Is the term 'price point' value a dangerous term.

[J Grant]

The yenta hears me mumbling about price versus value. She asks don't you value houses based on what others sold for ? I'm like yeah we find hopefully five or six homes that sold and that are most similar to the home we're appraising.

Then she says do you use the sales prices or the value of the comparables
to arrive at a final value on the one your appraising ? I'm like we use the Sales prices on the Comparables.

Now she says you better stop the bull**** because I'm not playing any of your silly word games, so if you don't know the value of the comps and just the sales prices , how can you know the value of the home your appraising ?

Now she says you either use the sales prices or the value of each sale ! otherwise your math is convoluted with bull**** just like your sales equals value but the subject being appraised is the only one that has value and not price.

That's it I'm done and I told her I have no idea and I'm as confused as her. As she walked out she says because your stupid and your peers are stupid and no wonder everyone hates you people.

Geez La Wheeze-trying to explain value to a bitter old retired electronic engineer is like telling her how a lightbulb works.
It all seemed so easy when i took my McKinsey Online Value V Price class.

Lol the Yenta gets a medal for being married to you!

 

[Terrel L. Shields]

How do you manage to arrive at a credible value if you refer to statistics for why a property sold at odd terms /for a very high or low price?

It is called a bell curve. Exactly what you are doing. You reject the high and low numbers and pick comps from the middle of the curve...

 

[J Grant]

It is called a bell curve. Exactly what you are doing. You reject the high and low numbers and pick comps from the middle of the curve...

View attachment 99171

I appreciate the thought but I do not reject high and low "numbers" , I reject higher or lower outlier prices -
I do not pick comps for their being in the middle of a bell curve - I pick comps that are the most similar to the subject, and use then filter from there as I research them more. I reject sales where prices are too affected by motivations or terms to the point where their price makes them outliers . But I will include lower and higher price sales and then research further to see which comps are more teliavel as MV indicators for many reasons.

I wrote price instead of number because it is a mistake to think of properties in statistical terms - we can use statistics to analyze market trends, or support adjustments but using them to pick comps - is removing the methodology too far from the source. Does any buyer , other than perhaps a sophisticated investor, use statistics to make a home purchase decision? I think not -

 

[Tom D]

I wrote price instead of number because it is a mistake to think of properties in statistical terms - we can use statistics to analyze market trends, or support adjustments but using them to pick comps - is removing the methodology too far from the source. Does any buyer , other than perhaps a sophisticated investor, use statistics to make a home purchase decision? I think not -

Hmmm, i was a broker long ago. Maybe instead of price point term, we should call it the hot point value. Find the buyer's hot point, and they pay whatever.

 

[Terrel L. Shields]

but using them to pick comps - is removing the methodology too far from the source.

Same thing...filtering, whatever, same old same. It's statistical at the core.

 

[J Grant]

Same thing...filtering, whatever, same old same. It's statistical at the core.

You can say that if you want, but appraisal is not a statistical problem to be solved; it is a marketing problem to be solved.

That is why it is called market value, and why it is not called statistical value.

 

[Tom D]

You can say that if you want, but appraisal is not a statistical problem to be solved; it is a marketing problem to be solved.

That is why it is called market value, and why it is not called statistical value.

Is an avm really a statistical value, since it ain't seen the house. Just a thought. I think a waiver is a statistical value based on loan risk.

 

[Terrel L. Shields]

appraisal is not a statistical problem to be solved; it is a marketing problem to be solved.

No set of numbers can escape being analyzed for its statistical attributes. There is no statistical value except to determine is a set of numbers are random or not. If not random, then the set is amicable to analysis of its statistical properties. You don't simply use some sale because of its properties even though it is well below the typical range of prices. You analyze why it is low and even if you cannot determine a reason, you reject it as out of the ordinary ("typical") range and you do the same for those above the typical range. "Most Probable" implies an adjusted price that is the median sale - that is a price that is equally likely to fall below or above that value.

 

[J Grant]

Is an avm really a statistical value, since it ain't seen the house. Just a thought. I think a waiver is a statistical value based on loan risk.

A WAIVER is not a statistical value.

The WAIVER value is either A) the value estimated by a loan officer, or B) the sale price of a property if there is a purchase.

IDK whether to call an AVM a statistical value - maybe it is - in any event, the fannie or freddie AVM produces a value range and as long as either the loan officer;s value estimate flls in the AVM range, or the sale price falls within the AVM range, the WAIVER proceeds to lend on the stated value.

Note that even as Fannie and Freddie boaasts baobut how "low risk" the Waiver based loans are, note that the GSE's do not back these loans with their own $, and note that the loan officer who enters the value is not responsible for risk either - the entire risk wrt the collateral valuaiotn is shifted to the tax payer. ( in a waiver, the lender is relieved of reps and warranties, meaning the lender is not e not responsible for a buyback wrt any collateral value issue , which they are if an appraisal is used)

 

[J Grant]

No set of numbers can escape being analyzed for its statistical attributes. There is no statistical value except to determine is a set of numbers are random or not. If not random, then the set is amicable to analysis of its statistical properties. You don't simply use some sale because of its properties even though it is well below the typical range of prices. You analyze why it is low and even if you cannot determine a reason, you reject it as out of the ordinary ("typical") range and you do the same for those above the typical range. "Most Probable" implies an adjusted price that is the median sale - that is a price that is equally likely to fall below or above that value.

Yes, appraisers or reviewers or both can use statistics to analyze the market.

But these are not numbers, they are prices, and prices can be off of what the MV concept is - which is why an appraisal is done.

Numbers can be random, but prices are not random. I agree not to use outliers well above or well below the typical range, but that is because of market-based reasons, not statistical reasons.

Most probable was inserted to replace the former "highest most probable price." Most probable means the most likely price for a specific property, which is not always the median price or median sale price of a comparable.

Some properties deserve a higher price as the most probable, and some properties deserve a lower price as the most probable, and some deserve a middle price, depending on the subject's qualities as well as market trends. When I say deserve, I mean supported by the appraisal which uses actual sales and supply/demand in the market. Why underappraise or overappraise a property just to see a safe middle ground?

Why would the most upgraded property or the least upgraded property both get the same median sale price value in an appraisal? It makes no sense when people pay more for upgraded houses, and the subject (for example ) is closer in upgrades to the most upgraded sale comp, which also sold for the highest price.