Fannie definition of market value

[glenn walker]

I understand that, but the bulk of your discussion on this subject seems to imply some great divide between MV and price. The divide is not that great. What are the specific things in a fast-changing market that you would say cause there to be such a big difference in price and market value?

A definition is something that can be changed over time and USPAP needs to address additional definitions to be used in different market treads when it no longer fits in with whats happening . In Realville it's simply delusional to think there is a difference between market value and a sales price. The appraiser uses it because thats what USPAP and Fannie Pre-Printed Forms and Certifications say. The Market definition in the past was not the most Probable Price and many years ago as I recall it was the Highest Price a buyer would pay. The IRS Definition Fair market value (FMV) is the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, ( IE Sale's Price ) All the IRS did was "substitute" the word Fair market value instead of using most Probable Value. In the end it's the agreed upon sales price between market participants and both Fair Market Value and Most Probable= A finalized and recorded sales price.

Also while market value is determined by what a buyer is willing to pay for a home in a free and open market, the appraised value is the opinion of a ( Single professional appraiser and it's not Market Value ) and many appraisers confuse their final opinion of market value as being what the Subjects market value is . Meanwhile when the Appraisers point of value agrees with the Purchase Contract or Sale's price what he/she is really saying is the buyer and sellers value is market value. Anything above or below that is simply one appraisers opinion of probable value.

Angry-Cat To Appraisers regarding Market Value. Your final opinion of market value will not change no matter what definition you are mumbling about but the truth is the market trend is what changes what you really end up doing. In a Stable Market the definition of most probable price is reasonable because normal buyer and seller interactions in negotiations are fairly normal- A buyer offers a lower price and sellers counters back at a higher one at at some juncture a meeting of the minds is completed but rarely over list price. In a BOOMING market trend where buyers are bidding $50K over list and prices are increasing at 2% to 3% a month-the truth is there are all sorts of underlying undue stimulants happening- but since everyone is on the same ball field we do not interfere by interjecting our own opinions on when its going to come to an-end. So now the Appraisers are using the silent definition of the Highest Price a buyer will pay. The same happens in reverse- when a market is in a meltdown and appraisers were using 1% to 2% a month negative time adjustments . Those appraisers where not appraising to the most probable price because their negative time adjustments were actually helping to drive each new sale to a lower price and the cash buyers were using undue stimulus on sellers who were desperate to get it sold. Basically the most Probable Definition is totally worthless outside of being in a Perfectly Stable Market Trend.

 

[Meandering]

12 CFR § 34.42 - Definitions.​

(h) Market value means 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 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:

(1) Buyer and seller are typically motivated;

(2) Both parties are well informed or well advised, and acting in what they consider their own best interests;

(3) A reasonable time is allowed for exposure in the open market;

(4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

(5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

Not a Fannie Mae Definition. But one voted and passed by Congress as a law.


IRS Publication 561 (02/2020),
Fair market value.

Fair market value (FMV) is the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. If you put a restriction on the use of property you donate, the FMV must reflect that restriction.


Fair market value, does not require exposure to the open market. Therefore relatives can buy, if they will pay the same price as non-relatives.


During a "pandemic"
you don't have an "open" market.
If the government is trying to "control" the "spread".
Hence Mkt value and Fair Mkt value needed definition enhancements, or,
someone needed to issue a definition of prices being paid in a panic market, beyond price gouging.
Or,
just let the appraisers be responsible.
Borrowers had the option to accept a waiver or not, so they are responsible for those.

Pleasanton grocery store guilty to price gouging​

Lakewood companies charged with price gouging PPE cut deal ...

Episode 10: Pandemic Price Gouging - Winston & Strawn​

Price Gouging and Pricing Issues During COVID-19 ...​

.


.

 

[J Grant]

Meanwhile when the Appraisers point of value agrees with the Purchase Contract or Sale's price what he/she is really saying is the buyer and sellers value is market value. Anything above or below that is simply one appraisers opinion of probable value.

Sorry my learned friend...
The above is not really accurate. When an appraiser's point value agrees with ( I prefer equivalent to ) but using your word -what he/she is really saying is the buyer and sellers value is market value.

the buyer and seller don't have a value, they have a price.

If our OMV is same as their CS price, great. But the OMV point value remains OUR value opinion, does not matter that it is the same numerical amount as their contract. Remind in a field or desk review it asks " does reviewer agree or disagree with the OA ' opinion of market value/ Whether the OA $ OMV was the same as a sale price means nothing. How any times have we seen a sale price at same a $ number as a OMV, later, if prices decline or rise, that sale price sticks out as over paid or underpaid ? .

 

[Meandering]

Next year, when it all settles down
and interest rates go up

Price gouging is going to be the cry of those that purchased during the pandemic

Heads will roll, but not at the banks. They relied on the appraisals.




Yeah it'll be different this time.

.
.

 

[glenn walker]

12 CFR § 34.42 - Definitions.​

(h) Market value means 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 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:

(1) Buyer and seller are typically motivated;

(2) Both parties are well informed or well advised, and acting in what they consider their own best interests;

(3) A reasonable time is allowed for exposure in the open market;

(4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

(5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

Not a Fannie Mae Definition. But one voted and passed by Congress as a law.


IRS Publication 561 (02/2020),
Fair market value.

Fair market value (FMV) is the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. If you put a restriction on the use of property you donate, the FMV must reflect that restriction.


Fair market value, does not require exposure to the open market. Therefore relatives can buy, if they will pay the same price as non-relatives.


During a "pandemic"
you don't have an "open" market.
If the government is trying to "control" the "spread".
Hence Mkt value and Fair Mkt value needed definition enhancements, or,
someone needed to issue a definition of prices being paid in a panic market, beyond price gouging.
Or,
just let the appraisers be responsible.
Borrowers had the option to accept a waiver or not, so they are responsible for those.

Pleasanton grocery store guilty to price gouging​

Lakewood companies charged with price gouging PPE cut deal ...

Episode 10: Pandemic Price Gouging - Winston & Strawn​

Price Gouging and Pricing Issues During COVID-19 ...​

.


.

Yes the IRS Definition is a better overall fit but their definition conflicts with USPAP and Fannie Maes guidelines.

 

[George Hatch]

It doesn't conflict with USPAP.

 

[Meandering]

. When an appraiser's point value agrees with ( I prefer equivalent to ) but using your word -what he/she is really saying is

The sale contract price and the market value are equivalent by coincidence.

Fixed it for you.


.

 

[glenn walker]

Meanwhile when the Appraisers point of value agrees with the Purchase Contract or Sale's price what he/she is really saying is the buyer and sellers value is market value. Anything above or below that is simply one appraisers opinion of probable value.

Sorry my learned friend...
The above is not really accurate. When an appraiser's point value agrees with ( I prefer equivalent to ) but using your word -what he/she is really saying is the buyer and sellers value is market value.

the buyer and seller don't have a value, they have a price.

If our OMV is same as their CS price, great. But the OMV point value remains OUR value opinion, does not matter that it is the same numerical amount as their contract. Remind in a field or desk review it asks " does reviewer agree or disagree with the OA ' opinion of market value/ Whether the OA $ OMV was the same as a sale price means nothing. How any times have we seen a sale price at same a $ number as a OMV, later, if prices decline or rise, that sale price sticks out as over paid or underpaid ? .

Your just playing word games and I have no problem with appraisers believing they are appraising as to the most probable price except is a lie and they don't and never have. And like I stated unless in a very stable market there is no such thing as-a probable price unless you have a Chrystal Ball Reader . I have not seen one single sale in 3 months that I would have thought was probable. At best possible

 

[glenn walker]

It doesn't conflict with USPAP.

George your right it does not conflict with USPAP but does with Fannie-freddie-FHA-VA and almost any loan production assignment.

 

[Alsie35]

*SNIP*



Yeah it'll be different this time.

.
.

Its different EVERY time.

So long as the economy keeps improving, with locked-in low interest rates, people may grumble if they lose equity but they will keep making their mortgage payments.

With the shortage of inventory, banks are facing no losses if they get the green light to start turning the screws on people who are behind on their mortgages. Seeing it already. People behind on payments are already selling their homes and even walking away with cash.

Everybody's happy, no?

(I'm no Pollyanna, but this is a completely different dynamic from 2007. Caveat: The Feds still may screw it up if they don't allow the free market to stabilize sometime in the near future.)