"Quantifiable Market-Derived Methods" for adjustments required by FNMA/USPAP

[Joe Flacco]

I can't think of a scenario where 20% would be reasonable, but maybe. It's been my experience that anchor bias has a tremendous impact on these variances. One appraiser gets fixated on a sale they think is really comparable and then try to make the data 'fit'. In this particular instance, the 'real' value is somewhere between $3.3M and $3.5M.

I mean, I don't know what a $3-4 million property in that market is. In the market I work, that price range is pretty typical, and a 20% range would be unreasonable.

When the subject is better than anything that has sold in the neighborhood, then 20% range shouldn't be viewed as unreasonable. One common issue at the high-end is that if your property is better than anything in the neighborhood, you go to competing neighborhoods to find similar improvements. Then you can deal with the difference in the value of the land between the locations, but then you are still left with the unknown of if the property is over-improved for the location or specific lot. Just the fact that nothing has sold like it in the neighborhood isn't evidence of an over-improvement.

You can even look at real estate agents at the high-end. Maybe 50% of the time, they nail the price within 10%. The other 50% of the time, they might be off by 20%-50% from where they started. You have to be a magician to be right within 10% all the time.

 

[J Grant]

We've been looking at absolute terms.
Each appraisers have their way of adjusting. Some are more conservative like me and the adjustments would be conservative throughout the differences.
The final value from different appraisers should be in more narrow range.
Lenders and GSEs don't understand this and looking at us to quantify like a computer.

Appraisals have a range of reasonable deviance from even a well supported point vlaue, just as an AVM has a confidence range of its point value.

For lending work, it would make sense to allow the lender to adjust the LTV % up or down with a few percentage points from the OMV.

 

[alebrewer]

If you have reason to believe the "real " value /best supported MVO is between 3.3 M and 3.5 M, why would you use again the appraiser who came in at 4 M?

man, oh man. Can you please try to scrape your mind away from AMC's, low fee shopping, and how/why someone orders from a particular vendor. This is NOT about this particular scenario. This is about the fact that appraisers quite frequently disagree to the point that both opinions are questionable. This particular scenario is under discussion simply because its the one I'm dealing with ATM. Try to focus on the bigger picture, J.

 

[Joe Flacco]

There was a property I appraised in 2015 for $13.75 million and the other appraiser put $5.5 million on it. That was an unreasonable range.

It ended up selling for $15 million in 2020. Knowing the data situation at the time, I don't think it would have been unreasonable if the other appraisal was at least $10 million.

 

[alebrewer]

I mean, I don't know what a $3-4 million property in that market is. In the market I work, that price range is pretty typical, and a 20% range would be unreasonable.

When the subject is better than anything that has sold in the neighborhood, then 20% range shouldn't be viewed as unreasonable. One common issue at the high-end is that if your property is better than anything in the neighborhood, you go to competing neighborhoods to find similar improvements. Then you can deal with the difference in the value of the land between the locations, but then you are still left with the unknown of if the property is over-improved for the location or specific lot. Just the fact that nothing has sold like it in the neighborhood isn't evidence of an over-improvement.

You can even look at real estate agents at the high-end. Maybe 50% of the time, they nail the price within 10%. The other 50% of the time, they might be off by 20%-50% from where they started. You have to be a magician to be right within 10% all the time.

Still can't agree. I'm guessing if you have one albatross property that's remarkably better than anything else in a 50 mile radius, maybe 20% is reasonable. It wouldn't be in any market (or property) I've ever worked.

 

[J Grant]

man, oh man. Can you please try to scrape your mind away from AMC's, low fee shopping, and how/why someone orders from a particular vendor. This is NOT about this particular scenario. This is about the fact that appraisers quite frequently disagree to the point that both opinions are questionable. This particular scenario is under discussion simply because its the one I'm dealing with ATM. Try to focus on the bigger picture, J.

You are imposing a limit on the conversation. Without mentioning AMC or low fee, I asked a reasonable question—if the low 3 million range is the real value, why would you then in the future use an appraisal whose value was 4 million? That is a very important part of the bigger picture.

Again, well-developed and well-supported appraisals come within a reasonably close range of each other, which, of course, would be a wider range with high-value or complex properties but not to the extent above.

 

[alebrewer]

You are imposing a limit on the conversation. Without mentioning AMC or low fee, I asked a reasonable question—if the low 3 million range is the real value, why would you then in the future use an appraisal whose value was 4 million? That is a very important part of the bigger picture.

Again, well-developed and well-supported appraisals come within a reasonably close range of each other, which, of course, would be a wider range with high-value or complex properties but not to the extent above.

Fine: limit imposed.

 

[Joe Flacco]

On a different one I was appraising in that range before, the other appraiser got my info somehow and was leaving voicemails and texts asking what my value is and asking if I want to discuss it. He was an SRA. It makes me wonder if that kind of behavior is or was common among those regularly working at the high end. And if it is / was, then it would explain narrow ranges between appraisals at the high end.

 

[Fernando]

On a different one I was appraising in that range before, the other appraiser got my info somehow and was leaving voicemails and texts asking what my value is and asking if I want to discuss it. He was an SRA. It makes me wonder if that kind of behavior is or was common among those regularly working at the high end. And if it is / was, then it would explain narrow ranges between appraisals at the high end.

When I know there's a second appraiser, I would love to know what the other appraiser's value.
If there's a wide discrepancy, lender will question both appraisers.
Also I want to know if I'm dealing with an incompetent appraiser.

 

[alebrewer]

Deleted.