Retrospective appraisal problems

[alebrewer]

Don't disagree with the recommendation to pay the appraiser at all. Would hope that the parties executed an engagement letter, which should have spelled out the intended use and intended user(s), as well as the effective date of appraisal. Under the assumption that the appraiser was aware of all of these items, the report should have been delivered in a format that the intended user could understand (e.g. no UAD verbiage). If that is the case, as the intended user, I'd look for support within the report for how the appraiser deduced the view (and/or location) adjustment. If it is not discernable/available/explained, I'd ask for clarification if I were the intended user. Something to this effect: "Mr/Ms appraiser, I have looked for documented support of your view/location adjustment within the body of the report. Could you please either (a) direct me to the section where you discuss support for this adjustment, or (b) revise your report to include discussion of your support for this adjustment." Should you need support for your request from USPAP, S1-6(a) and S2-2(a)x(1) might be helpful (assuming it was not a restricted report).

 

[Terrel L. Shields]

If you have no confidence in the appraisal, then get a second opinion. As a trustee, you must have some reliance upon the work product. If there is any possibility of heirs fighting over the value, YOU as the trustee are responsible for the valuation. As for Realtors, if you have no confidence in them either, then I recommend you auction the property. Set a date some 60 days in advance, advertise adequately, and then the open auction provides you some legal protection regardless the price. If exposed upon the market and an open auction, then the courts are very favorable to the outcome. That was taught to me by experience and legal council on how to dispose of property. If you express no confidence in the appraisal but rely upon it anyway, you are exposing yourself to complaints from heirs.

 

[bnmappraisal]

You don’t mention how far back you are going in time which can be a significant factor, depending on the market.

Good point Restrain

 

[phoebega]

Wow, a few of these responses seem quite vicious. Since I'm not an appraiser I have no right to question an appraiser's conclusions or ethics? I disagree.

This appraisal will used for income tax, not estate tax purposes. The appraiser knew it was for income tax purposes before accepting the job. He has many years experience in the local area and I found him via the regional chapter of the Appraisal Institute -- I specifically searched for someone with retrospective appraisal experience. I had some questions for him up front, which he answered to my satisfaction, in a timely manner.

The appraisal is dated Sept 2018. The home's view is directly into a large nature preserve (live oak, vines, saw palmetto) and the neighborhood is in a quiet, secluded upscale area with no traffic noise, bad smells, power lines or anything else that might offset the value of the view. It's a very desirable neighborhood and 3 people have already approached me (via neighbors) about buying, so hoping I may be able to do a FSBO.

I haven't paid for the appraisal not because I'm a deadbeat but because that's the ONLY leverage I have to try and get answers to my questions. To the individual who implied the appraiser is a fool for not demanding payment up front-- I would never hire an appraiser who demanded payment in advance, that would mean zero leverage instead of the (apparently small) amount I now have.

If the preserve view adjustment is simply an opinion based on experience and not a calculated figure based on data, why not say that? I asked him to describe the methodology and provide supporting data, but he has not done so.

I'm not using this appraisal to set a listing price or for anything other than the intended purpose. As trustee I have a fiduciary obligation to minimize taxes to the extent I'm able, and that means questioning an appraisal if something doesn't seem right. The appraiser's delay in producing the report (HE was the one who suggested the 10 working day completion date, not me) and his continuing refusal to answer my questions have been red flags. There's barely any adjustment for the desirable location of the house and the neighborhood, yet potential buyers have been approaching me before the house has even been listed. The appraiser's opinion of value is an unusually round number, and some of the adjustments seem inconsistent among the comps when they should not be, therefore my suspicion he backed into a predetermined value. If there is simply not enough market data to determine value and all of this is an educated guess on his part, so be it. But he should be willing to disclose that to me.

Thanks to those of you who provided reasoned suggestions. I appreciate your input.

 

[Elliott]

I've never done an appraisal for an estate for Income Tax purposes. Don't want to sound vicious. Virtually all the estate work is as of a 'date of death.' Except for estates which are over $11,000,000 there are no federal inheritance tax. Estate appraisals are used to establish a new basis value which is very favorable to the heirs.

Whenever there is more than one heir there are differences of opinion on what a house is worth. Sometimes when people get upset about the new basis, I'm fond of telling them that taxes take 92% of any earned dollar, the government gets the lion share, all you can do is delay when they take it.

Pay your appraisal bill, its a deduction against the estate.

 

[DTB]

My questions of the OP are; when was the house built? The appraiser needs to go back in time to find an adjustment for the premium view and go further out in distance to find similar areas with more recent sales. Believe me, there are similar areas. There always is.

When Mother bought this place, house or just site, what premium did she pay (percentage wise) for the natural view?

3 people approaching you to buy may be looking for a bargain, beware.

 

[alebrewer]

Wow, a few of these responses seem quite vicious. Since I'm not an appraiser I have no right to question an appraiser's conclusions or ethics? I disagree.

This appraisal will used for income tax, not estate tax purposes. The appraiser knew it was for income tax purposes before accepting the job. He has many years experience in the local area and I found him via the regional chapter of the Appraisal Institute -- I specifically searched for someone with retrospective appraisal experience. I had some questions for him up front, which he answered to my satisfaction, in a timely manner.

The appraisal is dated Sept 2018. The home's view is directly into a large nature preserve (live oak, vines, saw palmetto) and the neighborhood is in a quiet, secluded upscale area with no traffic noise, bad smells, power lines or anything else that might offset the value of the view. It's a very desirable neighborhood and 3 people have already approached me (via neighbors) about buying, so hoping I may be able to do a FSBO.

I haven't paid for the appraisal not because I'm a deadbeat but because that's the ONLY leverage I have to try and get answers to my questions. To the individual who implied the appraiser is a fool for not demanding payment up front-- I would never hire an appraiser who demanded payment in advance, that would mean zero leverage instead of the (apparently small) amount I now have.

If the preserve view adjustment is simply an opinion based on experience and not a calculated figure based on data, why not say that? I asked him to describe the methodology and provide supporting data, but he has not done so.

I'm not using this appraisal to set a listing price or for anything other than the intended purpose. As trustee I have a fiduciary obligation to minimize taxes to the extent I'm able, and that means questioning an appraisal if something doesn't seem right. The appraiser's delay in producing the report (HE was the one who suggested the 10 working day completion date, not me) and his continuing refusal to answer my questions have been red flags. There's barely any adjustment for the desirable location of the house and the neighborhood, yet potential buyers have been approaching me before the house has even been listed. The appraiser's opinion of value is an unusually round number, and some of the adjustments seem inconsistent among the comps when they should not be, therefore my suspicion he backed into a predetermined value. If there is simply not enough market data to determine value and all of this is an educated guess on his part, so be it. But he should be willing to disclose that to me.

Thanks to those of you who provided reasoned suggestions. I appreciate your input.

So sorry for the rude responses. It is sad that so many appraisers are short sighted and focused on payment. As with any service, payment should be expected, but also should quality service be expected. Refreshing to see you stand your ground.

 

[Michigan CG]

................There's barely any adjustment for the desirable location of the house and the neighborhood, yet potential buyers have been approaching me before the house has even been listed. The appraiser's opinion of value is an unusually round number, and some of the adjustments seem inconsistent among the comps when they should not be, therefore my suspicion he backed into a predetermined value. If there is simply not enough market data to determine value and all of this is an educated guess on his part, so be it. But he should be willing to disclose that to me................

I think you have some good concerns here. Obviously this is a national forum so the majority don't know anything about your local market.

The location might or might not be THAT desirable. In my market there is little to no consideration for backing up to what you describe. Now if the neighborhood is exclusive with sale prices higher than other houses that are comparable because of the neighborhood that is a different situation. That higher price might not be backing up to your home but rather the neighborhood itself.

Opinion of value to an unusually round number; I am guessing that would be a number with five zeros.

As to the inconsistency of the adjustments you would have to show us, we can't rely on anything without seeing anything. I think you have the ability to screen shot part of the report with the adjustments but without any identifying information of the subject.

An appraisal report should be written to the intended user. If I am writing a report for a lender I might put in less detail. For a private party I put in more detail because they don't read but five appraisals in their lifetime, if they do read them at all.

In an earlier post you indicated you hired an AI appraiser. I belong to the AI and am a designated member and that designation cost me thousands of dollars and a lot of time to get. That being said, there are a lot of AI appraisers who are not good at what they do and there are a lot who do. The designation does not make the appraiser.

 

[J Grant]

Why I never do a private order without payment COD -

The payment was for an appraisal, not an obligation for appraiser to defend methodology afterward. It is polite for appraiser to answer a few reasonable questions but unless answering questions was agreed to as contingency for payment, withholding payment around it is despicable. Unknown quality of this report but usually AI appraiser are at least competent and report was delivered in a reasonable time frame.

.

 

[alebrewer]

The payment was for an appraisal, not an obligation for appraiser to defend methodology afterward.

So USPAP S2-2(a)-x-(1) doesn't apply if it's a 'private' appraisal (whatever that is)?