Awful Appraisal Article

[George Hatch]

Again, "most probable" in relation to what? Is the benchmark for "typical buyer reactions" pinned to an arbitrary external definition or is typical related to how the competition in a given market segment is actually behaving?
If it's an arbitrary external reference then that same reference would apply all the time to all the different market segments and all the different property types and all the different buyers and sellers, because it is that fixed external benchmark than never responds to market conditions.

If the reference is to buyers who are actually acting in a given market segment then that explains why what's typical for a rich guy in a high dollar neighborhood might not be exactly the same for what's typical across town for the entry level buyer.

 

[George Hatch]

Again, "most probable" in relation to what? Is the benchmark for "typical buyer reactions" pinned to an arbitrary external definition or is typical related to how the competition in a given market segment is actually behaving?
If it's an arbitrary external reference then that same reference would apply all the time to all the different market segments and all the different property types and all the different buyers and sellers, because it is that fixed external benchmark than never responds to market conditions.

If the reference is to buyers who are actually acting in a given market segment then that explains why what's typical for a rich guy in a high dollar neighborhood might not be exactly the same for what's typical across town for the entry level buyer.

The only lender expectations I have seen with comp section and analysis is comment required when outside of the expectations. I don't have to tell you that.

In your own use of the term you have acknowledged the "expectations" element of your "when outside of the expectations" observation. USPAP doesn't define what an acceptable comp selection looks like, how to make an adjustment, what a lender will and won't accept in terms of an adjustment or a combination of adjustments or in terms of supporting those adjustments.

USPAP doesn't define exactly what will be meaningful and not misleading to intended users, it merely requires the appraiser to identify what those user expectations are (as well as their peer's actions) and respond accordingly.

These aren't word games or distortions on my part just to make a point. This is actually how we're supposed to function.

 

[George Hatch]

That is the catch 22...are these sales closing above list prices as financed deals because of skippy appraisers pushing the price forward? Or are they closing due to buyers paying cash or a $ above a lower value opinion in cash? Are these deals closing about market value with listings under priced as a strategy, or are they closing above market value?

As an appraiser I really don't do "why". My job is to observe/report the "what" regardless of my personal opinions of the "why". It's not my job to steer the market or comment on the wisdom of the market participants. I am not a principal in these transactions or an active participant in the market.

 

[J Grant]

Again, "most probable" in relation to what? Is the benchmark for "typical buyer reactions" pinned to an arbitrary external definition or is typical related to how the competition in a given market segment is actually behaving?
If it's an arbitrary external reference then that same reference would apply all the time to all the different market segments and all the different property types and all the different buyers and sellers, because it is that fixed external benchmark than never responds to market conditions.

If the reference is to buyers who are actually acting in a given market segment then that explains why what's typical for a rich guy in a high dollar neighborhood might not be exactly the same for what's typical across town for the entry level buyer.

The most probable to be meaningful to the wide range of properties would be the most probable for the subject property occurring within the market condition's vetted by MV definition terms

Most probable is not an external benchmark of a central or middle trend (imo),. So yes, most probable for a rich buyer may not be the same as most probable for a lower income buyer...though what we often see is a lower income buyer over stretched and paying the highest price evah....while the rich buyer who often pays cash acting more conservatively.

What appraisers have to remember is that the most probable price, which could be the lower, the middle, or the higher price, whatever range of value it falls on...the most probable price is subject to the MARKET VALUE DEFINITION of the theoretical typically motivated buyer /seller..acting prudently, well advised, at a price unaffected by undue stimulus. Which is why an appraisal market value opinon, vetted by the MV defined terms can differ from a contract price an indivdual named buyer would pay (or what an owner thinks their house is worth in a refinance)

 

[Joe Flacco]

In your own use of the term you have acknowledged the "expectations" element of your "when outside of the expectations" observation. USPAP doesn't define what an acceptable comp selection looks like, how to make an adjustment, what a lender will and won't accept in terms of an adjustment or a combination of adjustments or in terms of supporting those adjustments.

USPAP doesn't define exactly what will be meaningful and not misleading to intended users, it merely requires the appraiser to identify what those user expectations are (as well as their peer's actions) and respond accordingly.

These aren't word games or distortions on my part just to make a point. This is actually how we're supposed to function.

Then we agree that lender does not direct the development of the appraisal.

 

[J Grant]

As an appraiser I really don't do "why". My job is to observe/report the "what" regardless of my personal opinions of the "why". It's not my job to steer the market or comment on the wisdom of the market participants. I am not a principal in these transactions or an active participant in the market.

The problem is the segment of number hitter appraisers are doing "why"..they have an agenda to see higher prices and they frequently post laments how would prices ever go up if appraisers aren't forward thinking and the like. THEY have no problem steering the market upward.

We don't just report the "what", we are supposed to analyze the what! Agree? Analyzing the "what", what is occurring in a market means analyzing when buyers or sellers are transacting with a different set of motivations or stimulus than the MV terms indicate .

 

[CindyR]

I sure agree that house is ugly. Don't they have windows in Minooka?? I'm also sure the chicago appraisers are reasonably competent and are recognizing the rising market conditions. Just not fast enough for this highly qualified market analyst...

 

[J Grant]

I've appraised at higher range and appraised over SC price when warranted. As long as a high price has credible market support ...it's when that support is not there we see problems. A superior property deserves a high price as the MV value...but when we see an inferior/mediocre property with SC price higher than the last recent sale of a superior property just because buyers got into a bidding war, what support is out there for the price as a market value ?

 

[George Hatch]

Then we agree that lender does not direct the development of the appraisal.

You're the one alleging control and abuse by the lenders, not me.

Let's go back to some fundamentals, starting with the definition of an assignment.

ASSIGNMENT: 1) An agreement between an appraiser and a client to provide a valuation service; 2) the
valuation service that is provided as a consequence of such an agreement.

If you read the SOWR it explicitly states that

Communication with the client is required to establish most of the information necessary for problem identification. However, the identification of relevant characteristics is a judgment made by the appraiser that requires competency in that type of assignment.

and in response to your allegations of control and bias

An appraiser must not allow the intended use of an assignment or a client’s objectives to cause the assignment results to be biased.

So those are the facts of the matter. The appraiser is the responsible party for identifying the elements of the SOW decision is also the responsible party for executing that SOW within specs, particularly with respect to complying with the ETHICS RULE. Not the client, not the other users - what they control is their own expectations for what will be meaningful to their decision.


If you ask me a question and I answer that question you did not "control" my answer. All you controlled was your question. AS IS YOUR RIGHT.

 

[Terrel L. Shields]

We need to be more like other professions with typical careers going from 22 to 65

The problem is we are in a profession where failure is unacceptable. Thus the 22 year old lacks the life experience to make judgments consistently without a mentor until they have the requisite backgrounding in both experience, and actually encountering the wide range of problems. Therefore, that mentoring comes at a huge cost, namely, why should I accept low pay for years until I can "go on my own" or, why not just get my teaching certificate and make more in year 1 than I will make in 2 years of mentoring and likely not catch up to for 10 years or more. The age issue is a function of the people already in the biz or taking up the biz when licensing was first started. Pre-licensing, how many appraisers were young? Not many. This is a profession for the middle-aged, dominated by ex-real estate professionals who started out as sales people or the children / friend of a functioning appraiser. And most of those pre-licensing were already vetted as brokers.

Is multiple bidding/warring offers a form of undue stimulus?

Phil Crawford thinks so, and I agree. The buyers are placing themselves in this position willingly because of the perceived notion that properties are scarce, and prodded by the Realtor to jack up the offer. By definition, in my book, anytime offers are higher than listings, something is wrong with that picture.

the most probable price, which could be the lower, the middle, or the higher price

Probable has a definition that includes

"A normally distributed population has half of its elements within one probable error of the mean." ( equal to 0.6745 times the standard deviation)
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Therefore it can be argued that "probable" is a fixed definition and thus is not going to be from the lower and higher prices unless the sales data are skewed to either the low or the high range. Technically, you can argue that the definition of MV is a FIXED mathematical formula within the range of arms length sales. Of course, as a practical matter that isn't likely, and remains murky since the range of values varies with the neighborhood and parameters chosen...And we all in the same assignment might choose different "comparables" based upon our market area, and the parameters (SF size, site size, age, etc.)

Any serious deviation from that mean above however should be explained and I would hate to argue for an isolated sale above or below the cluster in the middle without some exceptional reason.