Being Told The Contract Price Of A Subject

[ucbruin]

The fact that you are asking about it shows you are not a number hitter! They never ask what you are asking, they just try to make the SC price come in, and the SC price drives the comp selection and adjustments. The only time these folks come in "low" are the extreme outlier SC . Different clients want different things from their appraisers and some don't want a number hitter. But quite a few do, only it;s covert now. Hopefully the better appraisers find the better clients...but this and always has been a not 100% as it should be business to an extent so better to know that going in.

I'd like to add that some appraisers have a number hitter mindset, whereas others have a MV mindset. Nothing wrong with coming in at SC price in a close call and in fact I'll say the small bias toward SC price is healthy in a purchase appraisal...as long as one can put it aside . The appraisers with a number hitter mindset do the same thing on a refinance or other purpose appraisal...come in high $ /wherever they think will make the client happy. I did a fair amount of review work at one time and some of the wort number hitting BS occurred on refinance appraisals, one cant claim the SC price influenced them.

"The appraisers with a number hitter mindset do the same thing on a refinance or other purpose appraisal."

Oh brother....

 

[Dallas Scott Wilke]

And for everyone's concerns about bracketing the SC:

I think I've been misunderstanding it! They may HAVE been asking to bracket the Value Opinion, not the Contract Price. That was the basis of my entire bias hypothesis, too! I'll pay close attention next time, or see if I can find that last revision request, and clarify that.

Thank you, all for the great insight!

 

[TRESinc]

that makes a little more sense

 

[Eli]

And for everyone's concerns about bracketing the SC:

I think I've been misunderstanding it! They may HAVE been asking to bracket the Value Opinion, not the Contract Price. That was the basis of my entire bias hypothesis, too! I'll pay close attention next time, or see if I can find that last revision request, and clarify that.

Thank you, all for the great insight!

Yes! Contract price can have many buyer/seller motivations that are not typically motivated. So asking an appraiser to bracket contract price is not right. Just say no to anybody who makes such a request if the Value definition is “market value”. Reading the definition of market value in a report will clear it up. Tell them to read the definition of MV.
Lol.

 

[NC Appraising]

don't look at page 1 of the contract until you have completed your reporte.

Come on, welcome to the real world.

Your statement was one of the first things I have learned in pre classes.

But then I hit the real world.

If you have an adjusted range of $200-$210, and you put the appraised value at $204 and then looked at the contract price of $206...really? Are you that good?

Do appraisers realize how much is at stake and the issues they cause? Just think if appraisers started killing 25% of the deals over $2-5k. It would be chaos



NOW there has been times were the contract price taught me something and disproved my opinion after talking to the buyers and selling agent. This is true when they have close multiple offers and my value is below the contract price. Especially when the comps are not that good. They offer valuable feedback from buyers that have seen the home. It makes me do additional research and analysis and I use it as a teaching tool.

THAT being said, buyers agents are now HOPING the appraisal comes in low as they bid high just to get it under contract knowing it's not worth that much. FHA is a perfect example.

LASTLY, as others have stated, when I do come in low, I make my report bullet proof.

 

[TRESinc]

Come on, welcome to the real world.

Your statement was one of the first things I have learned in pre classes.

But then I hit the real world.

If you have an adjusted range of $200-$210, and you put the appraised value at $204 and then looked at the contract price of $206...really? Are you that good?

Do appraisers realize how much is at stake and the issues they cause? Just think if appraisers started killing 25% of the deals over $2-5k. It would be chaos



NOW there has been times were the contract price taught me something and disproved my opinion after talking to the buyers and selling agent. This is true when they have close multiple offers and my value is below the contract price. Especially when the comps are not that good. They offer valuable feedback from buyers that have seen the home. It makes me do additional research and analysis and I use it as a teaching tool.

THAT being said, buyers agents are now HOPING the appraisal comes in low as they bid high just to get it under contract knowing it's not worth that much. FHA is a perfect example.

LASTLY, as others have stated, when I do come in low, I make my report bullet proof.

easy there francis... the OP was not wanting to know the contract price prior to completion for fear of bias, so the simple solution is to not look at it until the report is done. they can still consider the contract price a data point and factor it into their final conclusion without any worries, it was just a simple solution to a simple problem that you made a mountain out of. i missed the post in this thread that told him to never look at the contract price and any worthwhile appraiser makes the hard ones/near contract but under as bulletproof as possible. go back and read my posts on this topic and you will see i am a proponent of using the contract as a data point, especially in situations like the one you made up for an example. the only one on here who is that good is jgrant.

gheez. have a coffee and a donut and a smile and just read what is here, not past it looking for something else.

 

[J Grant]

Come on, welcome to the real world.

Your statement was one of the first things I have learned in pre classes.But then I hit the real world.If you have an adjusted range of $200-$210, and you put the appraised value at $204 and then looked at the contract price of $206...really? Are you that good?Do appraisers realize how much is at stake and the issues they cause? Just think if appraisers started killing 25% of the deals over $2-5k. It would be chaos
NOW there has been times were the contract price taught me something and disproved my opinion after talking to the buyers and selling agent. This is true when they have close multiple offers and my value is below the contract price. Especially when the comps are not that good. They offer valuable feedback from buyers that have seen the home. It makes me do additional research and analysis and I use it as a teaching tool.
THAT being said, buyers agents are now HOPING the appraisal comes in low as they bid high just to get it under contract knowing it's not worth that much. FHA is a perfect example.
LASTLY, as others have stated, when I do come in low, I make my report bullet proof.[/QUOTE]
.

Knowing the "real world" is important for appraisers. And to the starry eyed, the real world induces a strong CS bias to any appraiser hoping to last long term, even those of us who come in "low" more than the others who pull out every rock to meet a CS price. On the other hand, the studies from Fannie/FHFA are critical of appraisers for meeting CS price too often, and the ramifications of that mean they drop us or marginalize us.

A couple of issues- the red is false assumption of how appraisers who come in low.. I've never heard of an appraiser , including myself, having a CS price bracketed between the adjusted values and coming in below the SC price ( with the exception of rare cases ). So to base the "are you that good " on a false assumption...I've seen that false narrative repeatedly on this board.

When good appraisers come in "low", as you note, they pretty much bullet proof the report. There are reasons to come in "low", though I detest that term since the real truth is the appraiser came in at MV and the SC price was high.
If people consider what CS prices really are and what they are based on (list prices) and how they are negotiated ( MV is the last ting on their minds), the idea of the CS price being such a great indicator of MV would be nullified. The reality is appraisers are under enormous pressure to match their MV to the CS price , and nothing much has changed about that. Therefore they rationalize that CS prices really do represent MV opinion in an appraisal in all but rare cases. Because of that mindset, appraisers start shaping results around the SC price...picking or excluding comps, and adjusting the adjustments--- till result is SC price comes in bracketed between the adjusted range. Which is great, providing comp selections are good and adjustments reasonable. But in inflated value app appraisals, the best comps are often excluded if they are a lower price or adjustments massaged to make a SC price come in. The weakness of these appraisals are glaring obvious in a field review but can easily pass a QC checkoff from an AM

 

[Terrel L. Shields]

I think the biggest issue I have is that knowing a SC price at all already puts a bias in our head,

So? You have the listing right? Does it not suggest a price?
You have the assessors estimate right?
You have the last sale of the property right?
You can check Zillow for a guesstimate....Trulia. Realtor.com....

What part of "Anchor bias" do you not understand? We see it, we know it, and in recognition we are able to neutralize it. BUT...one last thing.

The bias of "no bias" is a bias itself. We use the factors surrounding a property, information about pricing included, to create a heuristic analysis that "brackets" a range or value in our heads and we slowly nibble at the edges to arrive at our final opinion.

So...imagine an unbiased property appraisal. So you need no info much to speak of. Thus, what is the value of a 1,200 SF house built in 1959 in Kremlin, Oklahoma on 5 acres? It is average condition, retrofitted CHA in 1978 and is 3 bed, 1.5 bath. Now see the problem with "no bias"? Without any other information, you might as well use a dart board, not a bullseye.

The contract price is the least of your problems.

 

[gregb]

Yeah, the 10 comps from the neighborhood always put a bias in my head no matter what the contract price is.

 

[Evincere]

I like the way you put that. Thank you!

I think the biggest issue I have is that knowing a SC price at all already puts a bias in our head, however slight. I'm more focused on the psychology of that. It's similar to me telling you NOT to think about a cow. The very fact that I've said cow makes you think about a cow, if only a bit. I guess the best that we can do is to "act in an impartial manner" to the best of our abilities, as much as humanly possible.

My own bias is shading this opinion, though, of course, too. LOL.

Are you a shopper, a consumer? Knowing the CP of a property shouldn’t create any more bias than knowing the asking price of an automobile, or flat panel TV or a washing machine.

Experience afforded a person who appraisers houses sets them apart to determine worth just as one who specializes in cars, TVs or shoes does when it comes to determining the things specific worth.

The problem the appraiser has to solve is..is the property worth the price, or not?