Sudden Increase Of Value From Previous Purchase

[Deleted member 128537]

One thing we forget. It is possible that a real estate agent under listed a property. I once did an appraisal on a property for an owner looking to sell. I came in at 280,000. The RE agent that was going to list it called me up and argued that I was way too high. I held firm on my opinion. It sold for 284,000. She would have listed that for 20,000 less than I recommended. If I would have appraised that property 1 year later I would have been 20,000 higher than the sale price. My explanation? Realtor under listed it.

 

[timd354]

One thing we forget. It is possible that a real estate agent under listed a property. I once did an appraisal on a property for an owner looking to sell. I came in at 280,000. The RE agent that was going to list it called me up and argued that I was way too high. I held firm on my opinion. It sold for 284,000. She would have listed that for 20,000 less than I recommended. If I would have appraised that property 1 year later I would have been 20,000 higher than the sale price. My explanation? Realtor under listed it.

True, but if a property is substantially under listed, then either one of two things should happen. Either the propertry will sell in a very short amount of time with significantly less DOM than typically priced sales in the area or (in hot markets), there will be multiple offers with the price being bid back up to market value.

 

[Deleted member 128537]

True, but if a property is substantially under listed, then either one of two things should happen. Either the propertry will sell in a very short amount of time with significantly less DOM than typically priced sales in the area or (in hot markets), there will be multiple offers with the price being bid back up to market value.

Not necessarily. Let's suppose a property is listed toward the end of the buying season when there are fewer buyers than typical. I can see at that point the property is on the market for a typical time and that there would not be multiple offers. This is very typical in Wisconsin; especially in recreational markets.

 

[timd354]

Who said the appraiser should not analyze the prior sale? Assuming appraiser analyzes prior sale, why should the appraiser be put in the position of being defensive that a subject sold at a higher or lower price 9 months ago, if all the comps and listings used support the subject effective date opinion of market value?

I sold RE for over 5 years in 2 different states and prices can jump around for no particular reason that neatly fits into an analysis.

Come on, this thread is not about some small jumping around in pricing and truthfully nobody is worried about relatively small variations in pricing due to the imperfect nature of the market. What we are talking about here are appraisal reports which show a significant increase in the appraised value over a recent prior sale of the subject property for no apparent reason (appraisal reports states stable market, no renovations, etc.) in which the appraiser does not bother to analyze or provide an explanation for the increase in value. When that happens, the lender has every right "to put the appraiser on the defensive" and ask the appraiser to provide a narrative explanation for the apparent increase in value in a stable/flat market. Truthfully, a lender should not have to ask for such an explanation under those circumstances as a competent appraiser would have already addressed the issue in the appraisal narrative...I mean this is really residential appraising 101 and I cannot believe that anyone would argue with that or make excuses for such poor appraisal practice.

 

[timd354]

Not necessarily. Let's suppose a property is listed toward the end of the buying season when there are fewer buyers than typical. I can see at that point the property is on the market for a typical time and that there would not be multiple offers. This is very typical in Wisconsin; especially in recreational markets.

There is no doubt that seasonality comes into play in many markets and that in these markets,the season affects the number of sales, sale prices and DOM. However, if a property remains on the market for a typical DOM, taking into account everything including seasonal factors and then sells at a typical sale price/list price ratio for that market and that time of year, then I would be inclined to conclude that the listing price was not under market.

 

[huntercharlie]

True, but if a property is substantially under listed, then either one of two things should happen. Either the propertry will sell in a very short amount of time with significantly less DOM than typically priced sales in the area or (in hot markets), there will be multiple offers with the price being bid back up to market value.

Or, the listing agent has a buyer in their back pocket and slips that offer in without submitting those other offers to the seller. This was not unusual during the short sale frenzy but I still see it happening occasionally today.

 

[J Grant]

Yes, in answer to patronizing lecture about appraisal 101 everybody agrees appraisers should discuss a significant difference which results from their analysis of a prior sale of subject, and should provide their comments proactively.

But to be clear, USPAP states to analyze a prior sale of subject, it does not require providing a comparison of a prior sale "value" benchmark because that becomes an additional appraisal assignment.

Appraisers who are not careful can end up making retrospective appraisal opinions about a prior sale such as the prior sale was below or above market value.

 

[Mike Kennedy]

Come on, this thread is not about some small jumping around in pricing and truthfully nobody is worried about relatively small variations in pricing due to the imperfect nature of the market. What we are talking about here are appraisal reports which show a significant increase in the appraised value over a recent prior sale of the subject property for no apparent reason (appraisal reports states stable market, no renovations, etc.) in which the appraiser does not bother to analyze or provide an explanation for the increase in value. When that happens, the lender has every right "to put the appraiser on the defensive" and ask the appraiser to provide a narrative explanation for the apparent increase in value in a stable/flat market. Truthfully, a lender should not have to ask for such an explanation under those circumstances as a competent appraiser would have already addressed the issue in the appraisal narrative...I mean this is really residential appraising 101 and I cannot believe that anyone would argue with that or make excuses for such poor appraisal practice.

Excellent opinion.

 

[timd354]

Or, the listing agent has a buyer in their back pocket and slips that offer in without submitting those other offers to the seller. This was not unusual during the short sale frenzy but I still see it happening occasionally today.

Yes, unfortunately there are always a few agents who engage in unethical behavior

 

[timd354]

Yes, in answer to patronizing lecture about appraisal 101 everybody agrees appraisers should discuss a significant difference which results from their analysis of a prior sale of subject, and should provide their comments proactively. Apparently not everybody believes this otherwise it would always be done and often it is not and apparently was not done by the OP.

But to be clear, USPAP states to analyze a prior sale of subject, it does not require providing a comparison of a prior sale "value" benchmark because that becomes an additional appraisal assignment. Bull. Providing an explanation of why the value of the subject property apparently significantly increased since a prior recent sale for a significantly lower value is not an additional assignment, but is just good appraisal practice and actually rather easy to if the appraiser has actually bothered to analyze the prior sale as required by USPAP.

Appraisers who are not careful can end up making retrospective appraisal opinions about a prior sale such as the prior sale was below or above market value.

By the way, if you find my comments to be a "patronizing lecture" that's just too bad as the excuses you keep making for poor appraisal practice are ludicrous.