Reviewer's opinion of value

[hastalavista]

This is an excellent question.

Up to now, all of my review clients use a variance rule; usually somewhere between 3-5%.

Except, now, I have a new client that has been burned a number of times; they loan 2nds and use the primary lender's appraisal that was completed for the 1st TD.
I tried to steer the client toward a variance, but the client was adamant; either agree or provide your own value.

So, what I do is when I conclude my own valuation, if the original report is within my adjusted range, I will usually conclude it is reasonable and acceptable.

There's always an exception: If the adjusted range is wide, and the original report's value is at the top, and I conclude that a value toward the mid/lower range is the accurate value (and the difference of the original vs. mine is significant), then I'll provide my lower value.

 

[CANative]

I agree with Denis.

What I'm finding recently is reports which weight the top end of the range and have used older comps for the most part. The original apprasers are not taking current market conditions (flat, slow, high inventories of unsold homes, price reductions, active listings, etc.) into consideration. So, although the sales used in the report are not improper, per se, they do not represent current conditions.

The review process is getting harder and harder. It's difficult to explain a disagreement with a value opinion where comp selection and adjustments are not necessarily the biggest issue.

 

[Fred]

Geroge

Okay, I'll bite. If "agree" and "disagree" were not among the options in a review, what would we be using instead? "Supported" vs "Unsupported", perhaps?

No. While the last two can be used in meaningful conclusions, they do not substitute. You ought to have enough seasoning and sensibility to recognize that agree/disagree is not meaningful or accurate without being beaten over the head.

Just on a superficial level, it’s a black and white explanation of a result that of a process of analyzing shades of gray on several dimensions (a research-based point estimate within a range of error that has an implied level of confidence). Even in the practical examples given by Denis, for example, the client is redefining the word “agree” to within given range of error – because it’s literal definition is not meaningful as part of a review result.

Greg

The review process is getting harder and harder. It's difficult to explain a disagreement with a value opinion where comp selection and adjustments are not necessarily the biggest issue.

Is it or is just that a rising tide lifts all boats? There is no doubt that a consistently rising markets will cover a multitude of sins in the mortgage racket. Conversely, the lowering tide exposes and creates problems.

Part of it is that review is by its nature more complex than appraisal. Review has more dimensions. Simply adding another person to a small group always greatly increases the complexity of communication. Isn’t a hearing or trial that results from a value dispute a review process?

Part of it is practical. A lot of us have argued for years that the standard mortage appraisal report is a woefully inadequate for supporting the intended users decisions – yo, here is a single number in an truncated and unintelligible analysis, go for it.

 

[CANative]

Is it or is just that a rising tide lifts all boats? There is no doubt that a consistently rising markets will cover a multitude of sins in the mortgage racket. Conversely, the lowering tide exposes and creates problems.

Great analogy (or metaphor or similie.)

 

[George Hatch]

Even in the practical examples given by Denis, for example, the client is redefining the word “agree” to within given range of error – because it’s literal definition is not meaningful as part of a review result.

I agree, and this is exactly what I'm talking about. You are perhaps the biggest proponent on this board for the precise use of language. Our reports are most correctly understood and our performance can most fairly be judged when we use terms that will most correctly communicate what it is we are doing.

If I am using a narrative format for my review reports I can craft my verbiage to include the context of my client's "acceptable range" as well as make the distinction between my opinion as a reviewer of what a reasonable range is vs. my opinion as an appraiser of what I think the point value is. The latter being a subset of the former; it doesn't rise to the level of being critical of a reasonable value opinion.

However, with these damn forms and Fannie's clumsy and unqualified black/white distinctions we again come back to where people can say that reviewers commonly move their point value opinions around to fit the appraised value.

I think that if the literal definition would be more informative then that's what we should we be using.

 

[CANative]

However, with these damn forms

It almost "feels" like riding a bycycle with training wheels. You can move in the general direction you need to go but there is no subtlety.

 

[joe huffman]

If you agree/disagree or whatever you want to call it, when you question value, you are outside a review by Standard 3 and are appraising to Standard 1....

 

[George Hatch]

"Agree/disagree" is definitely in reference to the value of the property, so to that extent we are appraising and are firmly in SR1 territory.

However, without any additional explanation, the average reader would attribute "agree/disagree" as also pertaining to the quality of the workproduct, which also puts us in into SR3 territory.

If the conflict were unavoidable then I'd just go with it, but this is a problem that is avoidable. IMO.

 

[CANative]

I'm trying to figure whether to agree or disagree with the value opinion on the report I'm reviewing now. Refinance, not sale.

Big house on 14 flat acres in the dry interior and most remote area in my rural county. Newbie appraiser from the next county north. Very difficult assignment, no comps for many miles and certainly nothing similar has sold recently.

He used 3 sales (one sale was 85 miles away in an oceanside community) in his county (obvioously doesn't have MLS access to my county)

Sales prices: $650,000, $700,000, $900,000
Adjusted prices: $680,730, $699,600, $883,600
Cost approach: $729,811

Opinion of value: $754,300

Where the heck did that number come from and how can he be so precise?

 

[Fred]

George

I agree, and this is exactly what I'm talking about. You are perhaps the biggest proponent on this board for the precise use of language.

Use of the word “profession” or “professional” demands precision of language because is it goes hand-in-hand with command of ideas and ability to relate.

You may recall my posts that the appraisal dictionary includes three definitions of depreciation, that appraisers don’t consistently recognize this, that they use sentences that start out referring one type of depreciation and end up talking about another and in the process of making these incoherent statements confuse and annoy each other. I remember taking a couple hundred hours of course in a few months right before the licensing exam. This included my first “principles” class. The instructor put a slide on the overhead that depreciation is a loss of value from any cause. The next slide was that land doesn’t depreciate. It’s not getting any better. And if you mean to say the new form is a step backward, I agree.

I'm trying to figure whether to agree or disagree…
Sales prices: $650,000, $700,000, $900,000
Adjusted prices: $680,730, $699,600, $883,600
Cost approach: $729,811
Opinion of value: $754,300
Where the heck did that number come from and how can he be so precise?

Why do some of you get irked over un-rounded numbers? That’s 754 within a range of 680 to 884. That’s precise? Would it be less precise if he openly concluded 750 within a highly probable range of 730 to 770 – based on the same adjusted values?

I don’t have any trouble understanding the results. As to where it came from, it looks to me like an equally weighted statistical center of the three raw AND adjusted prices. But I don’t have a clue what you would be agreeing or disagreeing with. Maybe you should agree with 750.