How Many Have Figured Out

[RCA]

It makes more sense to hold a few variables fixed, smaller value adjustments, and develop a rational basis for the remainder of the adjustments, trying to discern what the market is doing. It is probably how most appraisers do a report so it is a reasonable, somewhat conservative analysis, which is appropriater so that it is acceptable to lenders. I won't deny a non-meat-and-potatoes appraiser from using esoteric models to influence the next level of appraiser users, but its not what most appraisers do. And that doesn't mean there is a better way to do appraising because it is not intuitive. If your not doing more than 150 reports a year, you may not be a residential appraiser. : )

Yea, I'm not sure what that "150 reports a year" means. Seems a bit open ended, with about 210 workdays in the year that is a bit over 1 report/day. I'm pretty sure a lot of SRAs would disagree with you. Some residential appraisals take several weeks, e.g. for high-end subdivisions. Some "residential appraisers" mostly teach courses and write books and the like. Some are partially active as appraisers. Many do both commercial and residential. - And if you are doing 150 year, that might sound good to an AMC; but otherwise I don't know that I would advertise the fact. I've never done more than 100 residential appraisal in a year - except in my first year …. tract homes all the way.

WRT to your method of appraising, I'd ask how you decide on adjustments for Condition, Quality and Style. But, I think, that Portland is more stable than this area. Why, job turnover is lower up there, the culture more homogenous, and so on. But of course, I'm not experienced appraising up in Oregon, although I grew up there and went to the U of O - back in the old days before the far left took over the state.

 

[George Hatch]

The majority of the successful buyers/sellers in the market don't seem to have any problems valuing these properties. Moreover, they commonly work with far less information than we do. After a certain point maybe it makes sense to wonder what they know that we don't?

 

[RCA]

This book isn't something appraisers can use. Unless you comprehend the math used in it and how to work it, you might as well use Zillow's Zestimate.

Why isn't CompCruncher more acceptable and more in use today?

Published on Mar 18, 2011

Ahhhh. CompCruncher. I worked one year for Bradford Technologies on Comp Cruncher. Now, in previous employment, or via AI classes and seminars, I had bumped into appraisers using some pretty advanced statistical methods - only they were on the commercial side. And it was apparently just chance that I bumped into them. There aren't that many. I went in there without, I suppose, a good sense of what appraisers were capable or not capable of learning and using. I don't think that even Jeff knew at the outstart. I had a lot of fancy stuff in Comp Cruncher that never made it into the final product, …, which I won't get into for the sake of confidentiality.

I tried to push MARS into that system, Jeff refused based on talking with other people, or just didn't want to rush into it so fast. In fact, apparently, and I can only presume from comments on this forum after I left, that they had major problems trying to explain the software to appraisers. Jeff is very conservative and he really builds his product for appraisers who want to be fast. It is not my business model. I'm more a CBRE 100 page narrative report guy, and was always pissed off that Jeff didn't care to figure out how to embed EMF formatted files (my Chief Architect floorplans) in his addenda. (But, look, he knows what he is doing and has kept himself in business all this time, - you can grant him that). Although I worked for him, I still use Alamode - because all of my old reports are Total … and I wanted to be able to pull them up, and I wanted to tie into XSites. Also, I do a lot of embedding of different kinds of files, and I can't trust Jeff to support all the wierdo stuff I do. He is a smaller company and more constrained in what he can support and take on. He narrowly focuses on a certain segment of his customers - and that has worked for him over the years.

As to CompCruncher - I always told Jeff that would never work for me. Never. In my market, for what I do, I need high R2 values, and I can't get that with standard parametric regression. - But he can always upgrade his software if there is a need. That is not likely to happen any time soon.

 

[RCA]

The majority of the successful buyers/sellers in the market don't seem to have any problems valuing these properties. Moreover, they commonly work with far less information than we do. After a certain point maybe it makes sense to wonder what they know that we don't?

Buyers come in with a number of options, such as leasing or buying, sell the old house and move closer to work, upgrade or downgrade. Then they invariably have a list of requirements. Are they a CEO? Do they need the home for entertainment? Do they need something impressive? Do they need a place to work with a couple of offices? Does it have to be energy efficient? Does it need an ocean view? Are they afraid of earthquakes, liquefaction, landslides or tsunamis? What is the desired commute time? Is the school district important? And on and on. Then they look around for the best matching homes for sale that they think they can afford. They go to the open houses and see. Talk to sales agent. Look at the disclosures. Get advice. They rank them, if there is more than one. Often, we are talking about 1-3 homes at any given time. They make an offer or two. - There is usually no big hurry to buy; in fact searching probably is a question of months if not years.


So, the buyer is working with his list of requirements and what he is going to have to pay out of his savings, what he is going to have to borrow and monthly payments - and the alternatives. Each and every buyer is different. The appraiser is concerned with market value, the characteristics of not just the average buyer, but the median buyer and the distribution characteristics. He can't get at these directly, only through the characteristics of the actual sales in the market place. And that takes analysis.


So what you are saying doesn't make any sense to me. None whatsoever. ….

 

[gregb]

Bert, have you had the occasion to apply your appraisal skills to an ERC assignment or residential income properties?

 

[Randolph Kinney]

Encinitas, California: Boat Houses
Two houses on a street along the beach look like they're ready to shove off into the surf. Built in 1928 by Miles Kellogg using recycled materials. The Encinitas Boathouses were purchased in 2008 by a non-profit for permanent preservation.

https://www.roadsideamerica.com/tip/10204

Bert, see above. Walk me through your method that you use for complex properties in the Bay Area and apply it to the Boat Houses.

 

[Carnivore]

The majority of the successful buyers/sellers in the market don't seem to have any problems valuing these properties. Moreover, they commonly work with far less information than we do. After a certain point maybe it makes sense to wonder what they know that we don't?

I have to say your entire post above is exceptional. What I emphasized in bold is profound. We make assumptions that all the buyers in a particular market segment think alike and/or have the same motivations and importantly similar goals. What appraiser cant do is talk to each buyer to try find out what they knew or why they bought that particular house. Selling Brokers OTOH do often know why.

 

[J Grant]

I have to say your entire post above is exceptional. What I emphasized in bold is profound. We make assumptions that all the buyers in a particular market segment think alike and/or have the same motivations and importantly similar goals. What appraiser cant do is talk to each buyer to try find out what they knew or why they bought that particular house. Selling Brokers OTOH do often know why.

The key to remember is that the market value opinion is filtered through the actions of the "typically motivated buyer" in the MV definition, and THEY ( the hypothetical buyer/seller in MV definition) assume the same motivations and way of acting- typically motivated, prudently, acting in what they believe their own best interest, well informed or well advised. Do "real" buyers and sellers always behave so neatly? No. But that's why we do an appraisal- it's a hypothetical model of "what it",,,,what "should" the property bring if buyer and seller were typically motivated ( and behaved with all the other stipulations in the MV definition we are using)

That levels the playing field for our lack of knowing exactly 'why" each buyer made the decision they did, or the fact that their decisions can be skewed by atypical motivations, not being well informed, influence of special terms, etc.

 

[J Grant]

The majority of the successful buyers/sellers in the market don't seem to have any problems valuing these properties. Moreover, they commonly work with far less information than we do. After a certain point maybe it makes sense to wonder what they know that we don't?

Actually, they may have problems valuing the properties, but they don't have a problem arriving at prices for the properties (unless the market stalls )

The key difference is they are not doing an analysis, they are using their own money and their own life to buy or sell or leverage equity in a refi. What's interesting about people is that they/we, often make the worst decisions when our own money or well being is on the line. You'd think it would be the other way around, but perversely, it's not.

That's why people eat junk food when they know they shouldn't and end up with clogged arteries, why they smoke, why they gamble, why they cheat on a good partner, why they make bad decisions in Real Estate or over spend on a dream house. Of course many people make astute or plain vanilla reasonable RE decisions. But quite a few don't, including people who are other fields/otherwise smart. .

The value of an appraisal is that it filters the messy range of real world market activity through the analysis of the MV definition and how the identified buyer and seller in the MV definition behave. .

 

[Andy Taylor]

Had a CE instructor say one time, in regards to arriving at values, that we as appraisers, "measure with a micrometer, mark it with chalk and cut it with a chainsaw".