Without access to sales data, it is hard to generalize. Out here in the sparsely populated areas, we thankfully are not seeing market conditions reported elsewhere, although some appraisers rely on the drama reported on the local news as their market analysis. But, earlier this year, when it seemed we were joining the fray, I completed an assignment where about 25% of the 20 sales in the grid stood out (higher) compared to the others after all had been adjusted to the subject for differences, including market conditions. I dug deep and was able to determine that in most of those instances, the buyers were from out of town, so were not knowledgeable of local markets, and were probably relying on market knowledge from where they had come. But, more importantly, if 25% of the data suggests one level of value and the remainder suggests a lower value, I think the most probable price is supported by the latter. While the exuberance is tapering off here, despite essentially no inventory of active listings, my primary concern has been where that balance shifts. Your example, I think, is right on the edge. I don't find the fact that 40% are concluding values below the contract price useful by itself (for example, how much below is important...some lag is clearly expected from reliance on closed sales), but over time some of those have to close so appraised values should climbing at roughly the same rate as closed sale prices are rising.
On the other hand, if the methodology followed by those appraisers compares to what I observe, and am told by local appraisers, with 3 closed sales selected prior to inspecting the subject and done, then the results, compared to what they would be from well-completed analysis, probably resemble the pattern formed by a shotgun aimed at the wall. What are the thoughts on that from your perspective?
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