Are properties really selling over market value?

[J Grant]

There have been ups and downs from the begining of time. Talking about suppressing renters and oversees buyers... more buyers will create higher demand = even higher prices.

There is not a never ending upward price in RE because so much of RE is financed. And even with low interest rates, at some point, the buyers do not income qualify for a loan .

This is not true of bit coin or the stock market where even with margin buying, it's the borrowers own funds, they are not having to show income to qualify for a loan, thus they can pay whatever high price they want.

 

[J Grant]

OK, I'll be "that guy".
I hear things from appraisers like "there were 8 pending offers to buy the property at $50k over market value". Hmmmm... All these buyers are lining up to pay X amount of dollars and it's "above market value" ... What is the definition of market value?
Seems to be the most probable price of the typical buyer/seller in the open market to me. Supply and Demand strutting it's stuff. It seems like many appraisers think their job is to control the market rather than to report it.

Prove me wrong.

Its not the appraisers job to control the market, but the appraiser has certain obligations per standards in developing their appraisal.

The appraiser does not merely report the market ( Zillow and AVM;s do that ) The appraiser is supposed to analyze the market in the appraisal and report their analysis. Otherwise, the clients do not need us. Because if all we do is report the market, a computer can do that in seconds.

If every SC by virtue of being a sale price is MV, the clients don't need us. Are you still appraising? Making a good case for no appraisals !

 

[J Grant]

The definition of market value assumes a buyer well informed or well advised.
Incredibly, even with all the internet tools avail, most buyers rely heavily on their RE agent. And the RE agents typically hand me the CMA they would show a buyer - with ridiculous superior properties showing the buyer where an inferior subject is worth more .
Agents continue to make misleading statements. The last one I appraised, ( a 3 bedroom townhouse subject ) agent told me all the sales in the townhouse community had lower prices because they were 2 bedrooms. When I did the research, all of the townhouse sales were 3 bedrooms, except for one. How stupid did the agent think I was ? Apparently as stupid as she thinks her buyers are for believing these kinds of statements.

 

[Meandering]

There have been ups and downs from the begining of time. Talking about suppressing renters and oversees buyers... more buyers will create higher demand = even higher prices.

But are there really "more buyers"?
as if prosperity and climbing the ladder is prevalent?
or are there just a few "panic buyers"?

What does the "volume of sales" say about the current market as opposed to markets past?

 

[Meandering]

Well that depends, look at all investment vehicles, are they overpaying some things in the stock market ? Are they overpaying for used cars ? Lumber and other materials ?
For RE we would need to look at building material costs right now, most have shot up 300-500%

Before Trump, it could have been viewed as an investment vehicle, a bit differently by generating a return at year end.

There are many markets.
there are many sales in many markets
only those sales that require financing via a government insured facility,
require the use of the market sales
that fit the government's legal definition of market value.

REOs sell in markets
Short sales sell in markets
and just as you have "distressed sales" that sell below the "market value" defined by the government,

you have "distressed purchases" that sell above the "market value" defined by the government.

If you want to say that the government should not be dictating definitions and requiring compliance with those definitions, but instead, every sale should be acceptable,
well, your argument belongs with Congress and the House Finance Committee, not with appraisers that are required to follow the government's definitions.

And if that is the path to take, take it all the way through and ban the Dictionary of Real Estate, cause you don't need anyone to dictate definitions.

Some days I miss Rodger much more than I would have considered possible.


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[residentialguy]

Its not the appraisers job to control the market, but the appraiser has certain obligations per standards in developing their appraisal.

The appraiser does not merely report the market ( Zillow and AVM;s do that ) The appraiser is supposed to analyze the market in the appraisal and report their analysis. Otherwise, the clients do not need us. Because if all we do is report the market, a computer can do that in seconds.

If every SC by virtue of being a sale price is MV, the clients don't need us. Are you still appraising? Making a good case for no appraisals !

Good morning jg. I knew I'd flush you out! Good to see you.. Like old times, huh? Deja vu of our 08 conversations.

I see you're still up to your old tricks by putting words in my mouth. I never said or suggested that one sales contract means mv. It was very clear that if everyone was paying the higher prices, that the market is speaking. We analyze it and verify the market sales ... and you know very well that I always have to the nth degree.

 

[residentialguy]

The definition of market value assumes a buyer well informed or well advised.
Incredibly, even with all the internet tools avail, most buyers rely heavily on their RE agent. And the RE agents typically hand me the CMA they would show a buyer - with ridiculous superior properties showing the buyer where an inferior subject is worth more .
Agents continue to make misleading statements. The last one I appraised, ( a 3 bedroom townhouse subject ) agent told me all the sales in the townhouse community had lower prices because they were 2 bedrooms. When I did the research, all of the townhouse sales were 3 bedrooms, except for one. How stupid did the agent think I was ? Apparently as stupid as she thinks her buyers are for believing these kinds of statements.

Lol. I've had this happen more times than I can count. I've gone so far as reconciling that the buyer was paying too much because of the wrong information the agent was feeding them.

 

[residentialguy]

Hi and good to see you back ! Here we are again lol

The definition of market value is most probable price WITH a set of terms for that price - a price unaffected by undue stimulus among them. Did a bidding war with 10 offers and decide in time pressure create undue stimulus affecting price ?

Hmmmm... so inflation is undue stimulus? Maybe you should pick a median value of the timeline and stick to that value from here on end ‍

 

[residentialguy]

So let me ask you guys/gals that are saying "this is whole market is undue stimulus and not market value"
When the market crashes, are you going to appraise these properties higher than the fast deselerating contract prices and shout out, "This is undue stimulus and not market value!" ???

Or are you going to have your cake and eat it too, lol

 

[J Grant]

So let me ask you guys/gals that are saying "this is whole market is undue stimulus and not market value"
When the market crashes, are you going to appraise these properties higher and shout out, "This is undue stimulus and not market value!" ???

I never said that and doubt others mean it either....

We can see from higher and rising prices that market conditions, including a degree of stimulus affects the prices upward, also due to supply, demand interest rates/other. So it is a given we are working with higher prices now. That said, as appraisers, we are tasked with an opinion of market value ( as defined ) with a price unaffected by undue stimulus a caveat of the MV definition.

The assumption in the MV definition is, was this property's individual price affected by undue stimulus ? ( not was an entire market affected by undue stimulus )

Since the MV definition is meant to apply in all markets, apply it now too, difference is prices of the comps are higher - our market analysis explains why