Weighted sales reconciliation methods

[Rlong]

Most weight was given to comparable 1 as it is a very similar model located in the subject neighborhood; comparables 2 & 3 are different models of similar GLA and have been given secondary weight as they tend to bracket the features of the subject well.

Comparables 4 - 7, (required by your stupid underwriter) have been given no weight as a typical buyer would not likely consider them as they are completely different properties and were only used because they bracketed the number of porch lights and sprinkler heads found at the subject.

It's not that hard, and can be qualitative OR quantitative.

Bob in CO

 

[Metamorphic]

It's actually worth up to a million dollars insured.


Meta, I'd blame the fact that the lender wants 3 or 4 sales when maybe only two sales are truly "Comparable." Sometimes you only have one!

I dunno. That's not even really an excuse. Even if you had to go to another town to pick up the 3rd and 4th market sales, with the correct location adjustment, you should be able to bring in an adjusted value that would be inside of 20%. I've had plenty of valuations where I had to hang my hat on the only good sale, but even then I figured out a way to spackle on some vaguely credible window-dressing comps that supported the idea that the 1 good sale was not a fluke.

But sure, in an ideal world the appraiser would be driving the boat and just say..."Hey, here it is. This is the best and only indication of value. I could throw in some nonsense just to yank your dangle, and it might even look good, but it would not make the report more credible." Unfortunately nobody trusts us that much.......despite USPAP :new_shocked: .

 

[mark hurlock]

how do you decide what comp gets 35% and what gets 38% and so on?





That depends on the basis of your weighting and what you consider reasonable.

It is not a matter of accuracy or correctness but one of reasonableness.

How many times does that need to be said?

 

[AnonApprsr]

But sure, in an ideal world the appraiser would be driving the boat and just say..."Hey, here it is. This is the best and only indication of value. I could throw in some nonsense just to yank your dangle, and it might even look good, but it would not make the report more credible." Unfortunately nobody trusts us that much.......despite USPAP :new_shocked: .

That's what I've been trying to say for a week, very few seem to understand the concept. They can't help but revert to "BUT IT HAS TO SUPPORTED!" when I'm not saying it doesn't have to be. It's just sad to me, it's a watering down of our profession. Seems some appraisers want an appraisal formula they can do the same each time. They don't understand that's the exact reason we still have a job, the fact that there is no formula for all homes all the time.

 

[Metamorphic]

That's what I've been trying to say for a week, very few seem to understand the concept. They can't help but revert to "BUT IT HAS TO SUPPORTED!" when I'm not saying it doesn't have to be. It's just sad to me, it's a watering down of our profession. Seems some appraisers want an appraisal formula they can do the same each time. They don't understand that's the exact reason we still have a job, the fact that there is no formula for all homes all the time.

I'm not quite sure when in happened, but most of what we do in mortgage lending work is really no longer an "opinion of value". Its really a method derived indication of value.

The lenders, FNMA, reviewers, clients, etc have evolved a framework that they demand we work within for our work to be acceptable to them. There is a path. There are rules, procedures, guidelines, and best practices. Collectively they reduce the envelope within which the valuation must fall. There is some amount of flexibility that exists entirely because of the unique nature of the commodity. And within this uniqueness we can provide a small opinion here and there, but that flexibility is definitely a "bug" in our clients eyes rather than a "feature".

A good example of this is what a lot of us are seeing in the market right now. Inventory is way down, by all reasonable expectations prices should be rising. I think that most of us would opine that there was upward pressure on prices. But there's not a clear convincing upward trend evident in the sales records in many areas. Effectively our opinion is at odds with the evidence. If we were providing opinions of value we would be making a lot of positive time adjustments. But the lender framework is biased against increasing prices right now and demands proof of a positive trend. So appraisals are coming in low as you see from all the recent news stories about appraisers not making value. The framework derived values are effectively damped (to use an engineering term) because that damping suits the lenders even though it represents a departure from what the market is actually doing.

 

[Webbed Feet]

Redfish, the AMC intrusion into how appraisers develop value is problematical. AMC's "like" the weighted averages because it appears to "prove" something definitively...all the more to sink an appraiser if challenged, because as PE said, how the heck do you determine precisely that one comp deserves 60% and one deserves 20%? <....snip...>

I know you really love a good chat.. So shall we Devil advocate this one?

We seem to have two groups here. One that advocates for vague statements to avoid being challenged and one that dares to be specific how their process of arriving at an opinion worked.. So now we role play.

Ok, your on the stand and I'm the attorney or judge asking you questions...

Judge: Ms Appraiser... Your report says you gave "strong consideration" to comparable one. Next you stated you gave "strong secondary consideration" to comparable two, followed by your statement that you gave "weak secondary" consideration to comparable three. Would you please explain to me what "strong," "strong secondary, and "weak secondary" each specifically means and how they all relate to each other in arriving at your opinion of value? I note your report has no definition of these terms you've used.

 

[Webbed Feet]

<....snip....>If weight and percentages are used it draws the reader to determine that a mathematical calculation was used to reconcile the ending value which is not proper appraisal practice. Since this is the only issue please re review and send to client.

It seems to me that the selection of percentages, used to weigh comparable, are of themselves all opinions. So kindly quote your definitive source, backed up by copious other sources in agreement, that says making opinions that lead to a final opinion of value is not proper appraisal practice.

 

[Metamorphic]

One way to avoid this problem is just to abandon the idea of a blended reconciliation. An instructor that I respect very much said there's no rule that you have to do any sort of averaging. Its perfectly reasonable to say:

"Comps X is the best indicator of value for the subject because of y and z. My opinion of value is the adjusted value of Comp X. The other properties presented in the SCA support the value indicated by the adjusted price of Comp X."

 

[Mile High Trout]

The urgent part of this thread is long gone. It's general appraisal discussion now.