Fannie definition of market value

[Overimprovement]

many people are still in panic mode over the virus, so they won't go out to buy or sell.

Now here is something that could be making a market not meet that definition of market value. Because how open is a market, if supply is STILL being artificially repressed? Do others here think that is still going on in their markets, or is something else keeping inventory so darn low?

 

[J Grant]

2) What if, as many continue to think would be best, myself included, no contract or list price was available to the appraiser. There would then be no anchor, and as Glenn points out, many appraisers could have a harder time concluding a reasonable market value. In this scenario, appraised values would possibly continue to lag behind actual current market activity. One could ask--is this a good outcome? Telling most of the market--you are wrong, what you SHOULD be paying is this? Do we create the market, or merely report it?

I disagree appraisers without a SC price have a harder time. A CS price can be a value indicator , and can support a OMV reconciliation. But whether a purchase or a refinance, the appraisal is supposed develop an OMV in the same manner. Those appraisers having a hard time with no "anchor" probably back into value from the price in a SC .

Err...we don't tell the market you are wrong or should pay this. We don't tell a buyer what to pay, we tell the client our OMV so they can make a decision/ set an LTV % ratio on it. If a buyer wants to pay more or less than our OMV, they are free to do so.

We don't create the market, but our professional competence /ethics, or lack of , influences it to a degree - appraisers who stop opining MV and become deal pushers for value inflation influence an upward direction of price in the market beyond what it would be if they did not do so.

 

[George Hatch]

As far as I'm concerned, whenever I conclude to a value opinion other than the contract price I am compelled to go beyond merely demonstrating my value conclusion. I must also demonstrate why the contract price *cannot* be considered a reasonable expression of MV in the market. If I'm unable to do that then I have to go back to my own conclusions to see where I might be screwing up.

 

[Meandering]

Now here is something that could be making a market not meet that definition of market value. Because how open is a market, if supply is STILL being artificially repressed? Do others here think that is still going on in their markets, or is something else keeping inventory so darn low?

The other thing,

If in forbearance, they can get a loan mod, and still benefit from the lower interest rates, so why sell and move, when you're happy where you are?

Mortgage Loan Modification After Forbearance | NAFCU​

https://www.nafcu.org/compliance-blog/mortgage-loan-modification-after-forbearance
Modifications that allow for forbearance period may include reducing the interest rate, extending the term of the loan, or adding missed payments to the loan balance. A modification also may involve reducing the amount of money a member owes by forgiving, or cancelling, a portion of the mortgage debt.

Options after a forbearance plan or resolved COVID-19 ...​

https://www.fanniemae.com/here-help...orbearance-plan-or-resolved-covid-19-hardship
Refinance When a borrower exits forbearance and enters a loss mitigation plan, the borrower is eligible for a new mortgage loan after they make at least three timely, consecutive payments as of the note date of the new transaction. These three payments must be consecutive and may not be made as a lump sum payment.

 

[Terrel L. Shields]

My hunch is that the phrase cash or cash equivalent (like cashier's check or wire transfer) is meant to be from the seller's perspective, not the buyer's.

Cash Equivalent Value (CEV) was taught, especially in the farm classes. Why? Because lenders often only lent 70-80% at most. The seller often carried the balance as a second mortgage and higher interest rate. If going rate was 8% on commercial farm loan then the owner financed part was usually set up as 10% or higher interest rate. You had to calculate an adjustment to price based upon what the buying power should have been.

is something else keeping inventory so darn low?

The general slowdown in the economy means few people have an incentive to move. This means the turnover is much lower....like the velocity of money. If you lost your job short term you might move if you have to go far for a job. If long term and not drawing the high unemployment, then you likely need to sell but a lot of folks are sitting tight.

 

[Alsie35]

 

[Zoe]

As far as I'm concerned, whenever I conclude to a value opinion other than the contract price I am compelled to go beyond merely demonstrating my value conclusion. I must also demonstrate why the contract price *cannot* be considered a reasonable expression of MV in the market. If I'm unable to do that then I have to go back to my own conclusions to see where I might be screwing up.

yeah, and it still goes back to apples and oranges. You can't compare apples to oranges. It goes back to appraisal 101. Heterogeneity and Homogeneity and principles of progression and regression. People act like all markets and real property are the same. That is not true.

 

[Elliott]

OI said, "Because I did not feel it germane to the discussion..."

So you only want the discussion of MV, (probably the most important discussion an appraiser can ever have), to include a full definition of market value with all its faults, bias, and predispositions imposed on appraisers. Okay.

 

[Overimprovement]

OI said, "Because I did not feel it germane to the discussion..."

So you only want the discussion of MV, (probably the most important discussion an appraiser can ever have), to include a full definition of market value with all its faults, bias, and predispositions imposed on appraisers. Okay.

Not sure I am understanding your point.

 

[RCA]

The problem with most appraisers is not that they are using the latest greatest sale prices, it is that they only think they are using them. By the time they get done injecting their personal out of thin-air adjustments for intangible/subjective features such as condition, quality, view, functional utility and so on, they have effectively altered the sale price of the comparables. They frigging don't know what they are doing -- most of them [OK, my guess, as I have only ever seen a very small fraction of other appraisals in existence.]

Your statement most appraisers don't know what they are doing is flat out wrong. Esp considering the scrutiny appraisals receive.

The SOW effectively alters the sale price of the comparable ( with applied adjustments ) that is the point of an appraisal -to find the equivalence between prices and market value -and market value is supposed to account for physical and locational differences between properties.
With all due respect, some of your comments about appraising sound like they come from planet MARS...

When I say "appraisers" I mean reviewers as well. Everyone else except me - as far as I know.

1. So. for example, let's start with GLA. Maybe the true price per square foot adjustment is $200/sf for the range of comparables we are dealing with, according to the best possible regression. If the appraiser adjusts, for the sake of argument at $400/sf and most of his comps have less GLA than the subject, then the adjusted sale prices for homes will a lower GLA than the subject will be higher than they should be, just as if they had a higher sale price than they in fact do. So, given his comps are unbalanced, the resulting value estimate will be too high if based on the average adjusted sale price. -- The opposite is true for homes that have a higher GLA than the subject. So, by using that large GLA adjustment, you force the sale prices of some comps to be effectively higher and other comps to be lower. You should be clear on that with a little thinking. And that is one reason evenly balanced bracketing is desired - because it will tend to negate the impact of improper adjustments. Unfortunately you usually cannot balance your comps in all respects; especially if the subject is at the extreme end of a range. But of course, note that a good appraiser can likely nail another appraiser who does a poor job in selecting an adjustment for objectively measured GLA. So, this example, is used just to make clear how this sort of thing works.

2. Now, jump to the intangible/subjective type adjustments such as for Condition, Quality, View, Functional Utility and so on. The problem with these kinds of adjustments, is that it is difficult for a reviewer (who doesn't know what he is doing like most don't) to decide whether these adjustments are too large or too small. Correct me if I am wrong by telling me just how you would be able to determine this. My guess is you don't really have a clue. ... Because this requires a deeper understanding of the Sales Grid than you will find in ANY book on appraisal.

No, you are categorically wrong. But, then you. just like thousands of other appraisers. wouldn't know any better. You don't even have the faintest clue.

You need both advanced tools and advanced understanding to get around these problems, - and in complex neighborhoods that can be a real chore.