Being Told The Contract Price Of A Subject

[J Grant]

I still want to know what you think is going to happen if the sales contract disclosure and review requirement is retired from USPAP. Do you think your clients are just going to let it go when you bring a value conclusion above or below the contract price - even if only by an insignificant amount?

Value conclusion was $200k, contract price was $200,500. Do you honestly think the average clerk at the lender will let that go without further inquiry? Or is it more likely that "contract review" will simply become another user-defined assignment condition?

What do you think?

IF the regulators or whoever is supposed to be safeguarding were serious about independent value opinions from appraisers, the above would not be a problem. They would have guidelines in place to handle it..such as a lender could lend 1-3% above or below a MVO depending on condition of property , down payment, borrower credit etc. Actually, lenders can do this now, correct ? Only they rarely elect to do so because that would make them liable for the point value $ amount LTV on the loan. The reason the fannie appraisal waiver works is that fannie is liable for their own decision to waive the appraisal since fannie UW the borrower and considers the down payment, condition of property (usually from former appraisals on file ) and performs own evaluation

Alternatively an insignificant amount" difference between a MVO from CS price could be dealt with is RE agents could prep their buyers and sellers this may happen and put that same insignificant amount in their own cash to make up the gap. .

Having a SC price provided would be far less of a problem with a true firewall in place instead of the present compromised system. A true firewall would see AMC;s on govt contract with no affiliation with banks or lenders.

Clearly, nobody on the stakeholder side is serious about removing CS price pressure , or pressure in general, since it is present in refinances as well. It's obvious a higher MV is advantageous in a refinance, and to get it, the same tricks are available to inflate value for those that want to...

I've had more client problems around refinance appraisals that the owner was not "happy" with..and here comes the ROV... than in purchase appraisals.
Some of the refi problems are due to if an owner purchased at an inflated price, then are "Shocked" when it appraises lower...or from those serial refinance folks when the "last appraiser" appraised it high.

To be clear, I have no problem supporting a high MVO in a refinance or CS purchase , as long as that high $ value is credibly supported. There is a difference between a credibly supported high value and an inflated value.

The regulators failed to make a true firewall for it ( no surprise, since they failed to even make an protected dedicated agent or tip line to report pressure.. for appraisers )

 

[Deleted member 130081]

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

?Get what right? I don't need a contract to get my opinion of the value right.

 

[ucbruin]

IF the regulators or whoever is supposed to be safeguarding were serious about independent value opinions from appraisers, the above would not be a problem. They would have guidelines in place to handle it..such as a lender could lend 1-3% above or below a MVO depending on condition of property , down payment, borrower credit etc. Actually, lenders can do this now, correct ? Only they rarely elect to do so because that would make them liable for the point value $ amount LTV on the loan. The reason the fannie appraisal waiver works is that fannie is liable for their own decision to waive the appraisal since fannie UW the borrower and considers the down payment, condition of property (usually from former appraisals on file ) and has confidence in its won data evaluation ( because it has such a large data bank of appraisals and other information )

The other way the "insignificant amount " of a MVO from CS price could be dealt with is RE agents could prep their buyers and sellers this may happen and to keep aside a few k in cash or re negotiate ( or agent can shave $500 off their own commission. ) What these people do about price should not be the appraiser's concern, but of course that is not the reality.

Imo appraised values would be quite different if SC prices were not provided, and /or there was true removal of pressure around SC prices ( round robin panels of appraisers, or instead of for profit with bank aligned AMC;s, the AMC's were govt contracted third party firewalls )

Clearly, nobody on the stakeholder side is serious about removing CS price pressure and expectations and influence to come in "high" ( which is present in refinances as well), they would change the ordering system. For tax payer backed loans only, change the third party firewall to govt contracted firewalls that can manage and assign and review appraisals to outsource it from lenders and their influence. Right now AMC;s, who were supposed to be the firewall, are beholden to their lender customers and want to keep them "happy" with as few "deal killing " appraisals as possible....and that includes refinance deals not just purchases. It's clear that the same tricks used to inflate value for a CS is also present for refinance from those same appraisers. Just review more than a few appraisals with inflated values and the methods are the same...only difference in a purchase is the CS is the excuse for the "market is speaking"

I've had more pressure and problems around refinance appraisals that the owner was not "happy" with... where is the CS price market is speaking excuse then? Its gone, all that is left is the stark truth that lender pressure, whether outsourced to an AMC or not is still there, Some of the problems around refinances are due to when a year ago they bought it at an inflated price, then are "Shocked" when it appraises lower...or from people who have owned it a long time, have done multiple refinances and the "last appraiser" appraised it high. To be clear, I have no problem supporting a high MVO in a refinance or CS purchase , as long as that high $ value is credibly supported. There is a difference between a credibly supported high value and an inflated value.

The regulators failed to make a true firewall for it ( no surprise, since they failed to even make an protected dedicated agent or tip line to report pressure.. for appraisers )

"To be clear, I have no problem supporting a high MVO in a refinance or CS purchase , as long as that high $ value is credibly supported. There is a difference between a credibly supported high value and an inflated value."

I'm not disagreeing with your point above....

What I do wish to highlight are certain term/phrase you employed to express your opinion....
When I employ similar, if not exactly the same, you've lamented that's not what appraisers are hired to do.....
It's not a low or high MV, it's MV....
We aren't hired to support SC....

Sometimes hard not to employ weasel words when making a point....

 

[J Grant]

It's not being provided with the SC price /contract that is the problem, it's the client and related parties expectations and pressure around the CS price, and business consequences for appraisers, that is the issue, why pretend otherwise. Appraisers are capable of unbiased and well supported opinions both with and without a SC price /contract provided, but the business and lack of protection compromises that - the supposed firewall has only marginally improved things and made things worse in other ways.

 

[Deleted member 152047]

You might not get it right if you don't have all of the information and make ASSumptions. Look, I don't know how often you are appraising non-ticky-tacky properties. I am often surprised by contract prices, when that happens, I often have to spend several days trying to get to the bottom of it.

 

[J Grant]

"To be clear, I have no problem supporting a high MVO in a refinance or CS purchase , as long as that high $ value is credibly supported. There is a difference between a credibly supported high value and an inflated value."

I'm not disagreeing with your point above....

What I do wish to highlight are certain term/phrase you employed to express your opinion....
When I employ similar, if not exactly the same, you've lamented that's not what appraisers are hired to do.....
It's not a low or high MV, it's MV....
We aren't hired to support SC....

Sometimes hard not to employ weasel words when making a point....

An appraisal is supposed to support its own market value opinion ( whether that is the same as, or higher or lower than a SC price ) An appraisal is not supposed to "support a SC price"

 

[J Grant]

You might not get it right if you don't have all of the information and make ASSumptions. Look, I don't know how often you are appraising non-ticky-tacky properties. I am often surprised by contract prices, when that happens, I often have to spend several days trying to get to the bottom of it.

Why do you have to spend days getting to the bottom of a SC price, when the presumed "sale" of a subject in our appraisal is at MV terms and motivations per the market value definition used? ..

As asked by another poster, What does "it " mean, when you say, "get it right?" Get what right??

 

[Deleted member 152047]

Why do you have to spend days getting to the bottom of a SC price, when the presumed "sale" for most probable price in the appraisal is at MV terms and motivations per the market value definition?

As asked by another poster, What does "it " mean, when you say, "get it right?" Get what right??

I don't have the time, energy, or inclination to explain reasons why you would want to analyze a contract price. This is SOP. Getting it right means that you analyze the information that you have. Additional data points, including contract prices can do nothing to hurt your MVO, but a contract price aberration could indicate other issues associated with the property.

Is Mr. Hatch in the building? Maybe Michigan CG or GoBears?

 

[ucbruin]

The weasel words distort the integrity around appraisals.... the fact that too many appraisers use those weasel words, even in their own appraisal ..well how did that serve the profession? The profession is dying on res lender end with the FHFA paper critical of appraisers for too high a rate of meeting SC price....if the consensus is appraisers are mainly rubber stamping CS prices why are they needed ? A cheap evaluation can rubber stamp lol. When appraisers say or write "the appraisal supports the CS price"...and have no idea why that is a problem, then that IS the problem.

An appraisal is supposed to support its own market value opinion ( whether that is the same as, or higher or lower than a SC price )

You just refuse to accept what the term "supports" means in an appraisal....

If real estate agents are doing their jobs....
And if the buyer and sell are informed/knowledgeable....
Why wouldn't the appraised value meet SC???

 

[Deleted member 130081]

You might not get it right if you don't have all of the information and make ASSumptions. Look, I don't know how often you are appraising non-ticky-tacky properties. I am often surprised by contract prices, when that happens, I often have to spend several days trying to get to the bottom of it.

To the bottom of the sinkhole? if you want to call me an ***, at least have the balls to do it as a reply.