Prudent?

[Carnivore]

OK, our we discussing "Market Value", "Prospective Value" or "Prospective Market Value" ? Can we state anything other than "Market Value" on the Effective date of a URAR Appraisal for lending purpose's?

Maybe I have misunderstood the conversation all together. References have been made to Skippy and some others stuff, etc.

I have run into similar situations like this recently. Charlotte/Mecklenburg is experiencing steep climb in market values also, and it varies in different area segments and as a county overall. Population Growth combined with a slower increase in new construction is the primary cause, but there are also secondary causes that I have to consider.

New construction is primarily limited to the outer areas. In-Fill has taken off dramatically, but that's running short also within the I-485 Loop. Affordable housing for middle class and below is disappearing unless you go further out(longer commute time)into bordering counties. Millennial are moving out of their parents basements, but want quality like their parents house but much smaller in GLA and they want to be in close to Central City Yankee's refugees from the north are coming in droves. Unfortunately they are also bringing their Tax and Spend attitudes with them(go figure). Older people want to downsize but have to move further out or spend all their cash from big house on a smaller house. So its rather complex market and you have to be right on top of it to understand what is the actual annual appreciation of a particular S/D or Condo Project.

If I have a Condo Project zooming upward, then I don't rely just on that project for annual/monthly increase. I find other competing projects and combine them to get a better picture. Also the more numbers I have make for better stat's, that's a given. I bump that against the County and Region to try and single out why a project(s) might be doing better than another. Access to current(and planned) Public transportation is a major factor close in to Uptown Charlotte.

 

[J Grant]

Here is a chart from a condo project in the town next door to where my office is. These are all 2br condo units of the same size (1,043sf):


View attachment 33912

Do you attribute the increase to number hitting?

This is an existing project; built in 1991. 64 sales over the course of the last 5 years.

I can't answer it without having reviewed every appraisal on all 64 sales ! Of course price increases are due to many factors, and number hitting may or may not play a role. But we clearly see a segment of appraisers who push value to make sales prices ...would you agree or not that it contributes to prices rising, since a pushed value closed sale becomes a new highest price sale for next appraiser to rely on?

 

[residentialguy]

The most probable price is 102k,. But as appraisers we are engaged to develop an opinion of market value, correct? Therefore,the question is not what is the most probable price, but what is the more credibly supported market value opinion ( market value as defined ) .

They are one in the same. If you don't have enough market data to support the most probable price, then you better turn down the order. Opining lower than the most probable price is nothing more than a misleading report.

 

[J Grant]

They are one in the same. If you don't have enough market data to support the most probable price, then you better turn down the order. Opining lower than the most probable price is nothing more than a misleading report.

Your post makes zero sense. How the heck would an appraiser opine lower than the most probable price, when it's the appraiser's own opinion of value as a most probable price ?? It's a matter of appraising to hit a SC price, that is the issue.

 

[George Hatch]

As others have said, the micro is but a subset of the macro. That's why we normally start from the outside and work our way in, and why it can be risky to skip the analysis of the macro and rely solely on the micro. If you start with the macro and work your way into the micro you won't have to wonder how indicative of "most probable" that 1 closed sale + 1 pending sale are. Nor will you sweat the rate of increase.

Your most similar comparables do not "create" the wider value trend in the market, they are the "effect" of that wider value trend. If you didn't have those particular sales to work with you'd have others that would presumably lead to the similar result - even if they were less similar and required more consideration of their respective variables.

 

[residentialguy]

The most probable price is 102k,. But as appraisers we are engaged to develop an opinion of market value, correct?

Therefore,the question is not what is the most probable price, but what is the more credibly supported market value opinion ( market value as defined ) .

I was about to ask you a similar question. You stated "The most probable price is 102k"....if that is the case, but you can't support that fact, turn it down

 

[hastalavista]

But we clearly see a segment of appraisers who push value to make sales prices ...would you agree or not that it contributes to prices rising, since a pushed value closed sale becomes a new highest price sale for next appraiser to rely on?

I have to agree because the premise of your question is that some sale prices are being pushed.
Where I disagree is that such scenarios are driving the market.
Do prices get pushed by some appraisers some of the time? Yes.
Does that move the market to a point that is not supported? Rarely, in my opinion and based on my experience.

(Seems that after the crash, most appraisers on this forum took umbrage at the accusation that the rising prices to unsustainable levels were due to bad appraisals and/or appraisers pushing value? Maybe I'm remembering incorrectly?)

 

[J Grant]

I was about to ask you a similar question. You stated "The most probable price is 102k"....if that is the case, but you can't support that fact, turn it down

Help me god, the point of an appraisal is it is not JUST a prediction/guess of most probable price as a stand alone ...( that was the point of what I wrote about the 102k, it was supposed to be sarcastic).Clearly if a buyer is paying 102k price, a most probable price can be 102k because someone is paying it, if that it the only metric of what we are supposed to be doing- but since we are supposed to provide a market value opinion , which factors in value differentials among properties as well as considering past most similar sales, a market value opinion can differ from a pending sales price...

 

[J Grant]

I have to agree because the premise of your question is that some sale prices are being pushed.
Where I disagree is that such scenarios are driving the market.

If it is on more than the rare occasion, it does influence the market...whether one says it drives the market depends on how you use the term, but it definitely influences the market and direction of prices.

Do prices get pushed by some appraisers some of the time? Yes.
Does that move the market to a point that is not supported?

The problem is the prices themselves "support" other prices- so if a sizable % of appraisers are pushing value in a certain price direction (usually upward), it supports other high prices.

Rarely, in my opinion and based on my experience.

(Seems that after the crash, most appraisers on this forum took umbrage at the accusation that the rising prices to unsustainable levels were due to bad appraisals and/or appraisers pushing value? Maybe I'm remembering incorrectly?)

I believe it is the very same appraisers who number hit who are the deniers. I did a lot of reviewing after the boom/bust...anyway why replay that whole thing, the essential question of what an appraiser's role is has not changed and the OP admitted a method of fudging adjustments and relying on less similar sales to reach a price of 102k, at least they acknowledged it

 

[hastalavista]

OK, our we discussing "Market Value", "Prospective Value" or "Prospective Market Value" ? Can we state anything other than "Market Value" on the Effective date of a URAR Appraisal for lending purpose's?

Yes we can. I'm reviewing a report right now where the requirement is for an as-is value and a prospective value upon completion. It is not headed to Fannie/Freddie.
But, for cases where it is headed to Fannie/Freddie, as you know, they want a market value "now". If for a proposed construction, they want it based on the "now" date using the appropriate HCs.

Maybe I have misunderstood the conversation all together. References have been made to Skippy and some others stuff, etc.

A common sidetrack here.

I have run into similar situations like this recently. Charlotte/Mecklenburg is experiencing steep climb in market values also, and it varies in different area segments and as a county overall. Population Growth combined with a slower increase in new construction is the primary cause, but there are also secondary causes that I have to consider.

New construction is primarily limited to the outer areas. In-Fill has taken off dramatically, but that's running short also within the I-485 Loop. Affordable housing for middle class and below is disappearing unless you go further out(longer commute time)into bordering counties. Millennial are moving out of their parents basements, but want quality like their parents house but much smaller in GLA and they want to be in close to Central City Yankee's refugees from the north are coming in droves. Unfortunately they are also bringing their Tax and Spend attitudes with them(go figure). Older people want to downsize but have to move further out or spend all their cash from big house on a smaller house. So its rather complex market and you have to be right on top of it to understand what is the actual annual appreciation of a particular S/D or Condo Project.

If I have a Condo Project zooming upward, then I don't rely just on that project for annual/monthly increase. I find other competing projects and combine them to get a better picture. Also the more numbers I have make for better stat's, that's a given. I bump that against the County and Region to try and single out why a project(s) might be doing better than another. Access to current(and planned) Public transportation is a major factor close in to Uptown Charlotte.

You are telling the complete story in your report. The dynamic you describe logically results in upward pressure on pricing and values.

I'm seeing the same thing in my micro-market. A relatively new BART (Bay Area Rapid Transit) commuter rail system station in the city that I live, and one planned for the city where my office is located within the next 5 years. The development pattern around these stations is (so far) easy to forecast. Higher-density residential and some mixed-use retail/residential is constructed in markets where, 10-years ago, wouldn't support that type of development. These buyers are a younger demographic, typically no kids, who use the BART system to commute to Silicon Valley or to San Francisco. They are fine with 2- and 3-story townhouse-style homes, or smaller patio homes with little yard/maintenance. They are also fine with the mixed-use (retail, as a rule) within their development projects. These are commuter villages where residents have traded what used to be their private lot/yard space for community space. Some of these homes/units don't even have garages.
They are selling like hotcakes because they are relatively affordable vs. similar living arrangements closer to the major employment centers of San Francisco or Silicon Valley.

The market dynamic is what the market dynamic is.