Data Cancer found....

[J Grant]

If appraisers are now suggesting that a waiver results in a non arm's-length transaction, I'm not sure we're even at a place where anyone will agree on anything.

Most of us agree that the one appraiser suggesting that a waiver results in a non-arms-length transaction was incorrect.

 

[J Grant]

Appraisals don't get used to establish prices. They get used to establish LTVs and mortgage decisions. That's a significant distinction.

When the appraisal value is LOWER than the SC price, the deal is dead ( unless they neogaitne ) and if they re-negotiate, it can be to the lower appraisal value as the new sale price, or the buyer puts up more cash, sometimes they meet in the middle etc - so an appraisal can result in a certain price.

Techincally appraisals are not used to establish a price or establish an LTV -the appraisal does provide value and other info for the lender to make a mortgage decision.

The LTV % depends on the amount of $ down from the borrower.

 

[Surf Cat]

What is market value?

Market value is generally defined as the most probable price a property should bring in a competitive and open marketplace, as of a specified date, in cash or its equivalent. This requires an arm’s length transaction, where both parties act in their own best interests, without undue haste or duress. Additionally, it requires that both buyer and seller are reasonably informed about the property and the market, and that the property has been exposed to the market for a reasonable period of time.

So, if a buyer makes a full price offer after 5 DOM and the seller accepts right away. Is that a reasonable period of time to be exposed to the market? What if the buyer is not reasonably informed?

Now the lender just waives the sucker due to the borrower making a large down payment. Where's the safety net? Who's protecting the consumer?

Especially if the purchase was at a price higher than the most recent, competitive sales. Who's to say that it's at fair market value? Collateral underwriter? Zillow?

The Realtor's happy, they made a fat commission check. The lender's happy, no speed bump appraiser telling them their deal's going to fall through.

What happens to the buyer when they go to refinance when rates are more favorable and find out their property is not worth what they paid for it a few months down the line?

Now the sale is injected into the market and others (appraisers, Realtors) are relying on it. This was the whole premise of the voice of the appraiser podcast. Did the host leave out some important details as George is contending? Maybe. Was the dude a little over the top and animated. Sure... but it's not a hard stretch to think that this couldn't be happening.

You in disagreement with me are thinking in the traditional, classic, real estate sense. A waiver is "not" typical.

 

[Terrel L. Shields]

as long as it falls within an AVM range (the AVM from fannie or freddie)

Like their AVM knows the difference in a house and a farm

 

[J Grant]

What is market value?

Market value is generally defined as the most probable price a property should bring in a competitive and open marketplace, as of a specified date, in cash or its equivalent. This requires an arm’s length transaction, where both parties act in their own best interests, without undue haste or duress. Additionally, it requires that both buyer and seller are reasonably informed about the property and the market, and that the property has been exposed to the market for a reasonable period of time.

So, if a buyer makes a full price offer after 5 DOM and the seller accepts right away. Is that a reasonable period of time to be exposed to the market? What if the buyer is not reasonably informed?

Now the lender just waives the sucker due to the borrower making a large down payment. Where's the safety net? Who's protecting the consumer?

Especially if the purchase was at a price higher than the most recent, competitive sales. Who's to say that it's at fair market value? Collateral underwriter? Zillow?

The Realtor's happy, they made a fat commission check. The lender's happy, no speed bump appraiser telling them their deal's going to fall through.

What happens to the buyer when they go to refinance when rates are more favorable and find out their property is not worth what they paid for it a few months down the line?

Now the sale is injected into the market and others (appraisers, Realtors) are relying on it. This was the whole premise of the voice of the appraiser podcast. Did the host leave out some important details as George is contending? Maybe. Was the dude a little over the top and animated. Sure... but it's not a hard stretch to think that this couldn't be happening.

You in disagreement with me are thinking in the traditional, classic, real estate sense. A waiver is "not" typical.

I agree with a lot of your thoughts on the matter -

However, a waiver becomes a typical component of financing when it is used frequently.

Typical does not mean good, ethical, or about looking out for the borrower. A borrower feels the pain later by overpaying in a purchase or overleveraging in a refi with a WAIVER . The few hundred bucks they saved on it can cost them their equity.

In the past, cigarette smoking was more typical than it is now In America. It is still that way in a lot of European and Asian countries. Typically, this does not mean that X is good for people. A waiver was designed to push deals through.

 

[Alsie35]

*SNIP*

My question is why Mr Crawford didn't mention these factoids in his oh-so-careful writeup? It appears he omitted the 05/29/2024 sale at $360k altogether even though it was marketed through the MLS.

I'd severely hassle an appraiser for trying to sell their opinion based off of price/sf analysis with a dataset ranging from 1444-3175sf.

Because ... ummm ... he might be trying to sell ... a NARRATIVE??

 

[J Grant]

What is market value?

Market value is generally defined as the most probable price a property should bring in a competitive and open marketplace, as of a specified date, in cash or its equivalent. This requires an arm’s length transaction, where both parties act in their own best interests, without undue haste or duress. Additionally, it requires that both buyer and seller are reasonably informed about the property and the market, and that the property has been exposed to the market for a reasonable period of time.

So, if a buyer makes a full price offer after 5 DOM and the seller accepts right away. Is that a reasonable period of time to be exposed to the market? What if the buyer is not reasonably informed?

Now the lender just waives the sucker due to the borrower making a large down payment. Where's the safety net? Who's protecting the consumer?

Especially if the purchase was at a price higher than the most recent, competitive sales. Who's to say that it's at fair market value? Collateral underwriter? Zillow?

The Realtor's happy, they made a fat commission check. The lender's happy, no speed bump appraiser telling them their deal's going to fall through.

What happens to the buyer when they go to refinance when rates are more favorable and find out their property is not worth what they paid for it a few months down the line?

Now the sale is injected into the market and others (appraisers, Realtors) are relying on it. This was the whole premise of the voice of the appraiser podcast. Did the host leave out some important details as George is contending? Maybe. Was the dude a little over the top and animated. Sure... but it's not a hard stretch to think that this couldn't be happening.

You in disagreement with me are thinking in the traditional, classic, real estate sense. A waiver is "not" typical.

Nobody is protecting the consumer. The borrower has WAIVED their right to the appraisal contingency in the sales contract. Note that the program name is now Value Acceptance - WAIVER might remind the consumer of what they have given up/waived. The term still exists so we use it here.

There is protection for the lender - - they are free of reps and warranties for the value when there is a WAIVER (which means the lender does not have to repurchase the loan due to a collateral issue as they do with an appraisal-valued property ) . The taxpayers bear the burden now 100%. That is the safety net. We, the taxpayer, are funding the borrower, saving a few hundred bucks by using a waiver instead of an appraisal.

The WAIVER offer no longer means a large down payment. Waivers are now available for 10% down purchases. Maybe lower down payment too, not clear on that but they recently expanded to 10% down. I am not certain if FHA offers a waiver option or not.

 

[Joyce Potts]

You won't believe this, but I just completed an assignment last week in the ghetto, and I've noticed that prices have increased by 22% over the past year. With the (GSEs) holding back real estate-owned (REO) properties and these waivers contributing to rising prices everywhere, it's no surprise that we continue to see price increases.

Appraisals don't get used to establish prices. They get used to establish LTVs and mortgage decisions. That's a significant distinction.

George, are you seriously suggesting that appraisals, in some cases, are not a factor in market prices?

 

[Phil Crawford VOA]

Well! That was certainly a fun 24 hours! Such passion in this thread!

Mr. Hatch.... I would respectfully request that you wait until I release the final report on my "Data Cancer" analysis. It will be out in January.
Please review and then feel free to crucify me at will.

Since you were able to find my home, my backyard, and my deer, I'm sure it would have been easy for you to locate my email and phone number as well. I think a true professional would have reached out privately to ask questions instead of obnoxiously thrashing me on this forum.

We may have had a nice constructive conversation. I may have invited you to visit my beloved Cincinnati and had you over for dinner at my home. I could have served you a steaming plate of smoked venison with some fava beans and a nice Chianti. But... sadly that didn't happen.... and that's my loss.

I do appreciate you spending nearly 24 hours on this topic. I would estimate a certified general appraiser in Carlsbad probably commands a billing rate of $400.00 per hour, so I figured you spent $9600.00 worth of energy and professional time on.... well... me.

I'm honored but I'm not going to pay that invoice. I recommend sending it to the GSE's. They'll pay it. Don't forget to include a copy of your W-9.

To everyone else... This is my first post on A.F. and I want to say thank you for listening to the show for the past ten years!
Kevin and I will continue advocating for the appraisal profession and we have a great line up scheduled for 2025!

We truly appreciate you listenership!
Happy Holidays!

Phil Crawford / VOA

 

[GWISC]

I watched the video and heard the claims made by Phil. Waivers, to me, have no more impact than a cash sale; both do not require an appraisal.

To be clear; I do not support waivers as I believe this trend could be abused by participants in the market by manipulating sale prices to achieve a desired LTV to trigger said waiver. Concessions, paid back to the buyer could resettle the inflated offer back to the original offer. Often, these concessions go unreported in the MLS and on Zillow and other sites.

The $430K sale appears to have a long view of the lake. Perhaps the buyer paid a premium for the long view of the lake, rather than just a view across the narrow portion. I do not see any other sale balloons showing other sales have this unique view. There are far too many variables to just declare that the waiver caused a "too-high-of-a-price sale". I don't buy it.

Also, the 430K waiver sale took place in April. The other prior sales took place in February. In my area, the market can transition quickly and dramatically from winter to spring.

Also, there was no discussion as to the overall features of the 430K sale. George Hatch even indicated a rather large deck. Perhaps that large deck contributed to the premium price. Such features will increase the price/sf. The deck looks like the kind that could host large gatherings. Large decks are very expensive to build.

Also, I do not consider our job is to shepherd the real estate market. We observe and report. The market takes care of that itself to it's benefit or detriment. A single appraisal report cannot shield a mass upswing or downturn in the market.

Also, if an appraisal were ordered on this sale, how do we know that it would not have appraised out? Or, if it did not, how do we know if the buyer would have made up the difference between the OMV in the report and the sale price? Answer, we don't.

Also, Phil seems to think that a RE agent's fiduciary responsibility extends to a requirement to inform buyers that they should seek an appraisal. They themselves are real estate professionals that can help a buyer with data to see what is an appropriate sale price for a house. See below for a real estate agent's fiduciary responsibility per NAR. No where in the list does it state that an agent must, or should, suggest the buyer get an appraisal, specifically.

https://www.nar.realtor/sites/default/files/handouts-and-brochures/2014/nar-fiduciary-duty-032213.pdf

The real cancer:
I believe the real cancer in the data is misreported sale prices and omissions of details regarding concessions etc... My example of such data cancer are two sales comparables (both discovered in the last month no less). In both cases I called the agent to verify the conditions of the sale. You all should do that. Verifying why the buyer paid the amount they do is eye-opening. Yeah, it takes more time, but it is worth it.

1) The first sale I came across had a sale price reported as $790K by Zillow. The actual price ended in an odd amount. I use Total as my software. The data is shared with other users of Total. After you type in the address, you can see how other appraisers, using the same software, used the same comp. When I started typing in the address, I noted that a few other appraisers used this sale at the $790k mark. I called the agent. The agent verified the price was actually $905k. She could only speculate as to why the price in Zillow was off more than $100k.

2) Another sale I came across indicated a price that was just over $400k. The MLS indicated a 3 car garage. I called the agent as the MLS photos and assessors data showed only a 1-car garage. Turns out the price paid to the seller was actually $5k less than what the MLS indicated. The other 5k? That was what the buyer paid to procure 2 garage stalls across the alley that was not connected to the subject property nor was owned by the seller (the garage stalls were part of a bank of garages that can be leased and are part of an HOA). The agent just combined the two transactions. And yes, other appraisers used the MLS reported price, not the correct price.

These two are just in the last month.

I find that most sale prices are accurate, but that sale concessions are not always reported. Also, don't assume that all concessions are for closing costs. About half of them, I find, are for repairs the buyer will incur after they take possession.