Real Estate Bubble & Holding Realtors Accountable For Listing Prices

[glenn walker]

Appraisers need to keep their heads clear and just look at the data if there is a limited supply of inventory and cash rich out of state buyers prices go up. I am told that Flagstaff is a small mountain community and many retired Californians are going either there or to Prescott. If there is another Bubble it's probably Phoenix. Thousands of low income workers -hot summers-too many investors and too many tenant occupied single family homes.

 

[glenn walker]

Flagstaff Arizona is a small market with many out of state buyers and many sold homes out here for $800,000 + so $400,000 looks cheap. Sometimes the last ones to know their market was undervalued is the locals. Kind of like Prescott Arizona it's almost impossible to find a native up there anymore because it's all retired Californians who have been pushing up the prices for years. Small community-Limited inventory and cash rich retired folks mean high prices. IF THERE IS ANOTHER BUBBLE it will be Phoenix Metro ** Low income buyers --lot's of flipping and thousands of tenant occupied homes.

 

[residentialguy]

Your statement still makes no sense. Of course any competent appraiser would consider the ocean view on an ocean view subject (or any important physical characteristic of a property)

Which still does not explain how an appraiser opines below market value because they did not take into consideration the market value.

Just as any competent appraiser would consider market conditions if market conditions has changed since the comps sold date, too. See, we're not talking about a competent appraiser. We're talking about the appraiser not considering the market conditions changing, therefore if there are $15k in market conditions that should have been adjusted, the appraisal will come in $15k below market value.

 

[J Grant]

OK., I agree on that

 

[Mike Kennedy]

Back in the last century when I took the real estate broker's course in N.J. we were taught that the listing price a broker sets on a property should be the price that the broker believes that the property will sell for.
Many brokers place "pie in the sky" listing prices just to get the seller to sign the listing contract.
Unfortunately most buyers only source of market information is the selling broker.

Correct, which is exactly why potential buyers should engage Professional RE Appraisers IN the specific market and obtain an independent, OBJECTIVE opinion of fair market value PRIOR to making a firm offer on ANY property. A few hundred now CAN save one thousand$ of misspent dollars buying pigs-in-pokes and intentionally inflated listed properties.

 

[George Hatch]

They are not "right, in that we are not "holding values down". The appraisal by its methodology makes it a product not designed to be a front runners for prices. So yes, closed sales to credibly support a value in order to satisfy cert 4 ). If those sales have not happened yet, if there is a gap between our OMV and a SC price, let the buyer close the gap with their own funds , which means buyer participation is generating the next higher price , vs appraisal facilitation .

I have come to believe that some appraisers have become institutionalized as a result of their narrowly focused specialty of doing mortgage oriented appraisal work. I think that in certain situation the answer to "what's most probable" can be very different from "what will the client accept". Enough so as to result in a value conclusion that more closely relates to the value a lender will loan on rather than a value that most buyers would actually pay.

I don't have a problem with "what will the client accept" because I think that's a legitimate question to which the appraiser can respond with a legitimate answer. However, what I do object to is calling that answer "Market Value" when a more accurate description might be something along the lines of "Mortgage Value" or its equivalent.

Get off my lawn

 

[J Grant]

I disagree with your last post, usually you are on point but imo this last is just an opinion piece.

A good market value opinion should not be what the lender will accept, it should be the result of the best appraisal development the appraiser is capable of...I suppose each of us has a limit of what that is. Pressure for fast turn times is hurting res appraisals for one thing....have never heard it said that appraisers are "institutionalized" (though it might send us there lol), I think the environment around doing res lending work makes it needlessly difficult..

Your statement is confusing, since buyers don't pay "values'; buyers pay prices. We appraisers are the ones tasked with reconciling prices to the concept of market value.

A buyer of course can have their own concepts about value which they are entitled to have. The lender client though is paying for our concept of market value...as developed by the appraisal.

 

[J Grant]

GH-However, what I do object to is calling that answer "Market Value" when a more accurate description might be something along the lines of "Mortgage Value" or its equivalent.

I agree with this , I wish they would change the terminology. Maybe "value of worth " or the like. Because market value is used by everybody in the RE business and by the general public , it has taken on a generic meaning and expectation, the common one of it's a price a buyer is willing to pay and a seller is willing to accept. Which can be suitable for that use, but the appraisal of opinion of market value reconciles value elements of property with prices, thus the development in the appraisal is more complex (and may yield a different amount of $).

However complex and time consuming an appraisal is, the outcome appears simple...opinion of value in a $ amount ($270,000). An AVM can deliver a market value estimate in under a minute, a RE agent can toss it off in a minute while driving a customer around and passing a house and telling customer what a house is worth. (that yellow house on the corner, that's worth $300,000). For all these reasons and more, the verbiage of our opinion would serve us better if it where specific to appraisals.

 

[Mike Garrett RAA]

But, but, but.....we had multiple offers and there was a bidding war!

 

[J Grant]

I think that in certain situation the answer to "what's most probable" can be very different from "what will the client accept". Enough so as to result in a value conclusion that more closely relates to the value a lender will loan on rather than a value that most buyers would actually pay.

That's an issue around "what is most probable"....is it most probable as to what most buyers would actually pay? That can be true when what most buyers would actually pay ALSO comes out to equivalent to the vetting of properties/values /market conditions developed in the appraisal. (the SOW)

You used the phrase what most buyers would actually pay, however the appraisal purpose MV definition states most probable price the property should bring, which is a bit different in context. "Should bring" takes into account in addition to what buyers would pay, what sellers can get in the open market. RE is a fixed location, theory is a seller can only get so much $ on the market per location influence.

Furthermore, the critical aspect is that in an appraisal, we are not asked as stand alone question of what is the most probable price the property should bring ? . Because that may be a price opinion, but still not a market value opinion.