Being Told The Contract Price Of A Subject

[Overimprovement]

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

It certainly is a legitimate potential question, but I've never seen it directly asked on a SOW for any assignment.

I would be entirely OK for a lender to send me an assignment which ONLY says, does the proposed purchase price, $X, cover the amount of the loan, $Y, we would like to make, at an LTV of Z? And a one line 'form' that says yes or no. Our appraisal would necessarily be as detailed and likely time consuming as the typical 1004. But oh would that report be a lot easier to write!

That honestly is all they want to know, but somehow that turns into 30 page appraisal reports. Or more precisely, what the Feds tell them they need to know...they just want to close it, sell it, service it...

 

[Terrel L. Shields]

I would rather side with caution than ever have my integrity questioned

Your reputation gets shot the first time you value above contract when that listing languished for months at that price and everyone -except you- knows for a fact that the value has to be something less. The second time you will have no reputation left and lenders and agents will be talking about how incompetent you are. They'll be hiring you so they can advertise, "PRICED BELOW APPRAISED VALUE".

So answer this. Do you read the RE section of the newspaper and ever see one of your subjects? Do you see the assessment card or ignore it? Do you access the MLS listing or ignore it? If so, you will quickly gain the reputation as the gang who couldn't shoot straight. Give me the listing and I have a pretty good idea what the price is going to be even if the contract isn't available.

 

[Joe Flacco]

I think the contract is relevant data that should be reviewed and considered. That said, borrower having to bring more money to closing than they thought should be normal and expected by users, borrowers, and other stakeholders. I don't understand how it ever got to this point where one or two percent below contract price is frowned upon and people get upset. It's even more unfortunate that it is frowned upon by some appraisers. This pressure on the appraiser exists and it should not.

 

[Mike Garrett RAA]

So, is your opinion of value usually based on the actions of both buyers and sellers, ie...the market? If that is true then is it not reasonable to conclude the contract may represent the current market...IF...and then there is a whole list of things which are defined in the definition contained in our certification.

The contract price shouldn't be a target but it should be something we take into consideration in our final value conclusion. Often we all say..."are we that good?". I have a comfort level and that might be more or less than others but I am also practical when it comes to whether the contract price is supportable. Maybe that is why we, as appraisers, haven't been replaced by AVMs long, long ago.

 

[Joe Flacco]

The purpose of the contract review requirement is not so that we can ask if "we are that good" compared to the contract price.

 

[Deleted member 130081]

Your reputation gets shot the first time you value above contract when that listing languished for months at that price and everyone -except you- knows for a fact that the value has to be something less. The second time you will have no reputation left and lenders and agents will be talking about how incompetent you are. They'll be hiring you so they can advertise, "PRICED BELOW APPRAISED VALUE".

So answer this. Do you read the RE section of the newspaper and ever see one of your subjects? Do you see the assessment card or ignore it? Do you access the MLS listing or ignore it? If so, you will quickly gain the reputation as the gang who couldn't shoot straight. Give me the listing and I have a pretty good idea what the price is going to be even if the contract isn't available.

Well, you pretty much make a great case for my opinion on the matter - thanks. Being privy to the sales contract is not necessary to develop an opinion of value so, why is it provided? George (and maybe yourself?) seem to think it would just be too much hassle for the lender and everyone else if appraisers were not steered to reconcile/answer to/for the contract!?!? I find it pretty funny (and quite horrifying) any appraiser would take that sort of stance. Here's a thought, how about we let the lenders solve their own personal problems all on their own, without dragging appraisers through the mud as the only viable solution?

And to answer your question a bit more directly, is it not the appraisers job to develop an unbiased opinion? Is it not the appraisers job to determine what the most probable price might be, despite the MLS and assessor? So a property is listed for $100k. So what? Is it worth $100k?

So answer this. What is the purpose of the appraiser? If everyone, including appraisers, think the only purpose of appraisers is to hit that contract price so everyone involved can get a warm fuzzy over the deal, then the appraisal industry is truly a sham, IMO of course - lol.

 

[ucbruin]

For FNMA....
Contract section of the appraisal form would have to be changed....
But I'm guessing FNMA wants the information....

 

[Deleted member 152047]

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?

You have to analyze the contract if it is made available. I personally like knowing the contract price as it can tell you a story. If the price is abnormally low or high there is usually something else going on with the property that the client might not have made you privy to (or they might not know).

 

[Deleted member 130081]

You have to analyze the contract if it is made available. I personally like knowing the contract price as it can tell you a story. If the price is abnormally low or high there is usually something else going on with the property that the client might not have made you privy to (or they might not know).

Something an ordinary assumption would not cover?

 

[Deleted member 152047]

Something an ordinary assumption would not cover?

Wouldn't you rather get it right the first time?