Reviewer's name withheld

[Mark Bets]

Thank you all for all of the good advice and information. I guess I didn't really explain my other concerns with the review....

Mainly it bothers me that huge negative adjustments were given on subjective lines (example: -13000 on a comparable the reviewer chose to call "good" rather than "average", with no explanation why such huge adjustments were given. No SOW was provided, no Appraiser's certification provided, basically just new numbers were put on my comparables with absolutely no recognizable methods or techniques given to support these huge negative adjustments. No Addendum to explain the adjustments and possible formulas used to adjust, nor explain anything done to arrive at a new value considerably lower than my value. Just: Here's a partial review report. He's says you're high. Whatd'ya thank of THAT?

Sheesh. How can I comment when I have no idea how the guy arrived at his adjustments?

 

[TEL2002]

Mark, you don't have to fight his adjustments...just defend yours with logic and data. Then his will automatically fall apart.

 

[Brad Ellis]

Hank,

Right on. Perhaps the single most salient thing I can tell field appraisers is this:

What you fail to tell me is often more important than what you do tell me.

As George pointed out, if I find a sale of similar size/age right near the subject, I'd sure want to know why it was not considered!

True story: I reviewed one about 4-5 years ago in which I questioned the appraiser's choice of comps since she left out 3 dead-on obvious model matches in the subdivision. Turns out 1 was REO but not apparent from the records, one was rented out to a tenant who had brought suit to fight eviction and the buyer was willing to wait it out and the third had an option to buy with their rental agreement executed 2 years before.

That appraiser made her case nicely- but then admitted, "maybe I should have discussed those in the report..?" Yep- I think so, and so did she in the end.

Brad

 

[Mister Ed]

Mark,

It sounds like the reviewer may have had the famous "adjustment list" used by real estate agents in their CMA's but using it in reverse.

Seriously, I have to agree with Mr. Lawrence's comments. Where you believe the reviewer's findings were wrong (in comparison to yours) explain in very extensive detail what you did and how you did it and where it came from. That is what I also recommend.

I review appraisals often, and I openly confess that I have seen a few where adjustments appeared to be PFA (like you described these adjustments but cannot say it and be professional). Unless I can definitely prove an argument that adjustments are just completely flakey (like $15k adjustments for a fireplace and $15k adjustments for a one car carport on a $70k house), I often go with adjustments used by the original appraiser if they seem reasonable.

If you are confident in your adjustments, then it is not really that hard... just a pain in the butt to waste the time on defending frivolous reviews.

Good luck to ya!

 

[TEL2002]

"maybe I should have discussed those in the report..?"

Brad, to some degree I have to disagree with you. I might have 20 potential comps and throw out 15 of them for a variety of reasons. I don't feel it is necessary to go through every comp I threw out & explain why. It is a summary report, not an all inclusive, everything about every house is mentioned report. If I lump all 15 into a one sentence statement about not using them, the reviewer may still come back and say why did you not use the following.... . I have notes & a work file that contains the data.

 

[Fred]

might have 20 potential comps and throw out 15 of them for a variety of reasons. I don't feel it is necessary to go through every comp I threw out & explain why. It is a summary report, not an all inclusive, everything about every house is mentioned report

I would characterize that as a common sentiment and "typical practice" even - but it sure doesn't come close to "summarizing" the scope of work. Summarizing is not synonymous with omitting.

From the intended users point of view, without at least the "summary" statistics of the 20, the correlations between attributes and price within that 20, what portion of the activity that represents, and how the appraiser decided 17 sales would get zero weight and three sales would get 100% of the weight - there is simply no way the user can "understand" (as Std 2 says). I surely can't understand and I am quite the intuitive reader of appraisal reports.

Three-sales-called-best-avaialbe or no-sales-and-naked-value-concluison - either way - from the reader's perspective, the report often says, take my word for it.

 

[xm72mhd]

I would characterize that as a common sentiment and "typical practice" even - but it sure doesn't come close to "summarizing" the scope of work. Summarizing is not synonymous with omitting.

From the intended users point of view, without at least the "summary" statistics of the 20, the correlations between attributes and price within that 20, what portion of the activity that represents, and how the appraiser decided 17 sales would get zero weight and three sales would get 100% of the weight - there is simply no way the user can "understand" (as Std 2 says). I surely can't understand and I am quite the intuitive reader of appraisal reports.

Three-sales-called-best-available or no-sales-and-naked-value-conclusion - either way - from the reader's perspective, the report often says, take my word for it.

And that of course begs the question, "What about all the rest of the "potential" comps?"

Summarizing is not synonymous with omitting.

Nor is summarizing synonymous with an exhaustive and detailed explanation. Anybody got a meaningful definition of summary? Don't give me the USPAP one. It's not meaningful, but is mashed. I think its just fine to summarize my search for comps with those I find useful and pertinent without any explanation whatsoever as to why I rejected everything else. Tell me a definition of "summary" that doesn't support that. Now, when it comes to understanding, I think that refers to what you do with the comps you choose, not the ones you didn't use.

 

[hastalavista]

Three-sales-called-best-avaialbe or no-sales-and-naked-value-concluison - either way - from the reader's perspective, the report often says, take my word for it.

This is the #1 cause of poor quality ratings for the reports I review- original value may be reasonable (within 5% of what I conclude, as a rule), but the report is so poorly written that a significant amount of independent research needs to be done to verify that value or understand how the origiinal report used its comps to conclude the value.

 

[The Warrior Monk]

Nor is summarizing synonymous with an exhaustive and detailed explanation. Anybody got a meaningful definition of summary? Don't give me the USPAP one. It's not meaningful, but is mashed. I think its just fine to summarize my search for comps with those I find useful and pertinent without any explanation whatsoever as to why I rejected everything else. Tell me a definition of "summary" that doesn't support that. Now, when it comes to understanding, I think that refers to what you do with the comps you choose, not the ones you didn't use.

I disagree with Edd and agree with Steven on this one. The client (or reviewer) is not a mind reader; explain what is done in the report. That's why they are paying you.

Here's a recent example:
I just completed an appraisal on a completely restored historic home. Real serious...all of the moldings in the home were taken off, stripped down to the wood, placed back, and repainted. This eliminated the usual chipped-paint look. All of the windows and doorways were made plumb, so all of the original doors and windows work. All the plaster was repaired...etc., etc.

When it came time for the sales analysis, I used a specific set of sales. Historic homes were used, newer ones were not, regardless of location or price.

I could have simply thrown the sales on a grid; hey, I would have known what I did...but the casual reader may not have.

So I described the home in great detail, explained the methodology for sales selection, and explained why certain sales were not used. In this particular case, I was able to do this as a class. Historic homes used; new homes not. As a result, the reader is not left in the dark about anything.
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If there is any one thing that is lacking in reports I review, it is methodology. I am left in the utter dark about why certain sales were used an others were not.

For example, in the rebuttal I received that I was PO'd about, the appraiser did not use other waterfront sales in the immediate area (plenty of them), but instead chose sales miles away outside of the village. Why? Beats me...how about a few lines of methodology for sales selection, and maybe a few lines about why specific sales on the street were not used.

Doing so would've likely eliminated the review in the first place.
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We're being paid for our expertise...give the clients something worth reading.

 

[hastalavista]

TE & Edd-

I don't think it takes a lot of effort to provide some summary; of course, the problem occurs when I think the data is self-evident but the reader/reviewer doesn't.

Case in point: I just completed an appraisal of a home located in a nice area on a busy street. Owner's estimate $810k. My value $685k. Issues were:
A. Garage converted with permits, so the house is larger than what's typical along this busy street.
B. Because of the converted garage, subject has a carport; this is not typical in the neighborhood.
C. Subject has had some nice upgrades and looks good interior/exterior.
D. Original models were around 1,050sf, 3br/1ba. Subject is now 1,440sf, 4br/1ba.

I know where the owner got his estimate: from the homes that are not physically far from his (1-2 blocks), well insulated from the noise/traffic, and were originally built as 3/4br-1.5 to 2 bath homes from 1,300 to 1,550sf. (Naturally, there is only one at $800k, the rest are $730k to $760k).

If one were to focus on GLA alone, one would conclude a higher value.
If one were to focus on Condition alone, one would conclude a higher value.
If one were to focus on location alone, one would conclude a lower value (original 1,050sf models on same street, upgraded to similar condition, sell for $650k+/-).

If a reviewer looked at the report and was not familiar with the neighborhood, she/he might conclude it warranted a higher value. Also, there was one sale with the same street name, larger- 4br/2ba, that did sell for $770k; however, that sale was in the neighboring city on a part of the street that didn't have same traffic influence and in a different neighborhood. It was not comparable.

So, to "summarize" the issues, I wrote the following:

The subject's market value is influenced by three factors:
A. The subject is located on a busy street and suffers external noise/traffic influence.
I was able to match the subject's street with two sales on the same street and one sale near a freeway with some (inferior- not similar) noise influence.
B. The subject has been significantly upgraded.
The subject's condition is above average and it has good upgrades. I was able to match this condition with one of the comps.
C. The subject has had an addition that appears to have been a result of the original garage conversion.
This creates a larger home with no garage among similar original models with a garage amenity.
I was able to bracket the subject's GLA and bracket the subject's lack of garage parking amenity.

I then discussed 2 sales I looked at but didn't use, and finally added this:

Although the subject matches homes of GLA that sell at a higher price, the subject's immediate neighborhood, original model, and street influence was a significant consideration in value. Other than the larger homes located in the City of Santa Clara, I found no homes that sold for more than $700k on XX street in the subject's San Jose area.
My final value is supported by the bracketed and unbracketed sales prices of the comps: It is valued higher than the same street sales as it is superior in GLA and condition, and is valued less than the non-same street sales due its inferior location. The valuation is consistent with the market and the comps.

The point being that now if someone reads the report, I hope they will understand my process and why what may appear to be comps worth consideration on paper are not worth consideration.
Also, I feel that by taking the explanation to this level, it does provide the reader/reviewer with a higher level of confidence that I have completed my due diligence and adds to the credibility of the report.

Obviously I'm not saying all reports need to go to this level of detail; some may need more. The point is that summarizing the process can be as easy an exercise as I completed, which took less than 10 additional minutes.