Awful Appraisal Article

[Michigan CG]

Of course strong demand lower supply markets will have rising prices, the point is, do the rising prices still correlate to value?

Um...............yes?

 

[Terrel L. Shields]

yes?

Again, I guess my problem with this is the simple fact that people overpaying is their problem, but when we go along just because "everyone is doing it" and these stressed out buyers who are frustrated are simply falling victim to "Auction Fever" ( https://web.stanford.edu/~jdlevin/Econ 286/Auctions.pdf )

Auction Theory is "In equilibrium, the auction ends when the bidder with the second-highest value drops out, so the winner pays an amount equal to the second highest value"

So is that all we do? When the madness reaches a level, at some point it has to crash. So we are supposed to step aside and say, "I could have told you that was over-paying but I saw it as "market" - rational, unrestrained, etc. No wonder they hate us. As some point, even if we aver the price is X dollars we need to say the buyer has succumb to auction fever and is over-paying because the market is over-heated and will eventually crash. Where exactly that crash point is, we cannot say but we can predict with certitude that it will reach it eventually. The fact it didn't for 70 years (1939- 2007) is a result of good bank regulation...something missing today. It won't be 70 years from 2011, that much I would bet.

 

[bnmappraisal]

Again, I guess my problem with this is the simple fact that people overpaying is their problem

but when we go along just because "everyone is doing it" and these stressed out buyers who are frustrated are simply falling victim to "Auction Fever" ( https://web.stanford.edu/~jdlevin/Econ 286/Auctions.pdf )

The house across the street from me (literally!) just sold for $255k. It's about 1,400 sf. It was an investors flip but they put a TON of time/money into it (months and months, believe me, i saw all the trucks!) Long story short I actually ended up knowing the agent/broker who listed it and it went under contract 3 times before closing. 1 at least was VA and didn't close for "XYZ" reason(s). Again, long story short the final purchase (per MLS) was CASH. Personally, and not speaking as an appraiser but as a neighbor, I think it sold above market...BUT ... It, along with another down the block, both have set the upper limits. I guess "someone has to!"

So is that all we do?

I don't think that's all we do. I, personally would like to think, we do more than that and actually do our jobs (that's what I do!) and give an unbiased, objective, independent opinion of market value .... but maybe I'm old school on the USPAP definition

 

[J Grant]

Terrel-"Auction Theory is "In equilibrium, the auction ends when the bidder with the second-highest value drops out, so the winner pays an amount equal to the second highest value"

It there's an auction, multiple offers from 5 buyers, and one "wins" at the highest bid of 300k, that means the 4 others DID NOT think the property was worth 300k(. So 4 out of 5 buyers did not think it worth 300k. Is the highest price really the market speaking, or just the risky edge of the market? Maybe the market value opinion of the appraisal will turn out to be 300k, maybe less, maybe more. But an appraiser is not supposed to say "yes" to the price just because a buyer is willing to "pay" it. (as the 2 posters above noted)

The borrower is not actually willing or able to PAY the price, they are willing to BORROW the price Now the client asks appraiser; named buyer is willing to borrow money to buy a house they want for 300k But is the property's market value 300k, or is it something else, so we can make an informed lending decision?

 

[djd09]

I bet 99.99% of the time it is something else. clog away

 

[Elliott]

"Appraisers are aging," said Jason Goldberg, founder of Valucentric, a national appraisal firm with an office in Deerfield. "The average age is 58 to 60, and they are used to a different time when they didn't have the benefit of technology."

"....real estate agents say the home valuation process has become a high hurdle. For a variety of reasons, appraisals often peg home values at below-market rates in hot areas of Chicago's real estate market."


Isn't the average age of appraisers 59? Perhaps the highest mode is 58 to 60. Jason might want to take a statistics course. I hope he doesn't live to be 58 because his brain will turn to mush and won't be able to use an IPhone.

Sounds like the cute solution for a hot market is to make the offer with a provision that the buyer will complete the transaction regardless of the appraised value. Not that hard for an realtor to add.

Too bad the "reporter" didn't get a comment from an appraiser, other than Mr. Goldberg. Poor editorial review by the Chicago Tribune. Not surprising print news is dying and full of fake news.

 

[J Grant]

https://www.nar.realtor/news-releas...s-more-younger-realtors-entering-the-industry

Per above, average age of a Realtor is 53 years old. Their typical CMA is comprised of the same cherry picked superior sales as 20 years ago. Pick up a decades old listing and a listing today and the two will be interchangeable . Mrs Clean lives here, watch the beautiful sunset from your balcony etc.

Older appraisers and younger appraisers both use the same technology and abide by the same opinion of market value. NAR is comical. First they blame "low" appraisals on out of area appraisers, now it's that appraisers are too "old". I wonder who/what they will blame when a computer driven Evaluation instead of an appraisal comes in below a sales contract price.

 

[TRESinc]

Older appraisers and younger appraisers both use the same technology and abide by the same opinion of market value.

i'm willing to bet the execution of that technology is vastly different as age increases.

back in the late 90s when clients were starting to mandate the use of computers and digital reports i had a nice side business. i am a second gen appraiser and i had about 25-30 appraiser's who were friends of my father, and in the same general age range, who knew nothing about computers. i would go to their home/office, setup their new machines and give them lessons. i would always make a very detailed list of what to do (1. turn on computer. 2. click on _____ icon. etc etc) and there was not one single time i did not have to go back a week or two later to fix what they had broken and give more lessons. fast forward to today and 8 of those people are still appraising. i still get calls from all of them every month or two asking me how to do something.

technology is for the young, and i don't say that to be mean. my 4 year old niece can operate an iphone better than either of my parents in their 70s.

 

[Deleted member 126639]

Quite a few anti-appraiser comments in there, but no questioning of actual appraisers by the author. It sounded pretty slanted to me. I'm younger than the average appraiser age quoted in this article, but would be pretty angry if I was 58 years or older since that implies that those guys can't keep up with the changing market trends.

Is the Chicagoland residential market really doing that well?

I doubt it. But, Chicago is notorious for having the absolute lowest commercial appraisals fees versus cost of living in the country. I just had to say it.

 

[Tom4value]

Sure, there are lazy or uninformed appraisers who would rather kill the deal than do research but the brokers, who get paid more with a higher sales price, are not the impartial party to turn to when determining the true market value.

I recently killed a deal with a contract price $40,000 above asking price. I had tons of sales data screaming that the asking price was the true value. The broker called me bitching, claiming that I didn't know my market and she did. She bragged about her years of experience and knew "for a fact" that the contract price was the true value and my appraisal was wrong. I pointed out that her experience apparently did not include ethics or else she wouldn't have called me. I then asked her, "if she was such an expert in the market, why did she price the property $40k below market value?"
We were done at that point!