ROV - "add comments why you didn't hit the sales price".

[Sadie]

I have started to see sales with long rent back periods, months long. These are coming in high which is directly related to the rent back.

 

[Fernando]

You know I'm getting ticked off with these purchase appraisals. Again, this morning, I called the List Agent to schedule an appointment. I asked her some basic questions about the unit if it was updated, needed repairs, etc. She said no, it was not updated, and no repairs are required, which the MLS photos confirm to be true.

Then she goes on about the spectacular view of the condo unit. And I would agree that this unit has one of the better views in the building. And it is the prime driver of value in the building, as you can see from the screenshot below. She says she would be stunned if the unit did not appraise at contract price or above.

Well, the unit is listed for 519K and is under contract for 520K. After doing my analysis, there is no way this condo is appraising for more than 480-490K. I am starting to think that Realtors, because of the severe lack of inventory, have gotten together and said, let's go for it, try, and get the highest price for your client.

I would advise appraisers to do some deep analysis if you are about to kill a deal. This market is crazy and will eat you up alive if you don't.

View attachment 53972

Views are difficult to adjust and very subjective. Some people willing to pay for good views. I love views personally and would pay a premium.
You may want to look at past history of subject and compare with other sales at that time to see how much of premium was paid.

 

[Chandler]

$835,000 for a 1475 sf house. Just another fine reason everybody is leaving CA.

If everybody was leaving CA, the contract price for a 1475 sf home wouldn't be $835,000

 

[Fernando]

I got an order for 1475 sf house and comps are in $2,000,000 range.
I raised my appraisal fee and waiting to see if it will be accepted.

 

[residentialguy]

Direct from a recent report I completed (some info redacted for confidentiality):
"Note: Subject listed 04/09/2021 through ********* for $879,000 (also current list price). Subject is pending contract for $884,000. This is an arms length transaction with conventional financing and no unusual circumstances. At this time, the subject's purchase price is considered above market value based on the closed, comparable sales available. Properties selling at or above the subject's contract price have been recently significantly renovated/remodeled, are significantly larger in GLA, located on waterfront or a variation of the three factors."

Why did they pay over mv?

 

[J Grant]

Direct from a recent report I completed (some info redacted for confidentiality):
"Note: Subject listed 04/09/2021 through ********* for $879,000 (also current list price). Subject is pending contract for $884,000. This is an arms length transaction with conventional financing and no unusual circumstances. At this time, the subject's purchase price is considered above market value based on the closed, comparable sales available. Properties selling at or above the subject's contract price have been recently significantly renovated/remodeled, are significantly larger in GLA, located on waterfront or a variation of the three factors."

That is a GREAT comment ! Similar to what I try to convey, but written better. I'd like to make a couple of suggestions though.

" purchase price is considered above market value"...change to "purchase price is above the appraisal opinion of market value"- MV is our opinion for the subject ,rather than an external benchmark

I also might add comments wrt lower price sales wrt relative to the contract price . Because though all our client cares about is why our OMV was below the SC price, someone reviewing the appraisal later might ask why our opinion of value was so high, if they pull up lower price sales. Therefore I reference both why higher $ and lower $ sales were not used.

"The appraiser reviewed additional sales to the comps used on the grid. Properties selling at or above the subject's contract price have been recently significantly renovated/remodeled, are significantly larger in GLA, located on waterfront or a variation of the three factors. Properties selling in a lower range than the contract price were found to be typically older, smaller, or in an inferior appeal subdivision"

 

[J Grant]

Why did they pay over mv?

WHO CARES ?

Buyers are allowed to pay whatever they want. They pay what they decide before we are called in to appraise. So we can't ask why they paid over MV, since MV is our opinion of the property, and they had no idea of that opinion when they negotiated price.

I was being a bit sarcastic when I wrote who cares...but the point is, we are not detectives engaged to find out why a buyer paid what they did. We are engaged to develop our opinion of market value. We can analyze a contract , but relevant as did contract contain atypical terms/terms affecting price. We are not lawyers and we are not forensic investigators into a past price negotiation we had no part in.

While it is informative for a client to know a reason why a buyer paid what they did, such as a concession, or a bidding war, or non AL terms etc, sometimes there is no clear reason. which is why in our comment, best is to reinforce why our OMV is supported, and that their CS price could simply reflect individual negotiation or market conditions.

The reason why these folks paid X and their motives for a CS price is really not that important , because whatever the motivations of an individual buyer, the appraisal opinion of MV derives from the assumed "sale" between the "buyer and seller" as typically motivated, at terms defined, in the MV definition. (of course we consider the CS price, to head off the accusation about ignoring it )

 

[djd09]

WHO CARES ?

Buyers are allowed to pay whatever they want. They pay what they decide before we are called in to appraise. So we can't ask why they paid over MV, since MV is our opinion of the property, and they had no idea of that opinion when they negotiated price.

I was being a bit sarcastic when I wrote who cares...but the point is, we are not detectives engaged to find out why a buyer paid what they did. We are engaged to develop our opinion of market value. We can analyze a contract , but relevant as did contract contain atypical terms/terms affecting price. We are not lawyers and we are not forensic investigators into a past price negotiation we had no part in.

While it is informative for a client to know a reason why a buyer paid what they did, such as a concession, or a bidding war, or non AL terms etc, sometimes there is no clear reason. which is why in our comment, best is to reinforce why our OMV is supported, and that their CS price could simply reflect individual negotiation or market conditions.

The reason why these folks paid X and their motives for a CS price is really not that important , because whatever the motivations of an individual buyer, the appraisal opinion of MV derives from the assumed "sale" between the "buyer and seller" as typically motivated, at terms defined, in the MV definition. (of course we consider the CS price, to head off the accusation about ignoring it )

come in too low and you are a racist, too high and you are a number hitter. which one are you?

 

[J Grant]

Actually I want to support the SC Price if it's adequately supported and at the same time I want the reader and user to know that the data and analysis did or did not support it. In the "reverse" lets flip it over and pretend the SC Price was $690,000 and my adjusted range of comparables ranged between a low of $680,000 and a high of $700,000. My reconciliation probably would have read something like **** The SC Price falls within the range of value "hence" the SC Price is considered market value. I want the reader and user to stay in the same lanes as me and they think in terms of what we call the contract price and what they call the sales price.

In A ROV my best line of defense if the ROV is not warranted is to ask for comparables that support their Sales Price. If they give me some comps that maybe I had missed or over-looked then I am going to adjust them and see if they help my value fall within the range of value. If so I am open to a higher value BUT usually they are using Gross Sales Prices and not ones that had been adjusted and sometimes ones that actually lower the value after adjusted.

The word adequately supports- removes preciseness or the implication the appraisers final opinion of value is the only one that could be correct and it's good enough. This is also used in in defense of values in reviews or in litigation. The appraiser wants to appear to be not overly heavy-handed or believing his value is the only possible value. That was advice years ago in a lawsuit where I was defending a value. The attorney told me to never get myself into a corner-defending a single point of value --Especially if that Point of Value was the ones the buyer-seller and lender all liked : ) LMAO

I agree adequately support removes preciseness.

But it should be adequately supports our opinion of market value ( not adequately supports the Sales contract )

Problem child :" The SC Price falls within the range of value "hence" the SC Price is considered market value. " ( the problem has nothing to do with precision )

If there was no contract, wrt a divorce or refinance, what would I say? Something like " the adjusted range is X-Y, more consideration placed on Comps 1 and 2 which are more similar to the subject , with comps 3 and 4 supporting. " I say the SAME THING when it is a purchase appraisal. ( any relationship of my OMV to a SC price can be made in additional comments ). But we are not appraising the SC in a purchase, we are still appraising the subject. Thus, to say the SC fell within the adjusted range, or the SC price is considered market value.... makes it sound like we appraised the Sales contract /

As far as litigation, that seems to be some kind of bogey man people trot out, when in reality most appraisers never get into litigation ( unless they specialize in it). Most appraisers if they are unfortunate enough to end up in litigation over a report have other problems than worrying about their reconciliation statement. WRT an appraiser believing theirs is the only possible value, nonsense, since the appraisal makes numerous statements and certs limiting the value opinion for one client /intended users and one intended use on one eff date. Everyone else is free to develop their own opinions of value, how is our appraisal stopping them ...

 

[Tom D]

But we are not appraising the SC in a purchase, we are still appraising the subject. Thus, to say the SC fell within the adjusted range, or the SC price is considered market value.... makes it sound like we appraised the Sales contract /

just a thought. you have brought a very interesting point of contradiction. the sc price is not a market value, it is an offer of value. so the standard comment that we may have been sharing maybe needs to be changed to
The subject's current contract offer price of $110,900 falls within the above range and can therefore be considered to be a reasonable expression of being 'Market Value as defined'.
a couple of different wordings just changed the thought that we appraised the sales contract.
sc price only becomes market value after settlement, yes.