Question from potential private customer re reconciliation at sale price.

[J Grant]

I disagree and I'm going to stand by my assertion. The real estate purchase is an emotional one, A hurried one, A desperate one. There's no way that anyone on this forum can "pinpoint" at any point in time the "exact value" of what a home price should be.

Does that mean appraisers shouldn't be used? Of course not. We follow (okay, some follow) well documented methodology that leads to the most probable price as of the effective date of value that falls within an adjusted range. Basically, an educated guess as to the price the real estate would fetch in a free market. Doctors do this too by the way. Medical science is not an exact science. They are using their best educated guess based on the patient's symptoms.

Ale's post in this thread illustrates my point.

Which value of the property is correct? Is it exactly $750k or is exactly 950k? I doubt either. But one of them is within the range of the most similar sales as of the effective date.

Sorry, but your reasoning is still a bit misplaced -it is worth discussing because getting our reasoning in line with USPAP and what an appraisal is helps us tremendously.
Indeed, we follow a documented methodology. But the appraisal methodology does not lead to the most probable price (which creates the mistaken idea it is an educated price guess )

The appraisal methodology leads to a market value opinion . An MV opinion is our stated purpose of the appraisal and in fact USPAP defines an appraisal as an opinion.

The MV opinion requires an MV definition - and it is within the MV definition where the term most probable price appears - the MV definition provides the terms and conditions for the hypothetical transaction we create in the SCA (sale comparison approach)

WRT Alsi'es example, as you note, either 750 k or 950 k is more in line with similar best comps ( unless both values are wrong) It is easier to come up with a range of value than a point value. Clients pay an appraiser for a point value not because it is worth exactly 800k (for example ) but because the client NEEDS one finite number, whether it is 800k or 810k or 790k , for the closing or for the division of assets in an estate, etc.

The client can not arrange a closing for a loan and dump money on the table and the parties say well the value is someonere in this range of money so we can maybe try to divide it up - if we the appraise can not or will not serivcie our client with a point value, they will find an alertnae source for it.

 

[J Grant]

Like many charades a point value is nonsense even though required by the PTB. No one should or does believe a point value is the "real" value. It is the contrived value of the systematic approach we call the "appraisal process."

If you think a point value is nonsense, then you are doing your clients a tremendous disservice and being misleading by providing one for them, especially if you think so little of the appraisal process that it is a "charade?".

What in the world is a "real " value? Are your clients asking you for a "real" value???

A point value is a model value developed per a methodology that should be close to what the market should pay if it transacted at the MV germs. If you think tis a charade and trash you should disloe that to your clients. .

Seriously, why are you doing this, going through the motions to sign your name to a process you don't believe in that you call a charade?

 

[Terrel L. Shields]

If you think a point value is nonsense, then you are doing your clients a tremendous disservice

Recognizing the reality of a "point value" is not a disservice. It's just recognizing that the appraisal process does not require a point value. But the clients require it. Nothing more.

 

[J Grant]

Recognizing the reality of a "point value" is not a disservice. It's just recognizing that the appraisal process does not require a point value. But the clients require it. Nothing more.

I aggee, an appraisal does not require a point value - but most clients do so that is what we need to support credibly. The appraisal is a value model (not a contrived charade)

 

[Tom D]

I think the waiver value is the most accurate, no subliminal sale price. The next best is the avm, totally scientific without any sale price bias. Don't need no stinking appraiser.

The main pupose of a human appraisal is to prevent value fraud. Most normal buyers are r.e. literate, having looked at other listings. They know the price range of what they want.

I always tell someone we have to put a number within that range. If the sale price looks reasonable, that's the mv.

 

[Deleted member 142783]

IMO - point value appraisals are a misnomer. At any given point in time a property will always express a range of value. Price is a point - value is a range. (again, IMO).

Like a sniper saying they can hit a pin head from 400 yards, when in reality hitting within a quarter is a bullseye and really all you need is to hit within a dinner plate size for it to be a kill shot.

I HATE single point values. I think they are on their face miss leading (with very few exceptions)

 

[Deleted member 142783]

Imo, an appraiser who believes "No one's that good" should not be appraising. PS the GSE's and clients hear it and think yeah, why use appraisers if they are not good enough. Would you go to a dentist who said that about themselves?

The appraiser's education and knowledge are supposed to make them "that good" , aka competent enough to develop a credibly supported MV opinion as a point value. This does not mean it is the one God like one and only one value for a property .

Your last statement is a WAIVER -using the argument about a range of values, and the lender estimates the exact number as a cherry-picked, make-the-deal work value estimate. A low bar exists for it to fall within the GSE AVM range which nobody else sees.

Note to others who have made the above sentiment that Surf Cat did, ( too many over the years ) - you all helped the GSE's argument to use WAIVERS..

Yo. I have been appraising over a decade and also sell homes. I have NEVER told a seller your home is worth zzz down to the dollar. I always give a range. Usually the range is 1% +\~ for tract homes and 5% for more rural.

 

[Surf Cat]

Sorry, but your reasoning is still a bit misplaced -it is worth discussing because getting our reasoning in line with USPAP and what an appraisal is helps us tremendously.
Indeed, we follow a documented methodology. But the appraisal methodology does not lead to the most probable price (which creates the mistaken idea it is an educated price guess )

My reasoning is not misplaced. Market value is defined as the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale.

Let's forget the appraisal terminology quiz and get back to the matter at hand.

Per the OP

the appraised value was reconciled at the exact sale price. She was curious as to why?

Everyone pretty much agreed that if the adjusted sales supported the purchase price, the opinion of value came in at the the purchase price. Easiest thing to do, fly low under the radar, make it happen and move on. After all, the purchase price fell within the range of the adjusted sales.

Your contention with me:

I always thought the appraised value should be a range of the adjusted sales, not an "exact" number and let the lender make the final decision. No one's that good...

Here's where you got down right nasty and went right to the basement...

Imo, an appraiser who believes "No one's that good" should not be appraising.

Note to others who have made the above sentiment that Surf Cat did, ( too many over the years ) - you all helped the GSE's argument to use WAIVERS..

I shouldn't be appraising? I helped GSE's go to waivers??? Go Fk yourself......I didn't create this mess. I swear J....you should come down off that high horse of yours to give your brain some oxygen.

I come in with a pinpoint value on every assignment I do because that's what's required. My opinion is that it should be a range. The range is derived from components of bracketing and or equality and similarity derived from the most similar sales to that of the subject property within the subject's immediate market area and adjusted for differences. You can weigh a couple of the comparables in the reconciliation to be at the low, mid, high end of the range based on being the most similar to that of the subject.

If you dropped everyone who commented in this thread in the same neighborhood to appraise the same subject property, there would be different opinions of the pinpoint number. Who's going to give the "correct" pinpoint number? Who's good enough to have "the" number?

Having said that, I believe the range of the adjusted sales from everyone would be very similar.

The client can not arrange a closing for a loan and dump money on the table and the parties say well the value is someonere in this range

Yes they can.....and that's what they are doing. But it's not MY fault!

 

[NC Appraising]

Had an interesting call from a potential customer. She is looking to purchase a home in the area, and wanted to get an appraisal prior to submitting a bid. She stated that the last two homes she or relatives had purchased, the appraised value was reconciled at the exact sale price. She was curious as to why? I told her without knowledge of these properties or appraisals that I could not answer that, but did tell her that if I was doing an appraisal and the comps adjusted to a tight spread, and the sale price fell in the middle, why not reconcile at the sale price? I reiterated the definition for market value. Then I saw a post from a realtor stating in her opinion, a lot of appraisers just try to reach the sale price to make their clients happy. That got me thinking, does the general public feel an appraisal is inaccurate if reconciled at the sale price??

I was taught in appraisal school to not look at the contract price until the opinion of value was developed.

If the contract price was not provided:
1. We would become better appraisers. No more appraising to the contract price and making adjustments to fit the needed value.

2. We would **** of everyone. You think we are hated now....

3. Would we get blacklisted less if we didn't know the contract price? Hard to blame us if we didn't know the needed price.

4. Let's be honest, life is way easier...you open up ww3 when you come in low. Armageddon.

Yes, AMCs and lenders still chose their number hitting appraisers and put them on their preffered panel.

Yes, inexperienced appraisers and not that good of appraisers hit the value because they are unable to defend their work. That high producing agent that knows the neighborhood like the back of there hands would squash them like a bug. So it's easier to meet the value.

That being said, there are a lot of good and ethical appraisers out there. It's just hard to compete with the number hitters.

 

[ucbruin]

What did the school teach you about refi appraisals....