Didn't Take High Offer Because Of Mean Old Appraiser

[Howard Klahr]

Without cash buyers, appraisers would keep marketplace stable, since looking backward to prior sales will never show you today's market.

This couldn't be any more wrong. It just shows a complete and utter lack of understanding of how to properly perform the sales comparison approach.

Market condition adjustments (time adjustment) bring the past data sales contact price up to present as of effective date value if market has appreciated or declined.

Quite correct and when done properly will reflect proper shifts in market conditions

 

[Joe Flacco]

 

[Joe Flacco]

The issue is trying to account for market conditions for a specific day, week or month is a pretty complex problem. The disconnect between appraisals and the market is sudden supply and demand imbalance. Such as the transition from the winter to spring market. It doesn't help that some clients require sales in the last 3 months. When the market gets hot suddenly in the spring, that requirement forces sales that occurred during the winter, a low activity season. But anyways, trying to account for sudden supply and demand imbalance is a very difficult thing to do.

 

[Elliott]

And.....the cash offer isn't highest, because.....its real money, it isn't an out of control bidding process based on easy financing and speculation. Two of the worse things to have in a market.

Olick said,

"During the previous boom, just the opposite was happening. Appraisals were being inflated to push home prices higher, as investor-flippers sought big gains. The result was an epic housing crash that thoroughly spooked lenders."

She's full of baloney on that statement.

She got it more right on the why behind the "shortage" when she said,

"Regulation, an altered appraisal market structure, and compensation issues burden those currently in the industry, while poor incentives make it harder to grow the next generation of appraisers."

The ASC's plan to lower standards by increasing quanity isn't going to improve compensation, but more likely will keep it at low(er) levels.

The shortage hypothesis is still fake news:

 

[Meandering]

The issue is trying to account for market conditions for a specific day, week or month is a pretty complex problem. The disconnect between appraisals and the market is sudden supply and demand imbalance. Such as the transition from the winter to spring market. It doesn't help that some clients require sales in the last 3 months. When the market gets hot suddenly in the spring, that requirement forces sales that occurred during the winter, a low activity season. But anyways, trying to account for sudden supply and demand imbalance is a very difficult thing to do.

Now you see the beauty of the 1004MC "median" prices for the last 6-12 months, as opposed to the previous 3 and current 3 months. That way you lose last summers sales to the "median" so the price is always "increasing" in the summer and always stable in the winter.

Smoke and mirrors accounting for a "growing" economy.

.

 

[J Grant]

"The cash buyers always push out the first-time buyers," Yun noted.

An ignorant comment. Most first time buyers purchase what is known as a starter home or condo, which though cash buyers do purchase them, starter homes are typically not a magnet for cash buyers. (unless in poor condition for investors but that's a different market segment. ) In addition, many sellers will accept a higher financed offer over a lower cash offer. Whether there is a "cash " deal ( which really means no financing contingency, ) or buyer gets a mortgage It's same funds disbursement as cash to the seller at closing, just a bit more risk with a financed offer.

 

[J Grant]

Elliot "During the previous boom, just the opposite was happening. Appraisals were being inflated to push home prices higher, as investor-flippers sought big gains. The result was an epic housing crash that thoroughly spooked lenders."
She's full of baloney on that statement.

Full of baloney?? .That's exactly what happened. What fog of denial do you operate in? I reviewed lots of appraisals post crash, in fact that is how my business survived, and nearly ever appraisal I reviewed had inflated or pushed value ( done by a few common skippy tricks - I can outline the tricks if you like). While all prices were higher in the boom, there was still a difference in methodology between pushed or inflated values and credibly market supported value opinions done in that time.

AND, I still see inflated value appraisals (using the same tricks)...it did not end with the HVCC . Some appraisers learned NOTHING from the crash, they still inflate value and do it on refinance deals as well as purchases, so they can't even blame it on the sale contract. These appraisers don't need a mtge broker to pressure them, these appraisers take it upon themselves to do it.

If 10 appraisers are active in an area and 3 of them are value pushers (it's often more but I'll be conservative), those 3 appraisers can skew markets because their pushed value purchase closings creates a new high priced comp that even an honest appraiser will use. Nothing wrong with a high purchase price when market supported, everything wrong with pushing value beyond what appraisal methodology is intended to yield.

 

[J Grant]

Riick said: ↑
Without cash buyers, appraisers would keep marketplace stable, since looking backward to prior sales will never show you today's market

Aplying time adjustments brings the value of past sales current to effective date, but beyond that, this statement is false for what happens in most bubble markets areas.

The highest prices are usually financed sales, not all cash sales. Though buyers can put down more cash to close a gap, most won't/dont...they no longer want the property at that sky high price if it means more cash out of pocket, or they lack the funds. So how do these financed sales, often the most vulnerable deals low cash down or FHA, end up being the highest prices?

All it takes is a few number hitter/value inflate appraisers working in a market area to facilitate it. By over valuing financed property sales, it creates a new set of high price comps always in the pipeline to skew the market,, and those comps end up being used by honest appraisers as well. That is how a bubble market feeds on itself. There is no substantial cash behind most deals and no real improved economy or higher wages present. The high prices fuel other high prices, till the whole thing pops.

 

[Bobby Bucks]

Multiple offers are not unlike multiple orgasms, sometimes the best one is not necessarily the highest one, I read that on the internet somewhere, USPAP is silent on the issue.

 

[J Grant]

And before the inevitable whine;"But appraisers didn't cause the crash, crazy mortgage loans did!" ...NOBODY, including me, blames appraisers as THE cause of the boom/crash, ( we all are familiar with the exotic/high risk loans no money down no income verification etc ). At the same time, it was that segment of number hitter appraisers (and there were quite a few, remember the comp checking debates?) who facilitated the explosive appreciation in prices because nobody but the appraiser was responsible for the valuation side.