The word "Average" in the improvements section - possible bias?

[Tom D]

my computer is systemic bad. one nice day why is it saying so many bad things on my report. it keeps asking me if i like that. a nice twilight zone episode. on a quiet mon afternoon a man is typing a report. bad words keep appearing, but the delete key refuses to work. he tries to correct it when done, but the computer emails it to fannie and the state. welcone to the twilight zone.

 

[RCA]

There are so many problems with traditional appraisal related to these subjective adjustments. I always say the GSEs are idiots for the standards or guidelines they provide. Well, yes, they are called "guidelines," but they are enforced as standards, so they are a standard, although poorly written standards. No doubt the GSEs will say they are dealing with idiots - so what?

1. All adjustments are modifications to a comparable's net sale price for some feature to modify that feature's impact on the comparable's market value to bring it in line with the subject's market value as far as such adjustments are recommended by a good regression model, so far, so good.

2. However, some features do not enter the regression and are left to the appraiser's discretion to specify. In this latter case, there is no objective constraint to let the appraiser know that he has gone too low or too high on some adjustment. Failure One.

3. In traditional appraisals, the value contributions behind the adjustments must always equal the net sale price when summed up. However, this constraint is invariably broken since traditional appraisers don't use value contributions to calculate adjustments. Failure Two.

4. It may sometimes be necessary to introduce an adjustment for super-adequacy (market value below in-use or cost value or possibly what you would expect the market value to be in other neighborhoods), or a below-market sale by an incompetent agent and poorly advised seller, or an above-market sale to an unknowing buyer. But how can this adjustment be objectively calculated to fulfill the previous constraints? Failure Three.

5. In many situations, Your comps will all be in the same condition or quality class according to Fannie Mae or Freddie Mac - but it is evident the impact on market value of the differences in condition and quality between comparable properties is quite significant so that the condition and class ratings are useless for valuation purposes. Of course, you can create a separate condition and quality system for that purpose, but it is not a standard, so the results from two independent appraisals of a given property on a given day are difficult or impossible to compare. The only purpose of the GSE condition/quality rating systems is ONLY for their internal use. At the same time, for the appraiser, it is generally nothing more than a comment that has little, if any, impact on the final value conclusion. Failure Four.

 

[J Grant]

It seems the argument about red flagging good, avg, higher, lower, etc is that they are subjective rather than biased, though I imagine someone could also claim using X word shows bias. The GSEs are not banning those words; they are saying there should be a context for using them- they had never needed a context for common enlgish langaure words for decades, but but here we are.

So perhaps the answer for appraisers is to include a context statement, such as,

The context for terminology used in the appraisal:

Since the market value opinion is based primarily on the sales comparison approach, certain words are used to describe the comparative features of the comparables as well as for other factors that are present in the market and can affect value.. Their use is not subjective, but rather describes market acceptance or resistance and commensurate market exposure and prices paid by participants.,

Examples of commonly used words: Good indicates a well-maintained or market-accepted feature; average indicates an adequately maintained or market-accepted feature; fair indicates deferred maintenance, adverse component, or market resistance; and very good or excellent indicates additional features, maintenance, and positive market acceptance. Reporting the analysis of the market in an appraisal requires the use of comparative words, and their use in the report is neither subjective nor biased. When comparing properties or their components to each other, superior, inferior, equivalent, higher than, or lower than might used in this context.

 

[Zoe]

zoe, the lender don't care who does what, if it is faster and no cost. the buyer does not care either. the agents do not care. if the loan amount is smaller than typical the risk assessment is low. the appraisal is only a part of risk assessment.
you don't understand that appraisers are done within the next 5 years or less, because fannie can spit out an avm appraisal in 10 seconds and also qualify the loan as to it's risk assessment. fannie put the anyway we want into anything as how fannie can do it. an avm, or hybrid, is an appraisal. to quote a famous movie saying with out lingo, appraiser, appraiser. we don't need no stinking appraisers.
marin city, the appraiser there would not be killed if there was a waiver. right now however, there are no waivers on properties over $1,000,000. long ago, that number was very few, but not today. that will change soon to.

That will change when market changes and it will change and drop.

 

[Zoe]

The value on the waiver is put in by the Loan officer! Or it is the sale price! A pre-determined $ value to meet a lending goal was what HVCC and Dodd-Frank were designed to prevent in appraisals, so the GSEs sidestepped it by not using an appraisal and replacing it with a waiver.

Caveat - the loan officer's figure or the Sale price as the $ amount on a waiver/value acceptance happens as long as the $ figure fits in the value range of a Fannie/Freddie AVM/valuation , the property also might need to have an appraisal done on it within a certain # of years (not sure if a prior appraisal on the property is still required)

I tried to tell the appraisers who insisted the value should be a range- I warned them that if the appraiser did not choose the point value, then somebody else would, and that somebody else in a Waiver who chooses th point value is the loan officer on a refinance, or the price on the contract. in a sale

I do not know if the value in a Waiver is called market value - or what it is called. Maybe someone on the GSE side can explain what the value is called..
It seems the WAIVER program is now called value acceptance., fwis.

I think your on right tract there. @DWiley is saying the GSE don't do it.

 

[Zoe]

The caveat is GSE buys the loan with a waiver that lender puts on the subject property. Value is involved somewhere as far as the collateral goes on the loan. Risk is heavily involved to both GSE and lender.

And TAXPAYER.

 

[Zoe]

What is the definition of value used on the collateral?

What is the basis of the value put on subject property?

 

[Zoe]

Appraisal institute should be up in arms but they have this parea thing going and play dumb to many things. Like grants from US govt override common sense.

 

[Dale Floyd]

The grade cards my kids got all included an explanation of what each grade meant. So that may not be the best example

If it is all as clear as you claim, why do I see so many reports for brand new homes where the condition of individual items is reported to be .... wait for it..... AVERAGE

Actually, it is the perfect example. And to be sure we all understand - Are you saying you would not have understood "Average: without that explanation on your kid's grade card? Come on Danny - I think I know you a little better than that... (BTW - GSE's have no solution for grading condition of individual items in a home outside of .... wait for it.... AVERAGE, ABV AVERAGE, BEL AVERAGE... That nasty little word is there again. If we say "New", we are taken to task because that's not an acceptable grading word. We can't say "Typical" anymore. We can't say "Adequate" anymore. Why? It's a mystery.

Since you are from this state, I'm very sure you do remember the way our schoolwork was graded in kindergarten and 1st grades, right? We had three faces that could be stamped on our work back then. A happy face - A bland face - A frowning face. I don't recall any explanation being sent, but my non-college educated parents seemed to understand very well which one meant "Average".



Respectfully, the only people who don't understand "Average" without a glossary of terms works for the White House or a GSE.

Sometimes I feel like the appraisal profession is turning so far to the left, we are being eaten from the inside. Let's be crystal clear - Whether I call a property "Average" or code it "C4", nothing changes about the value. NOTHING. Nothing changes about my perspective of the property either. If we have an idiot in our profession who is truly driven by issues of color, does anybody really think policing his/her words in a report is going to change that?

While I'm preaching - When describing the adjacent properties of a subject, does it really REALLY matter whether I say it is adjacent to a "House of Worship", "Church", or "Ecclesiastical Property"? Do we believe that forcing us to use politically correct terms in everything we do, makes us better analysts?

I'll be glad when we take all this nonsense out of our lives in this country. Drives me insane. (Stepping down from my stump.)

 

[ucbruin]

When I started appraising it was suggested/guided/lead/etc. that, in general, language in the report be vague....

Obviously that is no longer the case....