New USPAP Q&As published March 6, 2025

[Mike Ault]

The majority of price increases happen in the spring selling season and the majority of the data available to the appraiser at that time is from the previous six months... But can the appraiser safely assume that the market will increase during the selling season or will it be flat like some years?

That will be the year that the market tanks and all the springtime appraisal optimism will be considered fraud later that summer.

 

[The Bob]

The majority of price increases happen in the spring selling season and the majority of the data available to the appraiser at that time is from the previous six months... But can the appraiser safely assume that the market will increase during the selling season or will it be flat like some years?

I've never made any assumption about what prices may do.
On those early season appraisals, I just look at the listing's and pending's. Talk to agents. That will tell you what's going on better than a model match sale from Oct or Nov will.
I'm retired now, but in my 'hood over the past few months, there have been more and more open houses. A year ago those were almost unheard of. So this Spring may not be as big or any increase from last Fall.

 

[alebrewer]

Fact is, most of the time the contract is indicative of market value. No one really cares how it gets there except for us.

I mean, market participation is still at play, right? As inefficient as the RE market is, its still a market. If property is listed too high - you'll see extended DOM, price reductions, incentives to purchase, etc. If property is listed too low, its picked up before it hits the market. Regardless - the market still drives the prices.

 

[CGinMN]

The majority of price increases happen in the spring selling season and the majority of the data available to the appraiser at that time is from the previous six months... But can the appraiser safely assume that the market will increase during the selling season or will it be flat like some years?

If you are analyzing data more than just median sale price you don’t have to make assumptions.

 

[Mark K]

Per FHFA, "In 2021 from a national perspective, 15.2% of appraisals were below the contract price, compared to 26.7% of appraisals equal to the contract price, and 58.1% above the contract price."

Wow! From what I've seen the VAST majority of appraisals equal the contract price. Of those above I wonder how many were little more than rounding within 1% or so of the contract price.

 

[Mark K]

You are very naive if you believe that. I guarantee there would be plenty of lenders out there who would originate loans using BPOS and AVM's if the regulators let them even if they kept those loans on their own books. In any case, it does not matter as the secondary market will be the dominant source of mortgage funding until long after all of us are gone.

I seriously doubt that. If lenders had to keep their own loans, they'd be much stricter than F/F on appraisals, borrowers, and LTV.

 

[timd354]

I seriously doubt that. If lenders had to keep their own loans, they'd be much stricter than F/F on appraisals, borrowers, and LTV.

The Savings and Loan Crisis proved that lenders will not be any more careful with the loans they keep on their own books.....too many lenders will eventually succomb to chasing returns and greed (even if they own the risk) if you let them run amuck. Hey, only about 1/3rd of the S&L's failed during the crisis.

 

[timd354]

Yeah, the seasonality in the data is something we’ve discussed here before. My comment was more about the number of appraisals above contract because you said overvaluation is not an issue.

With purchase waivers at 12-15% and growing, the number of low appraisals relative to the total population of appraisals should theoretically be growing.

I have never said that overvalaution is not an issue. What I have said is that most appraisals are not inflated, however I readily acknowledge that there is a percentage of appraisals that are inflated, although that number is fairly small, especially on purcahse appraisals. (Refi appraisals are much more likely to be inflated ased on what I have observed over the years).

 

[Terrel L. Shields]

f you are analyzing data more than just median sale price you don’t have to make assumptions.

If your sales are from December but your value is in Feb or March and you know the prices are wanting to rise or could rise but you don't have any sales to support it, you have to project based upon what the overall market is doing. Otherwise, you would have usable sales from days or just a few weeks earlier that would support the value without a market conditions adjustment.

Savings and Loan Crisis proved that lenders will not be any more careful with the loans they keep on their own books

Deregulating the S & Ls created conditions that have not been repeated since. They were lending long and borrowing short and got upside down. Few banks (as opposed to S & Ls) were not better run although the S & Ls were milked by both Wall Street and newbie owner-buyers. People like Jim McDougal and Madison Savings and Loan lending millions of brokered dollars on wildly speculative real estate deals.

Refi appraisals are much more likely to be inflated

There is a trend of anchoring on sales prices or recent prices that is absent in properties that have not been on the market recently. No anchor and pressure from the lender and some appraisers will err on the side of high simply to keep the UWs off their back.

 

[timd354]

Deregulating the S & Ls created conditions that have not been repeated since. They were lending long and borrowing short and got upside down. Few banks (as opposed to S & Ls) were not better run although the S & Ls were milked by both Wall Street and newbie owner-buyers. People like Jim McDougal and Madison Savings and Loan lending millions of brokered dollars on wildly speculative real estate deals.