How Precise Do You Need To Be?

[J Grant]

Doubtful...in those neighborhoods, there is little chance that you could recoup the cost of rehabbing those properties. There is a reason that are over 10,000 abandonned housing units in the city of Baltimore.

Then the appraisal should reflect that.

 

[residentialguy]

1.78 of WHAT? 1.78 to precision about your own value ? It makes no sense. It is not a math equation in the reconciliation of a value, it is a numerical dollar amount that will be distributed at a closing or settlement.
Appraisals are supposed to represent the market. Prices don't always come in at round numbers, or in increments of 25k at upper price ranges, or any other generic formula

I do round off numbers for simplicity and will round up or down when appropriate, however imposing a rote formula can distort value .

Rounding to the nearest $25,000 on a $1.4M property. Actually that is precise to 0.89%. So yes, that is very very precise. That is way beyond any appraiser's ability, in fact that is more precise than the Market itself.

 

[TRESinc]

Rounding to the nearest $25,000 on a $1.4M property. Actually that is precise to 0.89%. So yes, that is very very precise. That is way beyond any appraiser's ability, in fact that is more precise than the Market itself.

don't all buyers of $1,000,000+ properties argue the sale price down to a $1,000 interval? it's just like the buyers of $100,000 houses who argue down to the last $100. no wait, that would be the same percentage and according to jgrant it doesn't work that way.

 

[residentialguy]

don't all buyers of $1,000,000+ properties argue the sale price down to a $1,000 interval? it's just like the buyers of $100,000 houses who argue down to the last $100. no wait, that would be the same percentage and according to jgrant it doesn't work that way.

If we were talking about one set of buyers, that would be a leg to stand on...but when we opine "Market" value...that's all the buyers & sellers together. Think of a shot gun pattern. Here's the same house with 100 different buyers and sellers. The next picture is the same house with another 100 different buyers and sellers...and so on and so one. The central tenancy of that middle area (range) is all just as probable to be hit.

 

[Tom D]

I have not appraised a 10k-15k house- If i did I might not make any adjustments but do it qualitatively-but whatever it takes to solve the problem would be appropriate one assumes.

obviously you live in a better neighborhood than AMC appraisers. here is the official adjustment list.
selling drugs on the corner -$5,000.
zombies walking around $50 each.
boarded houses $250 each if more then 4
section 8 tenant on either side of house -$100, -$25 for each sec 8 house on the block (that's a killer adjustment)
hookers on any corner. depends on their looks & real gender, qualitative adjustment

unfortunately, there are no sales to even do those houses. well, maybe tax lien sales.

 

[J Grant]

Rounding to the nearest $25,000 on a $1.4M property. Actually that is precise to 0.89%. So yes, that is very very precise. That is way beyond any appraiser's ability, in fact that is more precise than the Market itself.

Where, other than Mich CG who you are parroting lately, where is this BS about percentages and precision coming from? Where is it in USPAP (it's not). Where is the AI text about it. And Percentage of WHAT? We are not doing math formulas or chemistry with % of ingredients. If data indicates round up or down to any amount including 25k on a 1.4 millin property, by all means do it. Most appraisers including myself have some reasonable rounding that takes place ...unless there is a reason to do otherwise.

Nobody is saying the market is "precise"...but the fact is no matter what final digits the appraiser opines at, it comes out to a precise number and $ amount.

 

[J Grant]

don't all buyers of $1,000,000+ properties argue the sale price down to a $1,000 interval? it's just like the buyers of $100,000 houses who argue down to the last $100. no wait, that would be the same percentage and according to jgrant it doesn't work that way.

Where did I say million dollar buyers argue down to the last 1k or that 100,000 buyers argue down to the last $100? I didn't say that. I said a few thousand dollars can make or break a deal. Obvoiusly the deal breaker is usually in proportion to the overall dollar amount.

 

[TRESinc]

If we were talking about one set of buyers, that would be a leg to stand on...but when we opine "Market" value...that's all the buyers & sellers together. Think of a shot gun pattern. Here's the same house with 100 different buyers and sellers. The next picture is the same house with another 100 different buyers and sellers...and so on and so one. The central tenancy of that middle area (range) is all just as probable to be hit.
View attachment 33665 View attachment 33666 View attachment 33667 View attachment 33668

i agree, but that was not the point i was making. she said she makes adjustments down to 1% on a $50,000 property but when it gets to 7 figures the adjustments can be calculated to 0.1%.

 

[J Grant]

If we were talking about one set of buyers, that would be a leg to stand on...but when we opine "Market" value...that's all the buyers & sellers together. Think of a shot gun pattern. Here's the same house with 100 different buyers and sellers. The next picture is the same house with another 100 different buyers and sellers...and so on and so one. The central tenancy of that middle area (range) is all just as probable to be hit.
View attachment 33665 View attachment 33666 View attachment 33667 View attachment 33668

Yeah, too bad appraisal is not target practice. While a central tendency of middle might make sense for scatter graphs, if your subject is superior among the comps, or market is rising, wouldn't the MVO and most probable price be at the upper $ amount? Or if subject is inferior among the comps or market is declining, wouldn't the MVO and most probable price be at the lower $ amount? Or does your whole appraisal go out the window at the reliance stage and it is a guess about a price, or default to some central range ?

When we opine market value, we use ONE typical buyer and seller for the presumed model transaction for the SCA approach . the MV definition references buyer and seller singular, not plural. Of course conceptually the one represents most probable actions of that smaller set of buyers for subject property, but MV definition is still singular- there can never be a consensus of what "all" the buyers and sellers as a whole might transact at.

 

[residentialguy]

Where did I say million dollar buyers argue down to the last 1k or that 100,000 buyers argue down to the last $100? I didn't say that. I said a few thousand dollars can make or break a deal. Obvoiusly the deal breaker is usually in proportion to the overall dollar amount.

yes...you're talking about a specific set of buyer and seller. We aren't opining them...we are opining the whole market. Look at the shot gun patterns. That is the typical buyer/seller market. There is no one point that is most probable...there is a range of most probable points.