Awful Appraisal Article

[George Hatch]

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 .

And you apparently have no problem with steering the market downward by ignoring on a large scale a majority of the actual transactions because you don't agree with the buyer motivations.

When I run into a couple outliers I'm not going to be pinning "most probable" on them. But when it's 70% or more of all transactions they're no longer outliers. And as I say, if the closing prices are routinely in excess of their listing prices and its a rapid trend for increase then those are the facts of the matter whether I think these people are acting wisely or not. Same for when the market is in decline.

 

[Joe Flacco]

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.


If you read the SOWR it explicitly states that



and in response to your allegations of control and bias


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.

Huh? What are you talking about. I never alleged control and abuse by lenders. SMH.

 

[Terrel L. Shields]

if the closing prices are routinely in excess of their listing prices and its a rapid trend for increase then those are the facts of the matter whether I think these people are acting wisely or not.

But that invariably will lead to a bust...how many times has S CA or SF markets "busted" from 1991-2008 while the rest of the nation had to wait until 2008?

 

[Joe Flacco]

... It is the lenders who decide what they will and won't accept in an appraisal, and the appraisers respond accordingly. If lenders don't want to get out in front of the market then that's on them and the appraiser has little to do with it.

Look at what you wrote. I am the one that alleging control and abuse by lenders? SMH

 

[J Grant]

George Hatch said: ↑
if the closing prices are routinely in excess of their listing prices and its a rapid trend for increase then those are the facts of the matter whether I think these people are acting wisely or not.

The MARKET VALUE DEFINITION states a buyer/seller acting prudently among other terms...so it is our concern, not on a personal level of whether we think these people are acting wisely, but on a professional level.

Closing prices in excess of list prices could be an undervalued market catching up, or it could be buyers over paying for properties, or it could be a listing strategy in an area and the prices paid are MV levels. Each of the three are different . We analyze what is happening and vet if for MV terms, we don't merely report it .

 

[George Hatch]

But that invariably will lead to a bust...how many times has S CA or SF markets "busted" from 1991-2008 while the rest of the nation had to wait until 2008?

Not my fault and not my problem. I observe and report what is, not editorialize about what should be.

 

[George Hatch]

George Hatch said: ↑
if the closing prices are routinely in excess of their listing prices and its a rapid trend for increase then those are the facts of the matter whether I think these people are acting wisely or not.

The MARKET VALUE DEFINITION states a buyer/seller acting prudently among other terms...so it is our concern, not on a personal level of whether we think these people are acting wisely, but on a professional level.

Closing prices in excess of list prices could be an undervalued market catching up, or it could be buyers over paying for properties, or it could be a listing strategy in an area and the prices paid are MV levels. Each of the three are different . We analyze what is happening and vet if for MV terms, we don't merely report it .

That clarification clause (which is what is is) actually reads:

(2) both parties are well informed or well advised and each acting in what they perceive to be their own best interests.

So lets revisit the market being described - it's grossly undersupplied and there is far more effective demand than available units. The buyers these days have access to their own information and analysis without relying solely on the brokers and then they also have the brokers who in turn also have more data than ever.

If some of these buyers are actually experiencing the failure of their offers by losing purchases to competing buyers who are paying more, and/or if their brokers have been seeing this and relating the info to them; then how can you or anyone else say they're not adequately informed OR that they aren't acting in what they perceive to be their own interests?

"Undue" stimulus implies people acting in other than what they perceive to be their own best interests, the examples for which are obvious. A buyer who is afraid that if they don't right act now the pricing will leave them behind is most likely right under at least some circumstances. That's not coercion, that's basic supply and demand.

Now if we were talking about a market where the supply isn't constrained and there is no pattern of overbidding going on and pricing isn't increasing THEN you might have reason to ask whether a high sale buyer was well informed or well advised or acting in their own interests.

 

[George Hatch]

Huh? What are you talking about. I never alleged control and abuse by lenders. SMH.

Sorry about that aspect of it, I confused you with another poster I've been going back-n-forth with in the intended user thread.

The underlying point remains that the lenders are making their own decisions about what they think is meaningful to them and the appraisers are responding. There is no slack on our end for us to be taking up, unless it's to clamp down on those of our peers who think they've been ordained by GOD to steer the market by deciding who is and isn't sufficiently well informed.

 

[J Grant]

DEFINITION OF MARKET VALUE: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised, and each acting in what he or she considers his or her own best interest; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in U. S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions* granted by anyone associated with the sale.

I understand your point George. The obligation though is that as appraisers we would consider all the terms in the MV definition, not just some of them. A buyer can be acting in their own self interest, and consider themselves well informed, but are they ALSO acting prudently in a bidding war ending with them paying the highest price due only to a shortage of inventory?

Markets are typically cyclical, and the smart money buyers will wait a crazy hot market cycle out and buy when prices cool or stabilize. These are not easy questions to answer. We have to try though..such as what point did undue stimulus affect a price if there were 5 bidders and the price of a mediocre property ends up higher than the a recent sale price of a superior property? The answers can be different each time in each appraisal.

 

[J Grant]

Sorry about that aspect of it, I confused you with another poster I've been going back-n-forth with in the intended user thread.

The underlying point remains that the lenders are making their own decisions about what they think is meaningful to them and the appraisers are responding. There is no slack on our end for us to be taking up, unless it's to clamp down on those of our peers who think they've been ordained by GOD to steer the market by deciding who is and isn't sufficiently well informed.

That is utterly ridiculous. An appraiser doing their job is not ordained by GOD! It is these kinds of statements that mock appraisers for doing their job, aka applying MV definition terms that discourages them from doing so and thus end up number hitting. Are we or are we not supposed to come to a reasonable opinion of whether a buyer was well informed? Or just ignore it and pretend it is not there?

One way to see if buyer is well informed is what price did they end up paying? A lower price, a prevailing price, or a higher price? Does the price line up with quality and attributes of the property? Was the buyer following a RE agent's cherry picked CMA of superior comps to arrive at price? Etc. How in your view is that playing God? It's just doing our job which is far from God like in pay or how we are treated.