TAF and USPAP - great analysis

[Joe Flacco]

If you want to say the CA was a significant reason for the different value conclusions then that's really saying something. My assumption is that both appraisals still hinged on their respective SCs, with the CAs being dorked after the fact to fit the SC. I can't tell you how many times I've seen "site value by extraction" when what they really did was "SC - Depreciated costs = Site Value"

It's hard to prove intent. All we can actually know for a fact is usually limited to what the report does/doesn't say but which an adequately trained appraiser would have recognized as being significant to their analysis and conclusions.

One quirk about the COMPETENCY RULE that we don't often talk about is that the requirement isn't limited to simply being capable of doing the do, but also includes actually doing the do. So an appraiser can deliberately tell the lie (ETHICS RULE) and also not act competently (COMPETENCY RULE) in the same act of misconduct. But the reason for the misconduct accrues to the ethical elements, with the non-competent performance being the vehicle for committing that unethical act.

I think ethics was a much bigger issue pre-financial crisis.

I recently met someone that did appraisals between 2001-2006. So his wife was a loan officer at a mortgage broker and sending orders to the appraisal company. He got a trainee license at the appraisal company. He was doing 10 inspections per day making $700 per day ($70 per inspection) and the appraisal company had seven appraisers. So that appraiser was doing 70 appraisals per day with seven trainees with one of the trainees related to the loan officer. The mortgage brokers would pay after loans closed and he said sometimes the checks to the appraisal company would be like $100k+ and some would try to not pay.

That is like wild wild west stuff. Would be totally unbelievable today.

 

[Joe Flacco]

IMO those are some fairly obvious features. Sounds like some laziness may factor in

Who knows. I think the appraiser was incompetent.

 

[DWiley]

I can't tell you how many times I've seen "site value by extraction" when what they really did was "SC - Depreciated costs = Site Value"

Or the site value is exactly the site value assigned by the tax assessor.

Another favorite of mine is the GRM in the income approach of a 2-4 unit appraisal that is derived by dividing the value indication from the SCA by the projected rent, regardless of what the comps say the GRM should be.

 

[Joe Flacco]

Generically speaking and outside of the GSE appraisal policies:

Most similar is most similar. "Bracketing" for the purpose of bracketing or analyzing for adjustments isn't actually "most similar". I can and commonly do analyze for certain adjustment factors using a separate analysis.

If I do present a high sale or rental for purposes of disclosure or bracketing I say it that way and don't otherwise give that datapoint much weight - if any - in my value conclusions except to indicate to an upper or lower limit of value. In the same vein, I also think that the practice of presenting comps soley for the purpose of bracketing the attributes distorts the results of any averaging or sensitivity analyses that appraisers use with small datasets. That's not to say its ineffective when analyzing large datasets with a wider range of variable, just that when we're only analyzing 6 or 10 "most similar" datapoints the arbitrary inclusion of less similar can have an undue effect on the outcomes.

One other sidebite; use of one protocol doesn't prevent an appraiser from using others in the same assignment. Instead of thinking we must either choose one or the other, choosing "both" might sometimes be the better solution. When such conditions are present we sometimes perform appraisals using different approaches to value prior to reconciling for our value conclusions.

Most similar is most similar? lol You don't bracket for the purpose of bracketing. You are addressing differences that have significant impact on value.

"Most similar" is too vague and is meaningless in real world practice for anything that is a little bit complicated.

 

[djd09]

Or the site value is exactly the site value assigned by the tax assessor.

Another favorite of mine is the GRM in the income approach of a 2-4 unit appraisal that is derived by dividing the value indication from the SCA by the projected rent, regardless of what the comps say the GRM should be.

what happen to frank giving me ao lessons...who did you vote for???

 

[Joe Flacco]

Or the site value is exactly the site value assigned by the tax assessor.

Another favorite of mine is the GRM in the income approach of a 2-4 unit appraisal that is derived by dividing the value indication from the SCA by the projected rent, regardless of what the comps say the GRM should be.

The problem is panel management and appraiser engagement practices. The AMC's who mostly originate for GSE purposes engages the cheapest appraiser available. GSEs finding this practice acceptable and then complaining about bad appraisals is stupid.

 

[TerryRohrer]

I can and commonly do analyze for certain adjustment factors using a separate analysis.

In my view, this is an unrecognized, understated, overlooked practice that warrants greater focus in appraisal education and practice.

 

[Joe Flacco]

That's all good and fine. But if the land value difference between 12,000 SF lot and 8,000 SF lot is $500k, and the condition adjustment between C3 and C2/C1 is $500k, what is the most similar? Are the properties with 12,000 SF lots most similar or are the properties in the same condition most similar?


Which ones are most similar?

 

[TerryRohrer]

I think ethics was a much bigger issue pre-financial crisis.

As George Hatch indicated, you can't have an incompetent appraiser completing an assignment who isn't simultaneously violating the ethics provisions we all operate under.

And it is a fantasy to believe the appraisal mills you describe can not exist today! They are more prevalent than ever.

 

[Surf Cat]

We are talking about SCA, so throw out the cost data except possibly for new construction. I was just in an AI conference yesterday that had a couple of high-volume real estate agents discussing real estate along the California Central Coast. In Carmel, new construction SFR costs $4,500/sf for many homes. The agent said he recently sold a 2,500 sf home for $10.5M in Carmel. Santa Cruz - Monterey/Carmel real estate has been booming since the pandemic. Many wealthy people from Silicon Valley started moving in that direction. He said people see a house, fall in love with it, and are often willing to pay whatever it takes to get it (more or less).

My bold at the end of the paragraph. That right there is emotional.... the hottie wife (mistress?) pushes the remote control button in her Maserati to open the gates to drive into the approximate, $11 million private compound. "Whatever it takes", all cash purchases.....

MARs or any other super number crunching program is not going to accurately pinpoint the "most probable price", or price per square foot as they're emotional purchases. Sure, if you took all these Carmel oceanfront homes of similar size, quality of construction, views, etc., your program would cut a line straight through all the noise and give you a price per square foot, per bedroom, etc. However, I bet that scatter plot would have really wide variances.

It sounds to me from reading your posts about Mars, that it would be better as an AVM like Zillow or Redfin as opposed to a program to be utilized for a single residential dwelling.

Post an appraisal that was done with Mars and give us a look. Not a bunch of charts and graphs in a particular area, but an appraisal.