Being Told The Contract Price Of A Subject

[ucbruin]

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.

"The bias of "no bias" is a bias itself."

Is the source of above from the "old coots" advice society????

Let's add this to the list of advice....

 

[Mike Kennedy]

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?

The problem the Underwriter has to solve is..is the property worth the price, or not to determine Collateral Value?

The problem the Appraiser has is to extract a credible, supported Opinion of Market Value culled from analysis of the most proximate, similar, recent and directly competitive OTHER property sales which reflect the actions of OTHER buyers and sellers of OTHER properties which establish current, competitive Market Value.

Fixed it for you.

 

[Mike Kennedy]

https://www.inman.com/2015/03/26/th...market-price-and-market-value-in-real-estate/

 

[TRESinc]

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

no, it is not. our problem is to come up with an opinion of market value. price does not matter.

 

[George Hatch]

no, it is not. our problem is to come up with an opinion of market value. price does not matter.

Actually, both are legitimate questions for a user to ask in an appraisal assignment.

 

[TRESinc]

Actually, both are legitimate questions for a user to ask in an appraisal assignment.

our job is to form an opinion of market value based on what the market presents to us. as mike said it is up to the UW to determine if the property is worth the contract price with respect to the collateral value. the appraisal is one of many tools at their disposal.

 

[bnmappraisal]

Actually, both are legitimate questions for a user to ask in an appraisal assignment.

... depending on the SOW

 

[TRESinc]

... depending on the SOW

exactly. as jgrant loves to point out our job as an appraiser is to formulate an opinion of market value. if the client would like us to speculate on why that figure may be different from a contract price they can request it, but it is not an across the board requirement for residential appraising. it would be a client-specific request.

 

[Terrel L. Shields]

"The bias of "no bias" is a bias itself."

Is the source of above from the "old coots" advice society????

It was actually a quote from an old geologist - professor from Midland, Texas who pointed out that the geologist biases their data points by interpretation of their idea of what the environment was like those millions of years ago. If I imagine it to be a beach sand on an ocean shore, I map the structure differently than I would if I thought it a deltaic system of channel sands or wind blown sand dunes.

 

[Deleted member 130081]

I've been thinking a lot about impartiality and how to best improve your chances of truly eliminating bias.

When we are given the contract price of a subject for a Purchase Appraisal, and then asked to bracket that price in our comparables, does that not make us inherently bias toward a specific opinion of value?

I much prefer when doing an appraisal without a preconceived notion of value. Even it it does make my job a little easier to know what price to look around. I would rather do a Market Analysis and see what similar properties have for $/sf and go off of that. I feel that is more unbiased.

Are there articles that discuss this? Do you guys have opinions on this? Does this actually violate USPAP by creating partiality?

A large question that will not always result in the same answer from different appraisers...as strange as that may seem.

USPAP is in fact the culprit in this matter, which requires an appraiser to "analyze" all current agreements of sale, for reasons not entirely explained within the USPAP document (or at least explained in a manner that actually makes a lick of sense). So if you don't like the fact USPAP is requiring lenders to send you purchase contracts you are not alone and, you would need to take that up with the Appraisal Foundation, the entity that writes USPAP. Good luck with that.

I personally think the requirement is beyond ridiculous, and is the single most damaging requirement to both the profession and the interest of the public. One of the many obstacles to change is the fact that so many appraisers have been working this way for so long, that it would require appraisers to stand up and admit their little world is not as perfect as it could/should be, and pride is so much more powerful than people give it credit for.

This post is what I love about people who are new to something...a fresh perspective...an ability to observe the obvious that old curmudgeons have forgone.