Definition Of A Number Hitter....

[KD247]

Trouble is that lots of appraisers don't know the difference between a "number hitter" and an appraiser that recognizes a strong market for what it is.

Inspected a sale a few days ago. (I'll make up some numbers to tell the story.) 1,500 sf, 4 year old condominium listed at $400,000 for 5 days, received several offers at and above asking price, most with large down payments and no contingencies. The highest and most recent sales in the tract are 2-3 months old, similar models at $365,000. There are a few sales of competing properties that are more recent, but 2-5 miles away, with values between $380,000 and $400,000. There are several sales that are a few months old of competing, but larger, units at $420,000 - $430,000.

Current listings show the following listings as the most closely competing properties:
1000 sf, two year old condominium for $395,000
1500 sf, four year old condominium for $460,000
1100 sf, forty year old home (far inferior area) for $375,000
1000 sf, fifty year old home (fair condition) for $380,000

There are also three pending sales of generally similar properties (but none in the subject's project) with asking prices of $400,000 - $420,000.

The buyers told me that they've been looking for three months, at all types of properties in every part of the city. The subject is the only property close to $400,000 that has two bathrooms and isn't beat up. Also, this type of situation isn't a fluke. We've been seeing this same pattern for the last three years.

The contract price (no concessions, 30% down payment) is $405,000. Lots of appraisers would look at this scenario and determine that the subject "can't" be worth more than $365,000. But it's readily apparent to everyone that, if they were available, five or ten of these units would immediately sell at the same price. What's the value? I say it's $405,000.


Before you accuse me of being a number hitter, here's the flip side: in another nearby city, I inspected a small condominium in a marginally desirable project with a lot of weekend users. Borrower estimates $290,000 and there are five model-match sales at $285,000-$300,000; all about 3-5 months old. But... there's a very recent closed sale at $255,000 and there's a listing (again both model matches) that was reduced yesterday from $290,000 to $257,000. The agent said that there was no interest at $290,000 and the seller got nervous about completely missing the market while sitting on the $290,000 price. Our borrower needs $270,000 for his refinance. What's the value? I say it's $255,000.

Some of the same appraisers who would never appraise the first property above $365,000 would gladly use the slightly older comps and estimate $290,000 for the second property. Number hitters, or just numb?

 

[Judy Whitehead (Florida)]

See MH - Jo Ann wondered if you were male or female, too!!!

 

[Mike Garrett RAA]

Only a man would have posted that avatar!

 

[larryhaskell]

Not necessarily Mike. Could be somebody just kidding all of us. I'm guessing MH is a lady.

A number hitter is something like ****ography, it's hard to define but I know it when I see it.

 

[Tony in Ohio]

Brandon,

I was afraid some might not be able to see my tounge firmly planted in my cheek when I wrote that comment. I think you did because you included my (pause? periods? whatever that device is called). I do see your point however.


On topic,

I see that that the vast majority are looking at outright fraud or at minimum very poor understanding of appraisal analysis when they think "number hitters" but there is at least one who says if you have appraised it for the same amount that the Owner/LO/whoever thought it was worth then you are a "number hitter"

Typical. We can't get anyone to agree on anything.


While I would say that if I give a final estimate of value that is the same as the owners/LO/contract/whatever value, which is within the indicated adjusted range using the most similar and proximate sales and reasonable adjustments, than I am technically a "numbers hitter".

I can live with that.

As someone else said. I am not that good to be that precise. Or, since I do think I am good, I should say that the market is not that precise. How else do you explain a range of values on new or newer model match cookie cutter condo's?

 

[Steve Owen]

What about if the sales price is $150,000. There are 4 good comps, with sales prices of $152,000; $150,000; $145,000; and $140,000.

I'd have to ask why that one property sold for so much less than the other similar ones. Bet you in most cases like this there would be a reason. Often in one area where I work the reason is quality difference. A lot of comments in this forum have referred to "quality" as subjective, but when most houses have hardwoods, new heritage or shake shingles, crown molding and high ceilings and the next one has less of the same there's really not much subjectivity about it.

A lot of the time, the "number hitter" label is used to discredit otherwise good appraisers. Yet, the real number hitters? Well, in this market everyone knows who they are.

I've heard some really stupid statements made by otherwise intelligent people on this subject.

I heard one regulator say that 50% of the time your appraisal should come out below the sale price or you are a number hitter. WRONG. The buyer and seller have already each done the best job they could in the market. There are two main reasons why a sale might not appraise at the sale price. 1) If one of the people in the contract is ignorant of the market, for example, and out of town buyer. 2) If fraud is involved. (Of course, there are other reasons, which come into play even less frequently, like selling to brother-in-law.)

So. . . in the case of a sale (at least in this market), the appraisal will probably come out at or near the sale price most of the time. That's not number hitting, that's reality.

Re-fi's are a different matter. If every one of those you do comes out at the owner's estimate, then you'd better take a reality check. I have one LO that almost never sends me a re-fi that won't work. Just because this guy is good, am I a nubmer hitter? No, I come in below for a lot of the others a lot of the time, and sometimes even for him.

If you ignore the facts and start at the owner's estimate, working backwards to get there then you are a number hitter. Otherwise, I wouldn't worry about it if I was you, even if a lot of your deals work out.

Will you say NO to a loan officer or a good client when that extra $1,500 dollars

That depends, I've had deals where there were only three best comps and there was nothing else to adjust. I told the LO, "sorry, this ones only $1k below the owners estimate, but there's no way to bring it any higher." However, most of the time, there's really no way to know. If I get that close I'm going to go back and look at the cost approach - is it higher? If so, then maybe that adjusment should have been a little different. As a general rule, no one is that good; changing that adjusment to get an extra $1,500 doesn't make you a nubmer hitter IMHO; especially if you have support from another approach to value. On the other hand, if you ignore the most similar, most recent and most proximate sales, (as well as the sale history and other pertinent facts) then you are probably a number hitter.

 

[Mountain Man]

Koert, your first example is not an example of hitting a number, it's a good example of how much harder an appraiser has to work in a very dynamic, and rapidly changing market. With that waiting line for homes, multiple offers, and considering the current listings, I can agree with you. That is a function of supply and demand, with the supply side being very short. No number hitting there, just requires lots o'splain' for the UW.

However, it the situation changed to having 6 sales within the past year, condition ranging from average to good/remodeled, between $280,000 to $365,000. But you had to go to a new development for the $400,000 to $420,000 range to support the $405,000 mark....... then you just might be a ......

 

[KD247]

"But you had to go to a new development for the $400,000 to $420,000 range to support the $405,000 mark....... then you just might be a ...... "

Most of the time, I'm just glad not to get the tough ones. Here's an even tougher example. On a particular street, which is such a well-defined sub-market that even comps from adjacent streets don't apply, there are a few high quality larger homes that have sold in the $600,000 - $750,000 range. The typical small old cottages on this street rarely go over $500,000. An investor buys a small cottage and spends $150,000 fixing it up, puts it on the market and sells it immediately, for $740,000. The selling agent said their were several offers between $700,000 and $750,000 and they picked the most qualified buyer.

The best comparables on the subject's street are a recent sale of a fixed-up smaller cottage for $600,000 and a 1,000 sf larger home that sold 9 months ago for $775,000 and is now back on the market for $825,000.

What's the value? I think probably (I sound tentative, don't I?) $740,000. Do I want to do the appraisal? No way!

In the meantime, a cottage that would have recently been valued at $500,000 is now pending at a little over $600,000.

This really shows the importance for competancy in a particular market. While I'm trying to get within 20% accuracy on some of these appraisals, appraisers in other areas might have valid debates over whether a bathroom adds $3,500 or $4,000 in value. Take either perspective to the other location and you'd look like a fool. Meanwhile, several successful (financially) appraisers are advertising that they do appraisals within a 300 mile radius. Many of them send inexperienced trainees to the distant appraisals and then sign as if they personally did the inspection.

 

[Mike Garrett RAA]

But, but, but.....I am that good...just ask me! :rofl: :rofl: :rofl:

Common sense, just common sense. What is a good indicator of what something is worth?

What a ready, willing, knowledgeable buyer, not acting under duress is willing to pay.

Anyone ever notice how often when doing reviews the company ordering the review says......."if your value conclusion is within 5% of the value conclusion in the appraisal report let it be and move on".

Relocation companies do the same thing.....if two appraisal are more than 5% apart they order a 3rd appraisal.

Does that make 5% a magic number? No, of course not, but it certainly indicates we are not perfect and there is, or should be, a margin there that we use. I do not consider myself a "number hitter" but I don't take any pleasure or joy being so stiff necked that I can willfully kill a real estate transaction for say 1 or 2% on a $150,000 house.

Isn't there still an underwriter's option to increase a value by 2%. I know the VA has done that on some of my appraisals in order to accommodate the veteran.