, the market psychology is one of the fundamental elements of the economy in general and the RE markets in particular.

 

[Overimprovement]

This thread is rapidly spiraling downward ...

That is because of the undue stimulus of those who continue to assert there is some grand difference between the definition of market value as given by Fannie and printed on the 1004 form, AND what the appraiser is supposed to be reporting.

As you stated and I fully agree, an entire market can not normally said to be under undue stimulus, not acting in its own self-interest, or stupid. If the market is composed of a bunch of uneducated greedy people, then guess what, that is the market. Deal with it.

 

[J Grant]

Why do you believe that we legal rights in land in a manner that is not legally defensible? And why would a lender want an appraiser to do that?

Imo it is off f topic and even if it relates it a legally defensible take back is not why we are hired...we know it is property rights...not trying to be rude but I barely have time to post on the topic...