Value reconsideration

[moh malekpour]

I did an appraisal 2 months ago on a property in a new subdivision. My comparables were 3-4 months old at that time but market was increasing almost daily. I had 2 model match listings that were listed 10% higher than my comps. I used one of them as a support but the value was based on closed sales comps, which was the low-end value at the time according to listings and market condition because I was limited to those available sales at the time. Now one of the listings is sold higher than its listing price and the client asks me to reconsider my value conclusion according to the new sale in the market. I am not sure which way should I go? If I don’t change the effective date, my new sales date is going to be 2 months after effective date and this is not going to work. If I want to develop a new report, then I have to reinspect the property and take new photos, which is very difficult to do as it is in a very far distance. The third option is to update it but I guess the updated report is supposed to be more than 4 month and less than one year old and it is for the lender who has the original report. But I think the broker likes to shop for new lender. Which option do you think is the best option to take for this porblem?
Thanks in advance

Moh Malepour

 

[Ray Ohler]

were "reasonable" time adjustments made in the first report?

 

[Larry Lyke]

moh --

You didn't tell us if the first loan closed?

You can update the report and charge a full fee or do a new appraisal.

I don't see the quandry clearly.

 

[Ross (CO)]

Moh, you do need to know if the transaction of 2 months ago is completed and has your other appraisal been applied in their decision. All parties are aware of some sale(s) which has happened since 2 months ago, and such is the situation for a lot of neighborhoods around where you live and where we all live. School is out, houses list and finally sell and the market rolls along. In an indirect way you are being asked to "reconsider" your earlier value, perhaps as in update of the last appraisal, but more so you are being asked to simply appraise with new market data and there may be more than this one sale when you actively dive back into the database of that area again. This new sale will at least be 1 of 3 sales that you will use. It may be "sold" to you as being the sale which (by itself) re-defines the subject value. You speak of distance away, which also means time. If you feel you were not compensated for that before, then another assignment may be where you do not let it slip by without its being acknowledged. I would be inclined to require the new appraisal be developed with this new comp sale(s) data and photos -- which means you are making the drive again. The notion of not re-measuring the house would likely carry little impact on your total fee. Get your full and fair fee for the efforts and crank out the new report. Maybe 3 months from now they will want you to reconsider when another house sells nearby. This could become a milk-cow for you !

 

[Ray Ohler]

I missed something. Moh said he did the appraisal TWO months ago not 10 months ago (meaning its REAL recent). Used sales that were within 3-4 months old. Regardless whether or not the intended use of that appraisal was met or not is not an issue. That appraisal was done by Moh. If he didn't make time adjustments in the first report, how would he support an increase in value strictly due to time ("the market is increasing almost daily" it WASN'T two months ago?). I don't care whether the report is for the original lender OR another lender. My take is if time adjustments were not made in the first report, he should not even attempt to prepare a second report with a new effective date or not. And as far as "revising" a market value opinion, well, the first report is still out there and it was prepared by him.

 

[moh malekpour]

I didn’t make a time adjustment 2 month ago. My comps were 3 –4 months old at that time so why should I have made time adjustment? They were current at the time. I was not sure that the listing would sell for that price or higher at the time. I have seen so many over priced listings that I thought that was one of them and that is why the listing cannot be really considered a reliable comps until it is at least a pending but I was surprised when I learned that some one has bought it. Remember we as appraisers are always following the market. We cannot go ahead of market nor we can change the market. They are buyers and sellers who change the market and as you know most of the time it depends on interest rates and some other factors that buyers and sellers consider. Now I understand that the market is not logical sometimes and acts like crazy but that is what buyers and sellers want. The stock market goes down, the interest rates goes down, and property value in some area like southern California gets over heated. I understand that and can live with that. I prepared the appraisal at that time based on available sold comps and I didn’t need to do time adjustment. That was a right value at that time but they waited for this listing to get closed and now they want a new value. Everyone knows that the market has gone up and keeps going up. But a listing is an offer to sell and it cannot be considered a real sale unless it is sold. I am just trying to find a way to be reasonable and solve this problem because they are on my back to get this report done. The loan is not closed yet and I am not sure that it has been processed. Problems that I have are long distance driving and limited comps. My comps that I used two months ago are old now and I don’t think I have newer comps except this new sale because my subject is a condo unit located in a neighborhood that 95% are single-family homes. You can hardly find a condo complex in the area. I may have to do time adjustment now because my previous comps are old.

Thanks,
Moh

 

[Frederick R. Ruffell]

Moh,
Just a couple of thoughts after reading the entire thread to date. Here in San Diego County the regional chamber of commerce publishes " the percent change in value" for properties for most neighborhoods. This data has proved invaluable to me for making time adjustments. It is very reliable data as the regional chamber of commerce actually has the same properties in each community appraised for every publication (every six months +/- ). Perhaps your area chamber of commerce does the same thing. If so see if the new sale conforms to the data or not.
If your area chamber of commerce does not do this then you might use your MLS statistical function to extract an average sales price for the earlier time period (i.e. 3 months to 6 months ago) and an average sales price for the most recent time period (i.e. today to 3 months ago). Then compare the two averages and come up with a percent change in average sales price. Again compare the new sale to the percent change in value to see if it conforms. If so make you adjustments accordingly in the new report or the update. I do updates on a drive by basis with a phone call to the owner to verify no significant changes to the property.

Just my thoughts on how to approach this one. any thoughts or objections?

 

[airphoto]

Moh,

You may have limited similar sales, but one sale does not a market make .. what're the circumstances of this sale? Former owner might've snagged the golden beebee ..

 

[Ray Ohler]

the mortgage broker/lender and/or buyer is looking for. That should not be a consideration anyway. However, if Moh doesn't want to go back to the property there are only two ways that I think what he is trying to do can be done. Neither one is free from possible exposure to criticism or worse and this post is not meant to be sarcastic as some on this forum would be quick to allude to. The original appraisal was performed only two months ago. To change that value without changing the effective date and support it "properly", Moh would have to now make time adjustments to the sales utilized in the first report. Using perhaps the method(s) described by Frederick and disclosing that he made an error in preparing the first report and not making time adjustments. Only because that first report is still OR, even if it is returned to him, a copy may still be out there. OR prepare a new report changing the value making time adjustments and ignoring the fact that he prepared the first report. There is a third solution, prepare a new report using two of the sales utilized in the first report (with time adjustments now) and plug in the third (recent) sale, change the effective date, not re-visiting the property. I cannot think of any other solutions to the question.

 

[airphoto]

Moh, et al ..

Another thought .. this is a new sub? What upgrades and differences in amenities in your most recent sale? If it's new construction, will bet there were a bunch of changes from the listed description. Once adjusted for such changes in amenities, you might well fall back into line with your previous group of sales.

InRe: Time adjustments .. based on your description and responses, doesn't sound like you have that much activity necessary to develop a reliable time adjustment ..