Comment Caucus

[sputnam]

I keep it short when short suffices, mid length if applicable, and will go long if something merits it ( which is less frequent but have done it )

What I find odd reading some appraisals is the disparity - short comments or no comment when a thorough explanation is desperately needed, and long, winding narrative about a nothing burger.

I agree. Occasionally, a longer explanation is needed. In the vast majority of residential appraisals, it isn't. I see that most in HABU comments. A few appraisers get it. Some essentially say nothing... either briefly or in a long narrative. If the zoning only allows single family residential... then that is the HABU and that is all you need to say. If there is something more complex going on, then you may need to say more. What is never needed, in residential reports, is a multi-paragraph explanation of what HABU is... yet, that's exactly what some appraiser do.

 

[Sadie]

Asking A) did an appraiser analyze and consider the SC is different than B) asking why the SC price and appraisal value are different. The former is required by USPAP, the latter B is not.

B is done as a client service, so the poor loan officer can show it to the enraged RE agent or disappointed borrower. It never should have been asked at all. DOH. The appraisal is why the market value opinion is what it is. A sale contract price is negotiated before the appraisal is done and their negotiation and motivations belong to them.

I disagree on that. The sales contract is an indication of what a market participant is willing to pay for the property. If your MVE is not similar to that, then you should probably explain why the contract price in this transaction does not equal market value. A whole bunch of reasons that can probably be explained in a sentence or two.

 

[J Grant]

I disagree on that. The sales contract is an indication of what a market participant is willing to pay for the property. If your MVE is not similar to that, then you should probably explain why the contract price in this transaction does not equal market value. A whole bunch of reasons that can probably be explained in a sentence or two.

No, we should not explain why the sales contract does not equal market value. We should explain that the SC was a negotiated price between two parties, and our appraisal market value opinion is well supported because : ( sum up a few salient points, such as used the most similar comps )

The contract is a price, and remains a price, even if our OMV is the same $ amount as the contract price. On an appraisal review, review, it asks: the reviewer :"Do you agree with the opinion of market value ? " The review does not ask "Do you agree with the sale contract price ?"

We always should consider the sale contract price as a market indicator. Which is not the same thing as assuming a sale contract price is "market value " .

Price is a fact, value is an opinion. Consider the several types of numerical expressions of value that USPAP gives for appraisal opinions :1) A range of value, 2) A point value, 3) A benchmark of value. The benchmark of value is an opinion of value greater than, less than, or the same as a benchmark number. In this case the benchmark is the SC price.

Our assignment is to develop an opinion of market value for the subject property. Our assignment is not : "Develop an opinion of value for the subject contract price benchmark "
When appraisers make statements such as "The subject contract is market value , " they dis an appraisal using the SC price as a benchmark. Which means, per USPAP, they have done TWO appraisals, and should keep work files for each of them The appraiser 1) gave a MV opinion on the subject property, and 2) The appraiser gave a MV opinion on the SC price benchmark.

This distinction would escape the average UW and even many reviewers . But it is correct according to USPAP.-

 

[J Grant]

I disagree on that. The sales contract is an indication of what a market participant is willing to pay for the property. If your MVE is not similar to that, then you should probably explain why the contract price in this transaction does not equal market value. A whole bunch of reasons that can probably be explained in a sentence or two.

This is a distinction that goes to the heart of an appraisal, and one that if an appraiser does not grasp sends them down a rabbit hole.

The sales contract is an indication of what a market participant is willing to pay for the property. You are correct in that, but it should stop there.
The MV opinion of value IS the appraisal, developed using a definition of market value conveying what the hypothetical "buyer/seller ) should bring ( at the terms spelled out in the MV definition )

We should consider a subject sale contract, but it remains an indicator of what one buyer and seller agreed to. A subject contract price can support our opinion of value . Our opinion of value is not there to "support a contract price "

 

[J Grant]

DEFINITION OF MARKET VALUE: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller,
( my insert: The definition means the hypothetical buyer and seller in the appraisal. It does not mean the ( names ) buyer and seller in a sale contract.)

An appraisal is an OPINON of market value. An appraisal is not a DEFINITION of market value. It is an opinion of value using a definition to identify the type of value. ( in this case MV)

A problem is the common usage including among RE agents, that "market value" means what a buyer is willing to pay. That is fine for their use. But their use of the word market value applies to a particular price. It is not the same as an appraisal opinion of market value. ( which uses a definition of market value for presumed sale terms )

The definition of market value in an appraisal contains a set of sale terms. An individual subject contract price or (sold price of a comp) can deviate from the MV definition set of terms.

 

[J Grant]

A rabbit hole of skewed logic:

An appraisal is an opinion of market value. Market value is the price a willing buyer pays. The sales contract price is market value . The appraisal supports the contract price.

 

[residentialguy]

I disagree on that. The sales contract is an indication of what a market participant is willing to pay for the property. If your MVE is not similar to that, then you should probably explain why the contract price in this transaction does not equal market value. A whole bunch of reasons that can probably be explained in a sentence or two.

I agree with your for the most part. I would have explained the steps you took to try to find out why the contract was above or below your opinion of MV."
For example: The parties of the contract were contacted and it was found that the buyer's daughter will be residing in the duplex and it is located in the same block on his primary residence. This is much more desirable to this buyer than other comp locations, whereas that would not be a factor to the typical small income property buyers and would explain why the buyer is willing to pay over market value.

It's not always this clear, however you still show you steps in you tried to find out why in you verification and analyzing.

 

[J Grant]

I agree with your for the most part. I would have explained the steps you took to try to find out why the contract was above or below your opinion of MV."
For example: The parties of the contract were contacted and it was found that the buyer's daughter will be residing in the duplex and it is located in the same block on his primary residence. This is much more desirable to this buyer than other comp locations, whereas that would not be a factor to the typical small income property buyers and would explain why the buyer is willing to pay over market value.

It's not always this clear, however you still show you steps in you tried to find out why in you verification and analyzing.

Hi Res Guy! I appreciate the effort you make into finding out more about their motivations. I make the effort as part of normal course of business but usually I do not go the extra mile -(judgment call )

One issue I see is the last phrase -"...and would explain why the buyer is willing to pay over market value." ( that is an appraisal of the sale contract price as a benchmark to MV ( post #53).
I would suggest instead :" ...and would explain why the buyer is willing to pay their sale contract price. "

 

[residentialguy]

Hi Res Guy! I appreciate the effort you make into finding out more about their motivations. I make the effort as part of normal course of business but usually I do not go the extra mile -(judgment call )

One issue I see is the last phrase -"...and would explain why the buyer is willing to pay over market value." ( that is an appraisal of the sale contract price as a benchmark to MV ( post #53).
I would suggest instead :" ...and would explain why the buyer is willing to pay their sale contract price. "

Hi JG,
I don't know why semantics like that is "an issue". It's just a possible reason I found of why they are willing to pay over my supported opinion of market value. Sometimes you read into things too much... which is why we love you

 

[J Grant]

Hi JG,
I don't know why semantics like that is "an issue". It's just a possible reason I found of why they are willing to pay over my supported opinion of market value. Sometimes you read into things too much... which is why we love you

Love you back!
WRT to my response - The issue I have is not that you went the extra mile to ask a buyer their motivation ( which can explain their price )

Issue is: " It's just a possible reason I found of why they are willing to pay over my supported opinion of market value.
It should be: "a possible reason I found of why they are willing to pay their CS price.

Making comments about their CS price being over ( or under ) the opinion of MV can be construed a s an appraisal relative to a benchmark of the sales Contract $ price number

USPAP-The appraiser may report the opinion of value as a single number, as a range of values (minimum to maximum), or relative to a benchmark. This should be specified in the agreement for services.