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Reconsideration Of Value - No New Comps

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Jim Vincent

Freshman Member
Joined
Jan 6, 2005
Professional Status
Certified Residential Appraiser
State
Connecticut
Hello,
I have received a reconsideration of value request, 70 days after the original report was submitted, which was based not on new or alternate comparables to consider. Instead, the property had been subsequently listed and received no offers at that value yet and based on feedback from the listing/showing, would I re-evaluate the condition adjustments and re-submit the report? As the client's usual procedure appears to be to order a new appraisal when actual market reaction is available, this seemed peculiar.

Does this sound appropriate to you, and what response ought to be given?
 

Randolph Kinney

Elite Member
Joined
Apr 7, 2005
Professional Status
Retired Appraiser
State
North Carolina
Tell them to order a new appraisal. The report will identify what is new and conclude a value.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
I don't fully follow what is happening here.

You completed an appraisal with an effective date of 70 days ago. You valued it at $X.
Now, the property is listed and isn't selling for whatever it is listed at (is it listed at the same price-point as what you valued the property?), so the "agent" is asking for a new appraisal?

What was the original intended use of the report and who is the client?
Is this an REO property?
 

Jim Vincent

Freshman Member
Joined
Jan 6, 2005
Professional Status
Certified Residential Appraiser
State
Connecticut
It's a REO property. Intended use was to provide an "as-is" CMV for marketing the subject, client is a REO management company. The client is asking for a reconsideration of value, which seems to consist of re-considering condition adjustments and re-submitting the old report. Yes, listed as same price-point
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
It's a REO property. Intended use was to provide an "as-is" CMV for marketing the subject, client is a REO management company. The client is asking for a reconsideration of value, which seems to consist of re-considering condition adjustments and re-submitting the old report.

Ok, thanks for the clarification; now the request makes sense.

While the request makes sense, I don't know if you need to or should reconsider your condition rating. Your rating "was what it was". The property isn't selling for what the appraisal concluded. I'm presuming that the client believes if you reconsider your condition rating (change it to a lower rating) that will cause a re-analysis of the value and a new value opinion.

The condition of the property when you observed it is a fact. The rating is your opinion, although if we are following the UAD protocol, there is a somewhat objective criteria to that rating.
If you rated the condition correctly the first time, there is no reason to change anything. In fact, I'd argue it shouldn't be changed.
If you think your rating the first time was in error, you can re-consider it and change it. That may be the case, but that would be unusual. If you change your rating, then it would logically follow that the value could change as well.
If the condition has changed since your inspection, then that would warrant a new appraisal; you can complete that how ever you and the client think best.

I wouldn't be opposed to reconsidering my condition rating, but I doubt that my reconsideration would result in a change. Unless I concluded I had erred the first time (always a possibility).
 

Jim Vincent

Freshman Member
Joined
Jan 6, 2005
Professional Status
Certified Residential Appraiser
State
Connecticut
Thank you, that helps.

I *think* they are asking more for a re-consideration of the adjustments based on differences in condition ratings between the subject and some comparables. As the basis for their request for that comes from information after the effective date (i.e. feedback from the listing and any showings), I'm leery of the propriety of making such any such change to the initial report vs having a new one ordered that can take that feedback into account without any issues.
 

RSW

Elite Member
Joined
Feb 18, 2002
Professional Status
Certified Residential Appraiser
State
Tennessee
I agree with Denis, but would like to go further. Tell your client to look at the definition of market value as reported in the appraisal report and to pay close attention to the underlined sections below:

The most probable price which a property should bring in a competitive and open
market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming
the price is not affected by undue stimulus.
Implicit in this definition is the consummation of a sale as of a specified date and
the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both
parties are well informed or well advised, and each acting in what he or she considers his or her own best interest; (3) a
reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in U. S. dollars or in terms
of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold
unaffected by special or creative financing or sales concessions* granted by anyone associated with the sale.

It sounds like they are asking for a market value for the subject property, but really want an value less than market value.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
Thank you, that helps.

I *think* they are asking more for a re-consideration of the adjustments based on differences in condition ratings between the subject and some comparables. As the basis for their request for that comes from information after the effective date (i.e. feedback from the listing and any showings), I'm leery of the propriety of making such any such change to the initial report vs having a new one ordered that can take that feedback into account without any issues.

I don't know your market, but things in many of my markets have gone from "increasing" to "stable" in the last 2-3 months.
A rising market (70-days ago) would typically result in less of an impact for condition differences (inferior vs. superior). This makes intuitive sense because, by definition in a rising market, there are more buyers than sellers and in a competitive market that is increasing, price reaction to condition differences get squeezed. When the market changes (stable), supply and demand are in balance, and buyers are not competing as fiercely for homes; condition differences that were squeezed before now have more of an impact.
Obviously, in a declining market, the competition is among sellers; so someone with a inferior-condition home is going to have to compete for the limited sellers by discounting further for their inferior condition.

The agent's feedback may be accurate and may reflect a change in the market. If so, then I agree with you; the way to address that is to complete a new appraisal. Current market conditions can then be taken into account.

Given all of the above, my advice is to suggest to the client the best way to reconsider the value is to complete a current appraisal that can take into consideration any changes in the market conditions that are present "now" (and that may be affecting the market acceptance of the subject property).

Good luck!
 

Jim Vincent

Freshman Member
Joined
Jan 6, 2005
Professional Status
Certified Residential Appraiser
State
Connecticut
Thank you!
One side question I also have is if the client is able to order a new FHA appraisal before the current one expires?
 

BRCJR

Elite Member
Gold Supporting Member
Joined
Sep 20, 2005
Professional Status
Licensed Appraiser
State
Virginia
Thank you!
One side question I also have is if the client is able to order a new FHA appraisal before the current one expires?
That is why they want a reconsideration......I will wager.
 
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