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I always hate the appraisal game (make that deal work)

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Tim Hicks (Texas)

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Texas
My best client has a new home construction loan. It is a D R Horton home in a tract addition in Keller, TX. I got the appraisal order and the sales contract is missing. I get suspicious when the sales price is quoted at $230,000, but the home is listed on the MLS for $187,990. Fine, fine I can get the sales contract from the builder, if that is easier for you. I obtain the sales contract from the builder. Their final price is $195,000. Where did I get the $230,000 sales price. From the lender. I give the loan officers name and number to the sales consultant because she wants to discuss it with them. I have already figured out they are adding a $35,000 pool/spa, but she can confirm it for me if she wants. I go inspect the property and when I return, she confirms the extra dollars are for a pool/spa somewhere in the $35,000 range, but they don't have the final price on that yet. I ask her if they have any new home sales with pools. No, they just don't have any in this addition, this is the first one. I check the MLS, no re-sales in the addition yet. Only one listing for $252,000 and it is larger, has a larger lot and has $20,000 in upgrades.

Now, this is where the problem starts. I pull two sales from the MLS of similar size homes and similar size lots and one sale from a competing tract home addition about 1.5 miles away with a pool. The two sales I used are not from the subject's builder, but they are similar in size and upgrades. The D R Horton sales of the same size home are about $10,000 lower, but I attribute that to the upgrades. I will not give full value to a pool/spa since I have never seen it have equal contributory value to cost, ever. I adjust $17,500 for the pool/spa, because it is in line with the one re-sale with a pool/spa that I have and only get $221,000. Well, the lender understands that the pool/spa is a depreciable asset and should understand why I can not get $230,000. Wrong.

Enter the agent. She can not understand why I can not get the new sales price of $227,342 (wow, the pool contract is actually $32,342). She promptly scatter shoots sales from all over the place in the $220-250,000 range, but none have pools. I could scatter shoot sales in the $150-180,000 range in retaliatory fire, but who am I kidding, the appraiser always loses this game. I explain that the problem is not the $195,000 home, but the $32,342 pool. "Well, I have never had such a problem with an appraiser. Do you realize this is a high-tech neighborhood?" (Oh, please!) All of my sales are in "high tech" neighborhoods. Two are from the same addition. She promptly sends me a pending sale. The one I mentioned above that is superior in just about every way. But, it is only pending for a week now and will not close until later in the month. They close next week, and who knows what that pending sale will actually close for and I could adjust it down to my value at full price.

Now, the agent thinks I am trying to kill her deal. The lender just throws up their hands pleading, "I don't know who to believe" and I am in jeopardy of losing a big client because I don't play the appraisal game. Now, they want me to re-consider the value one month later and I want to tell them I don't need to re-consider the value.
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
Pop in the pending one at the listed price, adjust it, explain what it is and send it in.

Sometimes, no matter what you do, when you do the appraisal correctly, there is no way you're going to win.

I'm working on one right now that I don't think is going to make what they paid for it last year. We all know that I have more abuse coming my way over it. At least I don't have a real estate agent involved since this is a refi. (see Richard, I did it!)
 

Ted Martin

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified General Appraiser
State
Kansas
I agree with adding the pending as comp (not sale) 4,5, or 6. Then add a comment that it wasn't relied on to estimate the value of the subject but is provided for information purposes only. Sometimes I'll even do this with the sales the agents provide just so they can't say I didn't consider thier prize comps.
 

Blue1

Elite Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
California
I sure hope that Mr. Bellamy is reading this thread. This is typical of the pressures Appraisers endure every day from real estate sales persons. Yet, it seems to always be the Appraiser's fault. Look, we can't just make up sales or do "shot gun" searches for value like most real estate sales persons do. We have to have REAL market data. Like the others, I would urge you to include the pending sale, adjust it and be done with it. Let the real estate sales person do their job from there........one of which is to negotiate.....

P.S. I just love it when the lender pleads ignorance and doesn't know who to believe! Let's see.....should they believe the RE sales person who is going to get a commission on a sale price?......OR......should they believe the licensed professional Appraiser they hired who recieves a flat fee for providing an un-biased estimate of value? Gee........tough one! :roll: Just added pressure on the Appraiser....
 

Mike Simpson

Senior Member
Joined
Jan 30, 2002
Tim-

We've all been confronted with the intrusive real estate agent. They've cost me plenty of clients in the past myself.

When confronted with a 'just do as you're damn well told agent' I first attempt to explain to my client (in writing) statistically how I arrived at the value determination I did. I NEVER talk with the agent--without exception this has ALWAYS proven counterproductive and a total waste of my breath. If my client were to insist--the debate with the agent would be in the form of written correspondence only...which I love, cause it's a lot harder for a real estate agent to argue on paper (most of them don't want this kind of tete-e-tete in writting anyway).

I've become very proficient explaining to my client how the real estate agents want what they want, they want it right now & that's all there is to it. This is a prime example of a real estate agent pressuring an appraiser to hit a predetermined value (I tell them), and if I'm not willing to risk my license to meet their unreasonable demands they're going to take a crack at me. They'll threaten to take their work elsewhere (applying pressure to you--the L.O.), or they'll claim I'm "incompetent" or "don't know the area."

I've come to point in my career that I'm unwilling to work with pandering real estate agents. I tell my client they're too problematic and I'm not willing to risk my license by appraising their properties. I BLACK LIST THEM!!! Take your business in a direction that will enable you to do the same--it may take time, but it's well worth it--you'll make more money in the long run, and have less aggrevation.

I just received another phone call not 20 minutes ago. I'm not listed in the phone book and I haven't advertised in 4 years. The L.O.'s assistant wanted to know if I'd do an appraisal for them in a county I don't typically appraise in. Seems they'd called 4 other appraisers who told them they were 3-4 weeks out--one actually told her they didn't want the job at all. I've turned down the assignment as well. This scenario is happening with more and more frequency...they're burning their bridges and don't even realize it!

-Mike
 
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