Delicate problem

[J Grant]

I would say the buyer type isn't what's significant, but the attribute for which the demand is higher. If the attribute is 1 story sells for more than 2-story then the observation of that difference and the quantification of the effect on value is what we're doing, not speculation about their motives being the buyers are older and don't want to do stairs.

This group sells for 12% more than that group. Done. The reason why doesn't matter in an MV appraisal. Nor does knowing why (if that's even possible) relevant to the decision maker's decision particularly when that reason gets into the personal attributes of the borrower. Even if that attribute isn't among the various classes protected in fair lending, treating one type of attribute different from another will soon touch upon the issue of treating people differently.

Stick to the property attributes and put the buyers' personal attributes out of your mind. If the location is the thing or if the orientation of the front door is the thing or if the number of bedrooms is the thing then prove it with the data. And keep any opinions you may or may not have about the people to yourself. Not one word.

And not just in the appraisal, either. If you're reviewing and some appraiser is running wyld with their speculation about the people then you gotta make them fix that because your client cannot get caught with a contaminated appraisal report in their files.

I believe the reason does matter in a MV appraisal. The reason gives the data context.

As appraisers, we may not need to (or be allowed to) write in the appraisal that the buyers are older for a 1- vs. 2-story; however, it is silly to pretend that is not the reason. The appraiser needs context to understand why X is this and Y is that. This context is what hard data or AI can lack - the actual perspective that makes things make sense.

"Flamingo villas are the one-story villas in an age-restricted community of Flamingo Lakes."(Age restriction is allowed to be disclosed in an appraisal.) "The one-story villas have more appeal and sell at a higher price point than the two-story villas in this subdivision. "

 

[J Grant]

I would say the buyer type isn't what's significant, but the attribute for which the demand is higher. If the attribute is 1 story sells for more than 2-story then the observation of that difference and the quantification of the effect on value is what we're doing, not speculation about their motives being the buyers are older and don't want to do stairs.

This group sells for 12% more than that group. Done. The reason why doesn't matter in an MV appraisal. Nor does knowing why (if that's even possible) relevant to the decision maker's decision particularly when that reason gets into the personal attributes of the borrower. Even if that attribute isn't among the various classes protected in fair lending, treating one type of attribute different from another will soon touch upon the issue of treating people differently.

Stick to the property attributes and put the buyers' personal attributes out of your mind. If the location is the thing or if the orientation of the front door is the thing or if the number of bedrooms is the thing then prove it with the data. And keep any opinions you may or may not have about the people to yourself. Not one word.

And not just in the appraisal, either. If you're reviewing and some appraiser is running wyld with their speculation about the people then you gotta make them fix that because your client cannot get caught with a contaminated appraisal report in their files.

Clearly, the attributes of a property are what the appraiser focuses on. However, there have to be enough buyers that want the attributes ( and can afford them ) in a market area.' It is not about peronal opinions of the borrower, evfen if we have them, we put that aside. It is about understanding what motivated the typical buyer ( that is in the MV definition) for that property in that location.

Do you honestly believe the "why" does not matter in a MV appraisal? When in reality the "why" matters enormously? It seems like the data only tells the story is a more recent opinion from the GSEs, which seek to marginalize the human appraiser's market knowledge and instead let the data be king, - so that an analyst can do it or an appraisal can be skipped ( a waiver) or an appraiser not go to the property and a PDR person "data collect" instead.

A buyer does not spend 600k and move 40 miles away because of "data". A buyer moves and spends large sums of money to purchase certain property attributes, in certain locations and they do so for X, Y, or Z reason.

 

[J Grant]

AI and data without context end up telling a story too. Even without an appraiser explaining the market motivations and context.

The story AI or Data alone tells can be totally wrong or taken out of context, but it looks "official. All of this veering away from what an appraisal is designed to convey, with respect to understanding the buyer and seller motivations and market trends, is done to avoid certain words??? Of course, an appraiser needs to avoid certain words and ensure that any bias or personal opinions about people are not in a lender-purpose appraisal. But that also doesn't mean an appraisal should turn into a data-driven AVM or statistical output. Though certain stakeholders want that for max profit and speed.

 

[J Grant]

Definition of Market Value​

Market value is the most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale with, the buyer and seller, each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

• buyer and seller are typically motivated;

What are they motivated by? DATA?/ Really? A buyer wakes up one day and says to their spouse, let's move 80 miles away, go through all the trouble of selling our house, and spend 600k on a new house because data shows sales have risen 5% in X county.

Nobody does that. An investor buyer might go by rent numbers alone, but most res buyers do not. In fact, they often make decisions that defy the data. They overpay, buy homes that need repairs they can't do, or overimprove a home, etc. The data can rapidly change - a hot market cools off, or a stable market suddenly explodes. WHY?? It just happens for no reason? The reason matters. An overpayment could be because super low interest rates drove prices up - well, the flip side of that is when rates rise, those prices can drop and buyers be underwater. Maybe a lender might want to consider that ?? Low rates driving bidding wars are a different reason than a major employer is moving to the area, and thus more buyers, as well as high-paying executive buyers, will soon be coming into the area - which is a more durable reason the prices rise.

 

[George Hatch]

Do you honestly believe the "why" does not matter in a MV appraisal? When in reality the "why" matters enormously? It seems like the data only tells the story is a more recent opinion from the GSEs, which seek to marginalize the human appraiser's market knowledge and instead let the data be king, - so that an analyst can do it or an appraisal can be skipped ( a waiver) or an appraiser not go to the property and a PDR person "data collect" instead.

I have been doing this a long time and I never get into buyer attributes. If the market segment is drivng off of owner-users or it it's driving off the rents or it's driving off the redevelopment potential then that observation is all it takes to justify that consideration, and only because it affects the necessity or weighting of the different approaches to value.

If I can show the difference in the data then I can make the adjustment. After that I have never been hassled for "why". If someone did try o elicit a high-risk speculation from me I'd just drop them a note referring to the requirements of the fair lending requirements that apply to what they're doing. I've never had do that, though, because it's never gotten that far.

If I can do what I need to do without raising my exposure or my clients' exposure to such claims then what reason would I have for sticking my head into that beartrap?

"Typical" is relative to that market segment and that dataset; not to all properties in the region. We've been through this over and over.

 

[J Grant]

I have been doing this a long time and I never get into buyer attributes. If the market segment is drivng off of owner-users or it it's driving off the rents or it's driving off the redevelopment potential then that observation is all it takes to justify that consideration, and only because it affects the necessity or weighting of the different approaches to value.

If I can show the difference in the data then I can make the adjustment. After that I have never been hassled for "why". If someone did try o elicit a high-risk speculation from me I'd just drop them a note referring to the requirements of the fair lending requirements that apply to what they're doing. I've never had do that, though, because it's never gotten that far.

If I can do what I need to do without raising my exposure or my clients' exposure to such claims then what reason would I have for sticking my head into that beartrap?

"Typical" is relative to that market segment and that dataset; not to all properties in the region. We've been through this over and over.

We do not need to get into the buyer attributes of them as people; however, different buyers have different property-related motivations. And that puts the data into context.

A spec home builder has a different motivation (profit ) and thus will take on a problem repair property. The buyer who six months later will pay double for the same house after remodeling has an owner-user motivation to move in ready home where they do not have to do any work.

That explains the low price of the first purchase and the higher price of the second purchase of the same house six months later.

 

[J Grant]

I have been doing this a long time and I never get into buyer attributes. If the market segment is drivng off of owner-users or it it's driving off the rents or it's driving off the redevelopment potential then that observation is all it takes to justify that consideration, and only because it affects the necessity or weighting of the different approaches to value.

If I can show the difference in the data then I can make the adjustment. After that I have never been hassled for "why". If someone did try o elicit a high-risk speculation from me I'd just drop them a note referring to the requirements of the fair lending requirements that apply to what they're doing. I've never had do that, though, because it's never gotten that far.

If I can do what I need to do without raising my exposure or my clients' exposure to such claims then what reason would I have for sticking my head into that beartrap?

"Typical" is relative to that market segment and that dataset; not to all properties in the region. We've been through this over and over.

I always agreed with this last line wrt typical. However, without an explanation for context that is typical for a luxury penthouse buyer motivation vs a budget first-floor no-view buyer in the same building, it's just senseless, disconnected data. And a poorly trained person or poorly prompted AI can average the two , the high- and low-price units in the same building, for a median or average per SF price and thus undervalue the penthouse and overvalue the first-floor unit looking at the parking lot.

TI is not that hard for an appraiser to avoid certain words wrt bias yet still provide an explanation giving context.

 

[RCA]

Use common sense. You can discuss objective facts that affect price. Are these houses restricted to members of some group? That could impact price. You need to look at the details of what those restrictions are; that gets into their policies and contracts. All objective facts with identifying objective information.

- Those associated bylaws, contracts, rules - could be very important, and you must have access to those to do a legitimate appraisal, same as you would for a Condo or HOA.

Make sure to leave out flippant comments that have little or no foundation in fact. Just stick to the facts.