How do you reply to these revision requests?

[Dublin ohio]

if there are 5 offers and the Subject SC price highest "won", then the other 4 buyers did not think it was worth going so high.

Or the other buyers just could not afford it. Regardless if they think it is "worth it" or not

 

[alebrewer]

Yes, but are the multiple offers creating undue stimulus affecting price. MV is supposed to be a price unaffected by undue stimulus. so what it IS current market data , it is an auction type bid under pressure producing a highest price - if there are 5 offers and the Subject SC price highest "won", then the other 4 buyers did not think it was worth going so high. Are they current market data too?
sold properties are historic, so what, we apply market condition adjustments to them.

Last month, the price of a nice NY Strip was ~ $15 per pound in my market. Today it's $25 per pound. That's an increase of ~ 67% in one month. Is that the market, or do I tell the butcher - "HEY - that's not a real market price. That's only due to several trillion dollars being dumped into the economy (i.e. inflation). Put that price back down where it should be!"

 

[Salty]

Don't get me wrong, I get it. But it is also a matter of price -vs- value. I don't want to be the first one paying $25 when my neighbor has a receipt that indicates $15. In the scenario the market might in fact indicate $25 is a supported price. If the Stirp is selling then that may in fact be the current value, but only if there are willing buyers. Not people saying they want to buy or they will buy, but people that have actually made the purchase. Otherwise its just a hypothetical. That is the key - it has to have sold at that price. Not be the first one to sell at that price.
If that scenario was applied to the real estate market we would not need appraisals. The value would simply be whatever someone is willing to pay.

 

[alebrewer]

If they couldn't sell the steaks at $25/pound, they wouldn't price them at that point. But they can...

 

[Tom4value]

I'm one year in to being certified here in the middle Tennessee area and I'm starting to see this more and more as lenders come into the market. I have spoken with my old supervisor about this but I'm curious what other people with years of experience comment/reply to revision requests like these:

first revision request:
Please comment on the value estimate being lower than the sale price. Please comment as to how the quality of construction adjustments were derived. Please comment as to why no adjustments were applied for differences in condition. Sales #2 & #3 were over one mile distant and located in a different town than the subject. Please provide market data which demonstrates the locations are similar to the subject with no adjustments warranted.

second revision request:
Please further discuss your analysis of the purchase agreement. Given that this represents a meeting-of-the-mind of buyer and seller for the subject's characteristics, how was this factored in the opinion of subject value. Per MLS comments multiple offers were received, please advise if the appraiser was able to confirm multiple offers 3.) please expand commentary on your reconciliation to value.

Now all of these things/adjustments are summarized in my supplemental addendum (which is almost two full pages of commentary). I have never seen such ridiculous revision requests and it seems as if they want the report to be specific as opposed to a summary report and put all legal onus on the appraiser. I replied with a polite decline and a suggestion that if these revisions were needed the fee would need to be increased and reminded them about the summary requirements of USPAP. Anyone else dealing with this bs? They also requested comps that have no quality adjustments, and it feels like they're pushing a value.

Oh and I've had multiple lenders/underwriters send me specific comps and a request to comment as to why these comps were not considered. This seems to be a violation of FIRREA to me.

I think its best to learn from multiple old-heads in the business and fight the good fight against underwriters and lenders together!

It may be a case of not thoroughly addressing what the underwriter is looking for. At the risk of sounding pretentious, over time you find it is an art form.

Sales price vs. OOV- Technically, we don’t have to address this. However, what we need to do and what we should do for doing a thorough job can be 2 different things. I always address it the best of my ability. The best way is to derive from the listing broker where they came up with the asking price and how the “meeting of the minds” came to be…..all the while not looking like you are asking, “what the hell were they thinking?!” Many times I say, “there were multiple offers that drove up the offers but market data indicates that x is the true market value.” This answers the questions without looking like you are “justifying“going under SP. It also shows that you considered what buyers and sellers are thinking.

Regarding commenting on adjustments, we need to summarize “ what we did. All too often, appraisers state, “comps 1 and 2 adjusted for quality”. Well, duh! We see that! Instead, say, “upon examining the exterior and photos and comments in the MLS listing and conversations with the listing brokers, comps 1 and 2 are adjusted for being superior in quality. Support for the adjustment is derived from comparison with comp 3, which is similar to the subject property.” Boom! You answered the question before it became a request for a revision!

Same with going outside of town, which always begs questions. You went outside for a reason. Explain why. No location adjustment? Explain that the subject and comparable town is similar in appeal and market values. If you explain thoroughly, they won’t ask for market analysis. They will assume you already did it.

Them asking to “expand commentary on your reconciliation of value” means just that, you didn’t sufficiently explain how you arrived at the value! In the Sales comparison comments, you summarize not just the adjustments but how you got there. Many appraisers say nothing and put down the number or just end with, “comp 1 weighted most” or my favorite, “all comps considered”. Explain the strengths and weaknesses of each comp, why a certain comp is (or isn’t) weighted most. Many times I also explain that I weighed the actual sales prices to determine a supportable range. You put thought into your number. Explain it!

Another thing that jumped out at me was your “supplemental addendum”. Do you lump all comments onto one addendum and the underwriter has to fish for what they are looking for? Make sure your comments have a title, such as “Comments on Sales Comparison Approach” and “Comments on Final Reconciliation “, etc.
Hope this helps.

 

[J Grant]

Last month, the price of a nice NY Strip was ~ $15 per pound in my market. Today it's $25 per pound. That's an increase of ~ 67% in one month. Is that the market, or do I tell the butcher - "HEY - that's not a real market price. That's only due to several trillion dollars being dumped into the economy (i.e. inflation). Put that price back down where it should be!"

You are not tasked to tell butcher a market value cause they did not ask for it - price is price for goods and commodities.

 

[J Grant]

Or the other buyers just could not afford it. Regardless if they think it is "worth it" or not

Whether the other competing buyers putting in bids could afford more or not, the point is, if 5 offers were made and subject is the winning highest, 4 other buyers offered less,

 

[alebrewer]

You are not tasked to tell butcher a market value cause they did not ask for it - price is price for goods and commodities.

Tried to find a SMH emoji, but couldn't find one... you're missing the entire point (again). The point was, that what you're calling 'undue stimulus' is nothing more than the current market participants acting in their own best interests. Such that, AS OF TODAY, that is the market. The market may change tomorrow, but that's why our opinions of value have a date stamp...

 

[J Grant]

Tried to find a SMH emoji, but couldn't find one... you're missing the entire point (again). The point was, that what you're calling 'undue stimulus' is nothing more than the current market participants acting in their own best interests. Such that, AS OF TODAY, that is the market. The market may change tomorrow, but that's why our opinions of value have a date stamp...

I am aware market conditions of shortage of inventory /low rates produce higher prices - within that, undue stimulus is it did or did not affect a price ( a price unaffected by undue stimulus)

if last month sales of a house closed at 500k and next month a same house gets bid up to 560k, but another same house a street over gets 530k, was the 560k price affected by undue stimulus ?

 

[alebrewer]

I am aware market conditions of shortage of inventory /low rates produce higher prices - within that, undue stimulus is it did or did not affect a price ( a price unaffected by undue stimulus)

if last month sales of a house closed at 500k and next month a same house gets bid up to 560k, but another same house a street over gets 530k, was the 560k price affected by undue stimulus ?

Depends on why the one at $560k got bid up... everything is not black and white, J. We live in a VERY grey world... I would imagine it would be difficult being an appraiser with such a black and white outlook on everything. But then again, I wouldn't know. I'm happy in the grey area.