Regression for GLA Adjustment

[Mike Ault]

I areas like mine often 65% to 70% is in the Lot and so almost everything sells for more than a cost approach. We have seen many cycles where used old homes sell for as much as a new one. Now where there is available land not so much.

So, you should actually be doing "land appraisals with improvements" instead of home appraisals. If things are consistently selling for far more than the cost of construction, maybe you should be going into the construction business.

 

[J Grant]

Do you believe that the benchmark for "typical" is internal or external to the market segment in which the subject is directly competing?

Do you think what's typical for timeshares is the same as what's typical for airports or refineries? Do you think what's typical for a $25M estate is the same as what's typical for a 100yr old beater in Detroit? Do you think what's typical in 2023 is the same as what was typical for that same property in 2019?

JGrant, since you're doing the "me-too" to Mike's post you should feel free to respond to that question, too.

You are imo, conflating different aspects of the appraisal and the market analysis we are supposed to be doing with the MV definition we use for our opinion of MV. They are different steps in the appraisal and all must be done - they intersect at the end for the MV reconciliation.

Clearly, a typical buyer for a luxury condo penthouse has different priorities, budget and expectations than a buyer for a tract home . Your question to me about it is insulting as if after 30 years in appraisal I somehow failed to learn that typical buyers are different for different property types? Would you ask a male appraiser that? And do not I play the female card, but come on, I I appraise 10 million dollar houses and you somehow think I dont' understand that a buyer for a ten million dollar waterfront estate is different than the buyer for a 200k starter house??

That out of the way, a typical buyer for a property type is a different step in the appraisal than the use of the "typically motivated " buyer terms of sale in the MV definition.

 

[Mike Ault]

That's not responsive to the questions I'm asking. Just sayin'.

But since you bring up the CA, do you think the typical buyer for SFRs is considering the CA or IA in their decision making? Or that if they aren't considering the CA or IA then that disqualifies them from being considered either typical or well informed as the typical buyers are being referenced in the definition of MV?

C'mon now. You know the answer to that one. We all do.

I thought it was quite responsive to your alphabet soup of scenarios. As someone who watched ethnic fraud up-close and personal, how it affected entire neighborhoods, and lost clients over the same, I'm just not with the "whatever you can talk people who are buying terms instead of housing into" as "well-informed", no matter how typically those poor folks get swindled. It's sad to see entire blocks of housing repossessed due to realtor-lender-appraiser collusion. It WAS gratifying doing the forensic reviews, however.

 

[George Hatch]

So, you should actually be doing "land appraisals with improvements" instead of home appraisals. If things are consistently selling for far more than the cost of construction, maybe you should be going into the construction business.

He didn't say that, and the HBU analysis for the as is considers the value of the entire property in its as is condition vs the underlying land value by itself. If it's worth MORE as a lot sale then you appraise it as land, but if it's worth more the way it sits as land+improvements then the HBU/"as is" will be that existing use.

Value as SFR = $300k
Value as land - $200k

HBU/"as is" will be the SFR. It doesn't matter what the value would be on whatever they'd build on the lot because that isn't the comparison. "HBU/as if vacant" is irrelevant if the SFR is worth more than the land value.

 

[Mike Ault]

He didn't say that, and the HBU analysis for the as is considers the value of the entire property in its as is condition vs the underlying land value by itself. If it's worth MORE as a lot sale then you appraise it as land, but if it's worth more the way it sits as land+improvements then the HBU/"as is" will be that existing use.

Value as SFR = $300k
Value as land - $200k

HBU/"as is" will be the SFR. It doesn't matter what the value would be on whatever they'd build on the lot because that isn't the comparison. "HBU/as if vacant" is irrelevant if the SFR is worth more than the land value.

Yep, you got me there… although I could do a land appraisal with an SFR just as easily as I could do a land appraisal with a well and septic.

 

[George Hatch]

I thought it was quite responsive to your alphabet soup of scenarios. As someone who watched ethnic fraud up-close and personal, how it affected entire neighborhoods, and lost clients over the same, I'm just not with the "whatever you can talk people who are buying terms instead of housing into" as "well-informed", no matter how typically those poor folks get swindled. It's sad to see entire blocks of housing repossessed due to realtor-lender-appraiser collusion. It WAS gratifying doing the forensic reviews, however.

That's a whole lot of feelings that have zero to do with the question I asked. And hey, thanks for the moral judgement you're trying to impose on me because I'm not allowing these other possibilities to interfere with me doing what I say I'm doing.

Regardless of the outcomes, when you develop an opinion of MV what are you making your comparisons to? What the comps are actually doing or what you think they should be doing if only they were as wise as you?.

 

[J Grant]

DEFINITION OF MARKET VALUE: 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.

I have bolded some of the terms of sale for our model HC transaction in the SC approach where we are to use the above applied- a model HC buyer and seller in the MV definition.

Contrast that to some possible actual terms of sale in a real live name buyer actual SC price - concessions, the property did not have reasonable market exposure, a buyer or seller is not acting prudently, the price was affected by undue stimulus, a buyer or seller was not well advised etc - any of these could produce a different price or affect a price , which is why among other reasons, a SC price might not match our MV opinion.

And once again, if our OMV is below or above a SC price, we are not lecturing a buyer or seller or telling them what to pay or sell for. We are (typically) engaged by the lender/client, a buyer can pay under or over our OMV, My OMV was 200k, the SC price is 220k, where did I tell a buyer what to pay?? they are free to put down 20k more in cash.

I am sick of the harassment lobbed if we dare do our job and opine a MV using the MV definition a charge comes that we think we are "smarter than the market " , or incredibly, that we are
" playing god"-made in the past on the board..

If an appraiser does not want to opine MV than don't take MV opinion purpose assignments. If you want to guestimate or predict prices then seek out price assignments -oh wait, there aren't any for appraisals -since an appraisal is defined as an opinon of value.

 

[George Hatch]

Yep, you got me there…

I'm not trying to get you or anyone else. I'm trying to get everyone who hasn't already worked their way through this stuff to think in terms of the underlying concepts and principals involved. The mechanics of what we do are supposed to be an expression and application of these fundamentals, and they apply just as much to the appraisal of SFRs as any other asset type even if the clerks at the lenders are operating off of checkbox mode.

 

[glenn walker]

So, you should actually be doing "land appraisals with improvements" instead of home appraisals. If things are consistently selling for far more than the cost of construction, maybe you should be going into the construction business.

O' No regression for GLA adjustments has turned into another "Price V Value thread. God I almost can't take it LMAO

 

[Mike Ault]

That's a whole lot of feelings that have zero to do with the question I asked. And hey, thanks for the moral judgement you're trying to impose on me because I'm not allowing these other possibilities to interfere with me doing what I say I'm doing.

Regardless of the outcomes, when you develop an opinion of MV what are you making your comparisons to? What the comps are actually doing or what you think they should be doing if only they were as wise as you?.

I apply my own independent judgment as to what the market "should be doing" given the information a well-informed/advised person "should be operating under". Not what it's getting talked into by a team of shysters colluding together to disguise the true nature of the investment.