How do you reply to these revision requests?

[Cob]

****Is that irrational behavior, or is that the market being the market? IOW, why would folks continue to buy homes if they (rationally) know they're paying too much?****

This is because there are a LOT of these properties are being purchased by LLC's, Investment companies, investors, etc. for short term rentals or to rent out, that along with companies like Opendoor, Orchard, Redfin purchasing properties for the same reason or to try to just re-sell for a quick profit, they have cash and don't care if they pay more than what it's actually worth, a LOT of this is manipulated appreciation, I have seen it personally on many appraisals I have completed lately.

I read recently that over 18% of total real estate sales in the US last year were made by these groups, it makes actual PEOPLE who want to try and buy a home at a HUGE disadvantage when they are trying to purchase a home to do something absurd and actually LIVE in it.

There is a small town outside of Austin about 30-40 minutes away, that I have completed appraisals in for years, this is small town that a lot of time you will have to go to the Realtor office, pick up key for appraisal and bring it back, they got TIRED of all these groups coming in and buying up all of the properties, now almost all of their real estate activity is obviously word of mouth, they aren't listing many properties on MLS, I have completed many appraisals their recently on sales that are not listed on MLS, which makes it seem like there is more of a lack of inventory than their actually is.

I am working on 3 sales right now, all in Austin and none of them are listed on MLS, the appraisal district in Travis County and the City of Austin has recently thrown around the idea of taxing properties used for short term rentals and tenants at a much higher 20%-30% rate.

 

[alebrewer]

No doubt that is the case in several markets. So, when researching comparable sales, do you pick and choose which ones you think should be counted as 'rational' and which ones should be counted as 'irrational' based on the purchasing entity? Property identical to the subject - and located next door to the subject - settles 1 week prior to your effective date, but it was purchased by XinJin Conglomerate. Do you toss it cuz it's one of the properties subject to 'manipulated appreciation'?

 

[Ariba]

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.

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.

Let's talk real world. As you stated, "You are supposed ........ Do you call on every comparable? I seriously doubt that. I have talked to many, many real estate agents through the years I am usually the only appraiser they have talked to concerning their listing.

 

[residentialguy]

Let's talk real world. As you stated, "You are supposed ........ Do you call on every comparable? I seriously doubt that. I have talked to many, many real estate agents through the years I am usually the only appraiser they have talked to concerning their listing.

Yes, I always have. It is a requirement.

 

[Ariba]

Yes, I always have. It is a requirement.

My hat is off to you. You are one in a million. I suppose they all answer their phone and return your calls? By the way, where is the USPAP requirement that appraisers must call real estate agents?

 

[residentialguy]

My hat is off to you. You are one in a million. I suppose they all answer their phone and return your calls? By the way, where is the USPAP requirement that appraisers must call real estate agents?

Usually one will answer the call. If they don't then I don't use it or if I need it, I explain it in my comments and don't weight it like I weigh the others that have been verified. We're required to analyze and verify the conditions of the sale. Basically that means what made that sale come together like it did. What motivations were involved? How did those concessions affect the price? etc. You can't do that without contacting the parties of the transaction. Data services don't tell you that.
Cracks me up that appraisers try to adjust $1500 for a bath, yet they ignore something that could warrant tens of thousands of dollars in adjustments.

 

[Cob]

No doubt that is the case in several markets. So, when researching comparable sales, do you pick and choose which ones you think should be counted as 'rational' and which ones should be counted as 'irrational' based on the purchasing entity? Property identical to the subject - and located next door to the subject - settles 1 week prior to your effective date, but it was purchased by XinJin Conglomerate. Do you toss it cuz it's one of the properties subject to 'manipulated appreciation'?

I am just commenting on what's going on in my market............

I do try to follow this as BEST that I can, I try to select sales that are most similar to subject property, but as someone already said on here, I am hearing a LOT of things similar to what I heard in 2007/2008, it's one thing if sales prices are just going up, up, up ,up, it's another when sales for similar properties 4-6 months ago are selling for $100,000-$150,000 less now and on $400,000 to $500,000 properties, not $1,500,000-$2,500,000 properties. It's real easy in this day and age for people to come after appraisers, I try to be as careful and logical as I can when selecting comparable sales in this market. That's what I do. You can do things HOWEVER you want, EVERYONE is different, some of these homeowners who bought a house at the peak of this madness may be in for a shock if they refinance in a year and a half and see the new appraisal, appraisers should buckle up for the ride in the next year or two.

DEFINITION OF MARKET VALUE:

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, 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 each acting in what he or she considers his or her own best interest; (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.

 

[Cob]

No doubt that is the case in several markets. So, when researching comparable sales, do you pick and choose which ones you think should be counted as 'rational' and which ones should be counted as 'irrational' based on the purchasing entity? Property identical to the subject - and located next door to the subject - settles 1 week prior to your effective date, but it was purchased by XinJin Conglomerate. Do you toss it cuz it's one of the properties subject to 'manipulated appreciation'?

I have also seen it first hand, properties purchased by Opendoor in August 2021 for $470,000, re-listed, sells in October 2021 and sells for $425,000, I see these kind of sales ALL THE TIME in the Austin area. If you were doing an appraisal a week after the October closing and the sale was right next door to your subject property and it settled 1 week prior to your effective date, would you use it? Do you think it's a reliable sale? Or do you use the sale from August for $470,000, you tell me which one you would use, again I see this happen ALL the time in Austin.

I also see for example, properties purchased by Opendoor in August 2021 for $470,000, re-listed, sells in October 2021 and sells for $550,000, when ALL the other very similar recent sales are $470,000-$490,00, so again, you tell me what is really reflective of the "current market" the property under contract for $550,000 or the other 12 similar sales that all sold recently for $470,000-$490,00, again, I "try" to be as careful and logical as I can when selecting comparable sales in this market, because it's HARD to figure out what's REALLY going on in this current market.

 

[JeffSH]

yes this type of scenario has been discussed ad nauseum on other threads. No I would never ever ever opine a value opinion with out at least one SOLD sale to prove it . Never.

Say the market is increasing substantially. Virtually all homes have multiple offers and are selling at or above list price. After all adjustments except for time, this is the best data.

Sale1: $95k - 1 month ago
Sale2: $96k - 1 month ago
Sale3: $92k - 2 month ago
Sale4: $90k - 3 months ago
Sale5: $100k - pending
Sale6: $101k - pending

The subject is under contract for $100k.

All the comps sold quickly, at or above list price. You verified that the pending sales had multiple offers and are likely selling at or above list price, but the realtor won't confirm because of confidentiality.

None of the comps stand out as being significantly more similar to the subject. The comps have similar gross adjustments. The pending sales are just as similar as the closed sales.

In this situation, the best data points I have are the pending sales. They are the most recent indicators of value in the fast-changing market. I would use the pending sales as support for a time adjustment that would most-tighten the range. I would reconcile the subject at $100k, even though it is not bracketed by a closed sale.

I ran into this a lot during the summer. If I get a revision request about the unbracketed sale price, I just explain my reasoning and state that it's not a Fannie rule.

 

[J Grant]

Say the market is increasing substantially. Virtually all homes have multiple offers and are selling at or above list price. After all adjustments except for time, this is the best data.

Sale1: $95k - 1 month ago
Sale2: $96k - 1 month ago
Sale3: $92k - 2 month ago
Sale4: $90k - 3 months ago
Sale5: $100k - pending
Sale6: $101k - pending

The subject is under contract for $100k.

All the comps sold quickly, at or above list price. You verified that the pending sales had multiple offers and are likely selling at or above list price, but the realtor won't confirm because of confidentiality.

None of the comps stand out as being significantly more similar to the subject. The comps have similar gross adjustments. The pending sales are just as similar as the closed sales.

In this situation, the best data points I have are the pending sales. They are the most recent indicators of value in the fast-changing market. I would use the pending sales as support for a time adjustment that would most-tighten the range. I would reconcile the subject at $100k, even though it is not bracketed by a closed sale.

I ran into this a lot during the summer. If I get a revision request about the unbracketed sale price, I just explain my reasoning and state that it's not a Fannie rule.

They are the most recent indicators of value in the fast-changing market.

They are the most recent indicators of PRICE in the fast changing market.

Nothing is " better " about the two pending's, other than that they are current. Since the sales are recent, being current is just showing a market jump. However, the pending's have not closed yet, so they are not as reliable. Selling above list price is not very meaningful in itself, multiple bids means intrest but the "losing " bids did not want to go as high as 100k so not all buyers are that on the edge to pay the highest.

If the above 4 closed sale prices had a market condition adjustments applied, maybe they would have adjusted out to 96k, 97k, 94k and, 93k. Even with a market condition applied, nNone of them break 100k. Find another closed sale at 100k . That is what I would do to support the value opinion, and if I could not find a closed sale at 100k, probably going to opine at 96k or 97k .

i do not make a market condition adjustment to the pending sales. I make a market condition adjustment based on the annual appreciation to eff date.

Of course examples like this are rare in real life, normally there are some condition or upgrade or view or other differences among the comps which need an adjustment, and typically in real life the subject is more similar to one or more of the comps ( which gives a reason to reconcile around other than just prices.