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Systemic Practices in our Profession

jay trotta

Elite Member
Joined
Feb 8, 2004
Professional Status
Certified Residential Appraiser
State
Connecticut
I bracket everything that needs bracketing, i.e. GLA, View, Pool, Lot Size, Condition, Year built, etc, so I don't have across the board adjs. But I don't go searching by price or outside the competing area. I try to make a sandwich with my comps, and have my subject right in the middle. Then I can reconcile if the subject is the mayonnaise on the bottom of the range, or the tomato on the top.

You must luv samiches
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
This is a methodology that has been pushed by Reviewers and Underwriters hard for the last few years and the appraisers no that if they dont bracket the Un-adjusted sale's prices,
Pavlovian responses are the result of lenders conditioning the appraiser to respond reflexively to certain stimuli...typically the punishment known as the "stip". They want it, they eventually train the appraiser to give it to them. It's a total disconnect between the valuation and the form of valuation. "It must be right, it is bracketed."

I am aghast at the large number of appraisers who use a percentage of the GLA $/SF or $ RCN as a " size adjustment", and I see a tendency of appraisers to use sales that are close to the value they anticipate, and then regardless the size of the dwelling, use a very low $/SF adjustment. Of course, that works. DUH. Never mind it is wrong, wrong, wrong. Likewise, I see age adjustments that are inscrutable as to their source. And to fill in the gaps we have the famous fireplace, granite countertop, crown molding adjustments. Never mind too, that every outbuilding or pool is exactly $5,000 or $10,000 adjustments and basements are 50% of the GLA adjustment....
 

glenn walker

Elite Member
Joined
Oct 11, 2006
Professional Status
Certified Residential Appraiser
State
California
I systematically bracket living area to avoid having to provide the 'additional comp' just to satisfy the anticipated stip (usually it becomes the 4th comp or a listing). Rarely, I get called for not bracketing sales price around my market value and then I have to explain why I couldn't.

When you find appraisers are bracketing at the top of the market, what do you do? Do you tend still to agree with their value or select comparables which are more appropriate that indicate a lower value?
I do not focus on gross Sales Prices when doing reviews. My focus is on the appraisers "adjusted values" and his reconciliation, and their final OMV should preferably fall within their adjusted range. If his final OMV is above or below the "adjusted" range, then I want to know why ? Hopefully he/she explained this in their reconciliation.

Unfortunately I find that at least 50% or more of the reviews we complete, the appraisers do not explain their reconciliation process or how or why they arrived at their final OMV. Of course if its a purchase they have a SC to target and 90% of the time that is their OMV. On refinances some of our "dunderheads " used to wander around in a fog and had no idea how to arrive at a number.

First Stip To Appraiser:
Please See Post #12 For Bigger Banks-adjustment methods. Also Please provide us with at minimum one comparable that sold at a higher price than the SC price or your final OMV. We have also forwarded you our bracket guidelines which had been prepared by our top team reviewers. Welcome on board and lets all get ready to bracket our way into en-exciting new career.
 

ZZGAMAZZ

Senior Member
Joined
Jul 23, 2007
Professional Status
Certified Residential Appraiser
State
California
I have been completing significant amount of Review Work since the Covid came into play. I do this because it simply is the best way for me to avoid Contact with People I don't know. It does not matter what people tell you, they are all liars or simply won't admit they are bending the Contact limitations. I am not willing to gamble.

I have observed a common pattern in comparable selection; Bracketing of Sale Price at the top of the Grid. In practice/theory its not a bad idea, as long as your actually bracketing Physical Characteristics/Economic Attributes. Twice now this month and one other a few months ago the Appraisers have used that method in their appraisals. The Result is two have over-valued the MV(not significantly). The third one created a lot of unnecessary work for himself., but the MV was good.

So I dug up an old article on this topic. https://appraisaltoday.com/2016/07/21/bracketing-and-USPAP/ This explains it very well.

What I can not understand; Who is teaching them this, or is it the Phone Monkey's using it either on their own or is it some Client desire or demand. It doesn't really matter who is pushing this nonsense. Its just showing up in Appraisal Reports.

I am just blowing off some frustration. This issue and others supports my position that our pre-licensing education/experience requirements has some fairly serious flaws. This also goes in part to Appraiser Independence! It is being compromised.

I feel like I am watching the movie 'Dumb and Dumber' over and over.
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One only needs to add an additional sold comparable that sold much above market, disclosing in the narrative that it is virtually meaningless and given little if any weight--without literally describing the rationale, per se--because doing so mitigates the stipulation that the unadjusted value range was exceeded, allowing one to indicate that "the Opinion of Value was obtained from within the unadjusted as well as the adjusted value ranges." It stinks that one would need to do so, but it works because the automated review master doesn't appear to communicate effectively with the SCA narrative.

HASHTAG . . . #creatingeffectiveappraisaltemplate
 

ZZGAMAZZ

Senior Member
Joined
Jul 23, 2007
Professional Status
Certified Residential Appraiser
State
California
I bracket everything that needs bracketing, i.e. GLA, View, Pool, Lot Size, Condition, Year built, etc, so I don't have across the board adjs. But I don't go searching by price or outside the competing area. I try to make a sandwich with my comps, and have my subject right in the middle. Then I can reconcile if the subject is the mayonnaise on the bottom of the range, or the tomato on the top.
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Quick (although kinda snarky) questions regarding SCA bracketing in a current assignment:

Interior access to the attached garage is via one of the subject's 3 bedrooms. Obviously I can't find a comp with a similar functional issue. Consequently would you agree that across-the-board adjustments are warranted in the SCA, although I'm unsure of the amount of the adjustment, if any;

Same subject has a leased solar system; and I'm not sure how to adjust for a comp with an owned solar system.
 

Mark K

Senior Member
Joined
Jan 27, 2004
Professional Status
Certified Residential Appraiser
State
Indiana
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Interior access to the attached garage is via one of the subject's 3 bedrooms. Obviously I can't find a comp with a similar functional issue. Consequently would you agree that across-the-board adjustments are warranted in the SCA, although I'm unsure of the amount of the adjustment, if any;

No, I would not make an across the board adjustment. I'd reconcile to the lower end of the SCA and explain that its due to this issue.

This atypical garage access may not be as big of a problem to the typical buyer as it is to the typical appraiser that often sees stigma or functional problems that buyers don't.
 

glenn walker

Elite Member
Joined
Oct 11, 2006
Professional Status
Certified Residential Appraiser
State
California
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One only needs to add an additional sold comparable that sold much above market, disclosing in the narrative that it is virtually meaningless and given little if any weight--without literally describing the rationale, per se--because doing so mitigates the stipulation that the unadjusted value range was exceeded, allowing one to indicate that "the Opinion of Value was obtained from within the unadjusted as well as the adjusted value ranges." It stinks that one would need to do so, but it works because the automated review master doesn't appear to communicate effectively with the SCA narrative.

HASHTAG . . . #creatingeffectiveappraisaltemplate
-----------------------
Quick (although kinda snarky) questions regarding SCA bracketing in a current assignment:

Interior access to the attached garage is via one of the subject's 3 bedrooms. Obviously I can't find a comp with a similar functional issue. Consequently would you agree that across-the-board adjustments are warranted in the SCA, although I'm unsure of the amount of the adjustment, if any;

Same subject has a leased solar system; and I'm not sure how to adjust for a comp with an owned solar system.
My experience is Functional Issues like whats described rarely have any measurable effect on values, and extracting an-adjustment is almost impossible. the biggest problem appraisers have is first they bring attention to thighs that once described the reviewer is forced to ask the appraiser about what effect it has
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Quick (although kinda snarky) questions regarding SCA bracketing in a current assignment:

Interior access to the attached garage is via one of the subject's 3 bedrooms. Obviously I can't find a comp with a similar functional issue. Consequently would you agree that across-the-board adjustments are warranted in the SCA, although I'm unsure of the amount of the adjustment, if any;

Same subject has a leased solar system; and I'm not sure how to adjust for a comp with an owned solar system.
My experience is Functional Obsolescence, regarding floor plans and issues like described above are rarely measurable in the real market and no I would not make any across the board adjustments, because it would simply be some number you made up. I let the market participants tell me what is going on. On a Refinance I know the owner lives in it and apparently has no issues and on a sale I look at the list price, sales price and how many days on market. If it sold quickly at or near sales price I know the new buyer loves his/her new weird floor plan and so why should I start yucking around with trying to arrive at some magical adjustment. Having been a Realtor for over 30 years I learned a long time ago , especially when dealing with older homes its like the old automotive sales guys used to say , there is an-*** for every seat, and its the same with houses. So I dont make "WAG'S or as we called them at the bank "wild *** guesses" and for any reviewer to think the appraiser is going to find a similar comp thats plain unreasonable, because Realtors do not place comments in their listings that their listing has a weird floor plan or a FO issue, therefore how would I as the appraiser ever know which one did and which one didn't. As far as your final opinion of market value just because it has a minor FO issue does not mean its automatically at the lower end of the range of adjusted comparables, your Subjects over all physical condition, location, size etc is what carries the most weight. My guess is this is on an-older home and most were built with no access to the garage from inside the house and so the owners placed a door in the bedroom. If its an-issue to a new owner he/she can have the door removed and seal it up and be done.

AS FAR as Solar-- The Subjects Leased System is the equivalent of having no solar system. I would insert- Leased in the Grid, then you are not required to even try and find a comp with an-owned system. If you do have a comp with an-owned system, I would just make whatever your usual adjustment is. In SO CA the typical appraiser uses $10K to $20K or about half cost new, kinda like a pool, seems like almost the same number. is it supported "NO" the truth is in most cases its not even measurable, especially in high cost areas of California, in my area the median price is $500K and a 2% to 3% seems to be realistic.
 
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NC Appraising

Senior Member
Joined
Apr 28, 2006
Professional Status
Certified Residential Appraiser
State
North Carolina
I have been completing significant amount of Review Work since the Covid came into play. I do this because it simply is the best way for me to avoid Contact with People I don't know. It does not matter what people tell you, they are all liars or simply won't admit they are bending the Contact limitations. I am not willing to gamble.

I have observed a common pattern in comparable selection; Bracketing of Sale Price at the top of the Grid. In practice/theory its not a bad idea, as long as your actually bracketing Physical Characteristics/Economic Attributes. Twice now this month and one other a few months ago the Appraisers have used that method in their appraisals. The Result is two have over-valued the MV(not significantly). The third one created a lot of unnecessary work for himself., but the MV was good.

So I dug up an old article on this topic. https://appraisaltoday.com/2016/07/21/bracketing-and-USPAP/ This explains it very well.

What I can not understand; Who is teaching them this, or is it the Phone Monkey's using it either on their own or is it some Client desire or demand. It doesn't really matter who is pushing this nonsense. Its just showing up in Appraisal Reports.

I am just blowing off some frustration. This issue and others supports my position that our pre-licensing education/experience requirements has some fairly serious flaws. This also goes in part to Appraiser Independence! It is being compromised.

I feel like I am watching the movie 'Dumb and Dumber' over and over.

I just did it. I have been doing it for the past four months. Yes, I do it to avoid UW and AMC rejections...I have to pick my battles.

The subjects neighborhood has been rapidly increasing within the past four months, and going up so fast within the past two months that I have been declining all purchase appraisals and only doing refi's. I have no idea how appraisers are hitting the contract price in this market. This is coming from someone who has been making rapid market appreciation adjustments. Just because the subject has the highest contract price in the PUD and is above the last selling home within the PUD does not mean that the ceiling has to be on that sale. I went outside of the PUD for a closed sale within the past 30 day's and to bracket the unadjusted sale price of the comparable sales. **I always note that in my report...I only used this sale for bracketing purposes and no weight was placed on this sale.

Bracketing can be a very useful tool, but how lenders want us to apply it is wrong.....either to bracket one feature, the unadjusted sale prices of the comps or to prevent across the board adjustments. Although there are other silly things to comment on...I could write a book on them.

Ranking analysis comes to mind when bracketing. One sale that is overall superior and one sale that is overall inferior (not just one feature). Good to use when no truly comparable sales are available or for complex properties.

I am speaking of cookie cutter homes that are selling $10-15K above the last home that sold within the same PUD or subdivision. Most have multiple offers? So what to do?

See the attached graph...I call it the COVID curve!!! I would be very suspicious when reviewing a appraisal and the appraiser hit the contract price and marked stable and made no market condition adjustments. Most are using superior sales with the PUD and not making condition adjustments or are going outside of the PUD and using superior sales. Although in this market, I have no problem going outside of the subjects PUD and using the most recently closed sales...that is all else being equal. I REPORT THE MARKET, NOT MAKE IT. If the lender wants to lend money at the height of the market, that is their problem. I wouldn't. Just like the stock market, buy low, sell high...let the suckers taken the risk...and future loss.

1602462260869.png
 
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glenn walker

Elite Member
Joined
Oct 11, 2006
Professional Status
Certified Residential Appraiser
State
California
What kind of sales prices are we talking about ? If you look at your graph the parabolic move upward began in 2020 , and interest rates falling to historic low. Also if you market is like mine there is very little inventory , so you 20 buyers chasing 5 or 6 properties within that development. This is what happens when buyer are no longer purchasing real estate but a monthly payment. BUT as the reviewer, my job is to be a referee, and as long as the appraisers OMV is adequately supported , I do not get my personal opinions about the market involved. Imagine if this time next year we are at a 1% 30 year mortgage, your green line will go up another 10% to 20% : ) LOL
 

Fernando

Senior Member
Joined
Nov 7, 2016
Professional Status
Certified Residential Appraiser
State
California
I'm from old school prior to USPAP and I admit I still do what I've been doing so when I get my comps, I don't think about bracketing.
I get comps which I feel are most suitable to consider and work on those. Only after the adjustments are done, I look at the sales price and realize they're not bracketed as bean counters would like.
I don't care, I submit it and see if reviewers have a problem.
 
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