How do you reply to these revision requests?

[residentialguy]

I don't mean to sound patronizing, but I have a couple questions for you.
Do you understand your requirement to analyze and verify the conditions of sale? You are supposed to do that with the subject as well as your comparables.
What does that mean? That means you have to talk to the agents and/or buyer and seller of each of those transactions and find out why it sold the way it did. How much do the concessions affect the price? 99.9% of the time it is $for$... but not always. What were the motivations? Maybe the buyer had atypical motivations to buy that house and not the other similar surrounding homes that were priced lower. One time I found out found out that the buyer bought bought that condo because he was handicapped and the condo was actually attached via skyway to his workplace. He overpaid for it, but it was worth it to him, but not to the typical buyer.
Often, when my value comes in below contract price, it's because they were well ill informed. Their agents used totally inappropriate comps. How do I know that? Because I always ask them for the comps that they used to either price the subject or that they used to show the buyer how good of a deal they're getting. That's my explanation I put into my reconciliation.
Not to mention, I get some good insider tips from agents because they have been walking around in many of these comps and share good insight that MLS and data sources do disclose. Of course I verify the subject's agent insights from an uninterested party.

Talking to the parties of the transaction (of both comps and subject) can provide a wealth of information information that can affect value once it has been discovered. Yes, it takes longer, however helps you bulletproof your report from ROVs, state board and lawsuits.

 

[residentialguy]

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

meh...People don't shell out earnest money (that they'll lose just for dropping out) when they can afford it. Agents aren't going to spin their wheels when their time is money.

 

[Cob]

Let's say your market is appreciating at 40% annually - as was the case in Austin last year (I understand it's cooled a bit now). That's a monthly increase of ~ 3.33%. Now, lets say the most recent sale in the neighborhood contracted 3 months ago, but sold last week. Do you apply date of sale adjustments to that sale? If so, do you apply them at 10% (which would be in line with market appreciation)?

The point is, that sold properties are, by definition, historic (meaning - not current) data. Whereas multiple offers at or above the contract price IS current MARKET data...

What's happening RIGHT NOW in Austin is that the sales that are 4-6 months old sold for WAY MORE than 0-3 month old comps, which are the most current, 4-6 months ago when people were purchasing properties as if they were crazy AND drunk, all the Realtors comments were, "well all these recent sales (30-45 days) are really reflective of the market", NOW all the Realtors comments are that the sales from 4-6 months (older) are reflective of the true market, since they were higher.

I have appraised in Austin for 22 years, the values have gone up and down several different times in the past 22 years, Austin also has TONS of different market areas like many large cities, the entire City of Austin hasn't experienced 40% appreciation annually for the past few years, sorry, but when I see properties sell for $605,000 that were listed for $440,000 in a subdivision where the highest sale EVER was $500,000 like I saw last July/August and now that same subdivision is back to $500,000-$515,000 max, to me anyway, those houses that were under contract for $605,000 are NOT the true market.

Just because some market data is current, doesn't always mean it's correct, especially when people are NOT making rational decisions when purchasing a property.

 

[Cob]

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 also don't have to take out a 15, 20 or 30 year loan to buy your steak from the butcher. It's like those classic car auctions, sometimes the estimated value on a car is say $60,000, someone bids it up to $75,000, when it's really probably a $60,000 car, the difference in that and most people buying a house is, when that person bids the car up to $75,000, he pays for it right there and then, he doesn't have a lender that is lending him money.

 

[Tim Hicks (Texas)]

I was listening to a Realtor commercial today. He was bragging how he got $60,000 over his list price and that's why everybody should be using him. All I could think is if you are that darn good, why didn't you list the house for $60,000 more? Appraisers need to be careful. I heard a lot of these arguments in 2007-2008 regarding offers and market value. Then these appraisers spent the next couple of years worrying about their 2007-2008 appraisals under review. Yes, there is an argument that multiple offers do drive home values up due to the lack of competition, but we better keep our fingers on the pulse of the market. I have had several people upset because I did not have 20% adjustments on my sales when I pointed out the 1004 MC showed an 8% decrease in the exact neighborhood in the 0-3 months from the 3-6 month data.

 

[J Grant]

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!

Oh... where to start. I did not see the appraisal so my comments are subject to that, BUT you mention "summary report" which has been eliminated as a category from USPAP- There is no more summary report now - it is either a report, or a restricted report. Although we can summarize things within the report.

reviews can be maddening, but it is a terrible idea to decline them/say you will only do them for an additional fee - unless you want to lose a client and/or risk a complaint. Part of this business, the part none of us likes, is responding to a review.

Moving on . the questions are legit except the one about the contract which borders on value pressure. But we still have to answer professionally. I dont'; know if Estimate is your term of the reviewer wrote "value estimate", but it is a value opinion - wrt irritating question why your value is lower than SC price should have been addressed upfront in the appraisal addendum. It is not a USPAP requirement, most clients ask for it - a brief statement that you considered the contract and its price, and the price is higher than your market value opinion, perhaps due to buyer motivation, low interest rates or multiple offers ( whatever applies ). Then double down on your support for your market value opinion - it was developed using the best sales and listing data, additional sales were considered, market condition adjustments applied, etc. Put that statement in a report any time the opinion of value is below SC price.

Then explain your reasoning ( whatever it was ) about condition, quality, location. Just explain why you adjusted or did not adjust. As far as the contract, then write you are aware of multiple offers, which appears to have acted as undue stimulus to produce a highest winning offer price. That you factored in the strong interest in the property, however, the appraisal supported your value opinion of X $ . Sometimes I also write in that a number of sales contracts in present market have a clause where buyer agrees to pay over the appraisal value but this contract did not have it.

THE END. you did your thing , you answered their questions.

 

[alebrewer]

What's happening RIGHT NOW in Austin is that the sales that are 4-6 months old sold for WAY MORE than 0-3 month old comps, which are the most current, 4-6 months ago when people were purchasing properties as if they were crazy AND drunk, all the Realtors comments were, "well all these recent sales (30-45 days) are really reflective of the market", NOW all the Realtors comments are that the sales from 4-6 months (older) are reflective of the true market, since they were higher.

I have appraised in Austin for 22 years, the values have gone up and down several different times in the past 22 years, Austin also has TONS of different market areas like many large cities, the entire City of Austin hasn't experienced 40% appreciation annually for the past few years, sorry, but when I see properties sell for $605,000 that were listed for $440,000 in a subdivision where the highest sale EVER was $500,000 like I saw last July/August and now that same subdivision is back to $500,000-$515,000 max, to me anyway, those houses that were under contract for $605,000 are NOT the true market.

Just because some market data is current, doesn't always mean it's correct, especially when people are NOT making rational decisions when purchasing a property.

I was making a point about a strong appreciating market. I don't appraise in Austin, so I have no idea what is going on right now down there. And who is to say what a 'rational decision' is? Are you the rational decision police?

 

[alebrewer]

when that person bids the car up to $75,000, he pays for it right there and then, he doesn't have a lender that is lending him money.

You make a lot more money than I do if you can pay cash for a $75k car...

 

[alebrewer]

What's happening RIGHT NOW in Austin is that the sales that are 4-6 months old sold for WAY MORE than 0-3 month old comps, which are the most current, 4-6 months ago when people were purchasing properties as if they were crazy AND drunk, all the Realtors comments were, "well all these recent sales (30-45 days) are really reflective of the market", NOW all the Realtors comments are that the sales from 4-6 months (older) are reflective of the true market, since they were higher.

I have appraised in Austin for 22 years, the values have gone up and down several different times in the past 22 years, Austin also has TONS of different market areas like many large cities, the entire City of Austin hasn't experienced 40% appreciation annually for the past few years, sorry, but when I see properties sell for $605,000 that were listed for $440,000 in a subdivision where the highest sale EVER was $500,000 like I saw last July/August and now that same subdivision is back to $500,000-$515,000 max, to me anyway, those houses that were under contract for $605,000 are NOT the true market.

Just because some market data is current, doesn't always mean it's correct, especially when people are NOT making rational decisions when purchasing a property.

If you're right about the market trends in Austin right now - and I have no reason to doubt you - then that market is a great example of 'what goes up really fast often comes back down really fast.'

 

[J Grant]

I was making a point about a strong appreciating market. I don't appraise in Austin, so I have no idea what is going on right now down there. And who is to say what a 'rational decision' is? Are you the rational decision police?

An appraiser is not the rational decision police.

But an appraisal for MV as defined, is the market value terms and conditions police.
People can make whatever good or bad buying decisions they want, pay whatever they want for a property. But a MV purpose appraisal is not just a price, or a value in a vacuum, it is a value at a most probable price per the MV definition terms - were the parties acting prudently ? Was the price unaffected by undue stimulus-? Etc, the terms exist in the MV to be used to vet a price or sale.