RE Mogul Finally Admits It !

[Joe Birrell (NY)]

One of the largest real estate moguls in the area (builder, developer, attorney, real estate broker, and member of builders assn.) has finally admitted that the sales prices are simply "made-up" as they go along. No concept of "market value" and they actually believe that appraisers exist to fill-in the number they want. Their justification is that the buyers are willing to pay the asking prices.

This is so incredible, I only wish that I had taped the phone conversation.
Here I am trying to argue that the contract price does not reflect the market, and that he should provide comps to prove me wrong. He gives me comps several miles away in a far superior location (I used one of his own "contracts" as supplemental data - comp 4 - 1 block from the subject - to kill the deal). Of course, I should not have done this because it dosn't make his deal. He insists that I use the comps he gave me, since the lender is out of state and won't know the difference !

When I asked how did he arrive at the contract price, the revelation was made. Of course, we have always suspected that the prices are simply made up, but to actually hear them admit it is something else.

 

[Farm Gal]

Well Joe,

You have come up against a 'willing buyer and a willing seller' the only part of the equation that is missing is the "knowlegable" on the part of the buyer, since the SELLER is obviously operating from KNOWLEGABLE Self-interest. :roll:

So by definition what IS the market value? I have heard a highly knowlegable and reputable appraiser privately admit that if there is even ONE person willing to pay a given price, that 'value' IS the upper end of the market value spectrum.

Perhaps we should start a movement to redefine the "Market Value" from 'most probable price' to "most probable price which price is most likely to be met in the open market within the normal marketing time for the subject" :idea: :roll: :wink:

I have no problem with someone overpaying for a house if that is what they want to do, but let them do it with their OWN money, not my parents' life savings :evil:

So are we really dinosaurs?!?!

 

[David C. Johnson]

<span style='color:darkblue'>"I have no problem with someone overpaying
for a house if that is what they want to do,
but let them do it with their OWN money,
not my parents' life savings"

Well said, Lee Ann.

dcj</span>

 

[airphoto]

True, Folks ..

Just because the seller grabbed the golden beebee doesn't mean there's a second ignorant person willing to overpay within a reasonable marketing period. Must'nt lose sight of the fact that we're dealing with the norm, rather than the exception ..

 

[liznindy]

Not only do we (as appraisers) protect your parents life savings, sometimes, just maybe, sometimes, we are protecting the purchaser from overpaying?!!


I remember telling my husband (pre appraiser days) at the time of our first home purchase....." If the house is not worth the price, it won't appraise for that price." Well, I was much younger then, and more naive!!



Keep up the honesty in appraisals, people. We are protecting the young and naive!!

 

[Farm Gal]

Liz:

Once upon a time starts out like all good fairy tales

The appraiser WAS the only one in the transaction looking out for the buyer... nowadays the lender just shoots the horse 'bad'appraiserto make the jump.
Capable not Competent!!

The buyer usually never even knows there was a problem!!!

They are maybe with a piece of paper that says 'SURE it's worth it'!!!

And everyone lived happily ever after even the forclosure specialist who makes money and the bank who writes of the bad loan...

Hey I think I am onto something here... anyone want to assist me in writing a modern fairly tale to send to the media and govt officials?? We could use varients on recognizable fairy themes and write the HUD and Fannie and mortgage lender, etc stories??? think it would get air time???

 

[Pamela Crowley (Florida)]

Lee Ann,

If we do it really well it could be something that would finally catch on in the media who seems to be totally ignoring this issue.

We could try! Sound like fun!

 

[Alan Simmons]

I am a FIRM believe that a willing seller and a capable buyer do establish value 100% of the time!!! Whatever price they agree upon is what the subject is worth!!!! No Doubt in my mind!!!

However most "Mortgage Wizards" conveniently omit a very important part of the value equation. The buyer must not only be willing but fully ABLE to pay the agreed price. Consequently, once the buyer applies for a mortgage his ability becomes defined by the Lender's limitations (appraisal, et al). As such any buyer with a mortgage gives up the right to anonymously determine value. The Lender's limitations will ALWAYS trump the buyer's willingness.

So having a willing buyer does not mean crud unless they have the ability. But then they do not really need an appraisal do they?

 

[Restrain]

A willing buyer and a willing seller DO NOT establish value. Prime example- a manufactured subdivision in my community. Developer set up 80/20 financing, getting people into manufactured homes at $90's to upper $130's. Problem was that the value of the homes was $50's to $80's. Yes, they agreed to the price. Yes, they could afford it. No, they couldn't sell them. All are now in foreclosure. Resale of the manufactured homes is now approaching market value. So, a stupid buyer and a ruthless seller create a sale - not market value.

 

[Larry Lyke]

Careful there, Alan --

You're bordering on the real world!