Why Are Fannie And Freddie In Such A Hurry?

[J Grant]

You provide "an opinion of value" where value is someone's definition of market value, in this case Fannie Mae's definition, which imposes hypothetical conditions and the requirement that your opinion of value is the "most probable" value, which implies that of all the knowledgeable well-advised buyers willing to buy the subject property, assuming there are any, you are providing an opinion of the average or median price they would pay for the property under the given conditions, something you couldn't possibly know, but have provided a supportable argument that it would be such and such a value for such and such reasons, a prediction that if these buyers actually showed up and bid on the property, that your golden value has support for falling somewhere near the middle of these hypothetical bids, and so you are attempting to PREDICT the outcome of something that hasn't happened, nor ever will happen.

We are NOT doing that (Opining what all knowledgeable well advised buyers would pay)

We are only providing OUR opinion of value (developed in the appraisal ) for a client for their intended use as of the one effective date.

Any and all other real world parties can go ahead and pay or accept whatever prices they want on the subject at any time. No, we can't predict what they might pay as a most probable price, but then again, we are not being asked to do so.

 

[gregb]

Weather reports predict the weather for the next 5-10 days, while I have heard said, appraisal reports "predict" what the lender could sell a property for in the event that it took back the property connected to a loan default.

 

[J Grant]

Weather reports predict the weather for the next 5-10 days, while I have heard said, appraisal reports "predict" what the lender could sell a property for in the event that it took back the property connected to a loan default.

Not that either

 

[RCA]

Weather reports predict the weather for the next 5-10 days, while I have heard said, appraisal reports "predict" what the lender could sell a property for in the event that it took back the property connected to a loan default.

The take back is generally several years out; maybe 8 years. In that time the house has depreciated prices may have declined and so on and so forth - and there are costs associated to foreclosure, repossession and resale. The 80% LTV, in combination with the payments on principle, was designed, from what I have heard to cover depreciation between the time of sale and foreclosure, admin and resale costs. And in fact, going below 80% probably would not have ever been acceptable. But 80% LTV seems like a good number in a stable market. So, what they were saying was that the collateral value was actually 80% of the appraised value. Nowadays, even that is not enough. My understanding is that collateral appraisers, at least some, deal not only with single homes but portfolios and aggregated risk and collateral value. If you have a large portfolio in California, then you should be worried.

 

[RCA]

How can you be an SRA and state some of the things you are stating?
Neither I, not any appraiser can predict, guess, or estimate what any buyer might pay or what every buyer would pay....but we can per the appraisal develop our OPINION for that ONE hypothetical transaction of what the "presumed" (model) typically motivated buyer and payer would transact at given the MV definition we are appraising to.

How does an appraiser "contaminate" a property? The appraiser , if engaged to do so, offers their opinion of value ( and other opinions, conclusions and analysis ) , and communicates it in the report to the client. The client is then free to use the results of the appraisal, or not , the client can throw it in the trash if they want.

???? We are not trying to guess or predict what a buyer and seller would transact at, even for a most probable price. We are providing our opinion of what the 'presumed " ( model) "buyer" and "seller" would transact ( what the property should bring) within the context of the appraisal.

Or what did you think you were doing all these years? Sorry but your posts on this topic leave me incredulous.

I'm getting burned out responding to some of these posts. Where did I ever say that an "appraisers contaminate property?" As to the first statement, that is exactly what Fannie Mae's definition of market value states.

https://www.fanniemae.com/content/guide/selling/b4/1.1/01.html

It appears you are in violation of USPAP.

 

[RCA]

keep posting, it still won't change. we do not predict values unless we are requested to by the client. as posted elsewhere:



but then you would start in again on the mathematical use of the word predict, which doesn't matter as we are not professional mathematicians, we are appraisers and we follow USPAP...

You provide "an opinion of value" where value is someone's definition of market value, in this case Fannie Mae's definition, which imposes hypothetical conditions and the requirement that your opinion of value is the "most probable" value, which implies that of all the knowledgeable well-advised buyers willing to buy the subject property, assuming there are any, you are providing an opinion of the average or median price they would pay (as a transaction with an "average" seller who typically accepts the highest offer) for the property under the given conditions, something you couldn't possibly know, but have provided a supportable argument that it would be such and such a value for such and such reasons, a prediction that if these buyers actually showed up and bid on the property that your golden value has support for falling somewhere near the middle of these hypothetical transactions , and so you are attempting to PREDICT the outcome of something that hasn't happened, will not, nor ever will happen.

Caveat: Fannie Mae's definition of MV talks about "... the buyer and seller, each acting prudently, ..." as if the appraiser were to focus on the actual buyer and seller, as of the effective date. As of an given effective date, there can be only one seller, the actual seller, who invariably takes the highest offer, assuming he judges the buyer to be sufficiently credit worthy. And the buyer would be the one making that offer. But then we have to make sure the buyer is acting "prudently", meaning that we believe that it is not likely he could get a better deal elsewhere. Then they throw in "the most probable price that a property should bring ...".

Of course if you are appraising for a refinance, there is no buyer - only hypothetical buyers. As of the effective date, you have a seller who isn't interested in selling. For all you know the actual seller has no intention of selling until he can sell it for a much higher value than it is worth at the effective date of appraisal.

So now, who exactly does Fannie Mae mean by "the buyer" and "the seller"? Well, you are required in general to conjure up a hypothetical seller as well. After all, the whole logic behind the sales comparison approach is to find a number of transactions with different buyers and sellers, make adjustments and average, possibly with some weighting. You are effectively defining an "average" or typical buyer and seller for this kind of transaction. And you average the adjusted values and typically give it the most weight for the final value conclusion. And this is typically your support for a transaction between a hypothetical buyer and seller for a hypothetical transaction. The whole goal is to predict what the property would sell for, if there were a typical seller interested in selling the house and some typical buyers interested in buying under the constraints of FNMAs definition of MV.

 

[J Grant]

Bert Craytor said: ↑
I never said ALL buyers are not knowledgeable nor well advised, only that many are. And many others on this forum state this as well, And further, that you do not know what a knowledgeable well-advised buyer would pay, you can only guess, or predict what they would pay, if they would pay anything at all: To wit you might have a contaminated property for which there may or may not be a knowledgeable and well advised potential buyer willing to buy. However, you might know a buyer who is not so bright and who could be convinced to buy the property, and in fact who has made an offer. But the existence of the other buyer, which presumably must exist within realms of probability for you to even come up with an opinion of market value, you simple don't know as a fact, you can only make an educated guess.

From a prior post you made on this thread: The first and only time I have ever heard of an appraiser "contaminating " a property! Refuting your other points would be too time consuming, and I can't afford the time. I hope at this point you are more engaged in software/engineering rather than appraising....probably more lucrative or rewarding.

 

[TRESinc]

You provide "an opinion of value" where value is someone's definition of market value, in this case Fannie Mae's definition, which imposes hypothetical conditions and the requirement that your opinion of value is the "most probable" value, which implies that of all the knowledgeable well-advised buyers willing to buy the subject property, assuming there are any, you are providing an opinion of the average or median price they would pay (as a transaction with an "average" seller who typically accepts the highest offer) for the property under the given conditions, something you couldn't possibly know, but have provided a supportable argument that it would be such and such a value for such and such reasons, a prediction that if these buyers actually showed up and bid on the property that your golden value has support for falling somewhere near the middle of these hypothetical transactions , and so you are attempting to PREDICT the outcome of something that hasn't happened, will not, nor ever will happen.

why do you constantly assume all buyers and sellers are ignorant, uninformed and not acting in their own best interests? you have stated this time and time again and it just simply isn't true. if it was then prices would be all over the place for similar housing, and we know they typically are not. we are not attempting to predict anything. we are giving our opinion of value for one day in the past based on historical data.

Caveat: Fannie Mae's definition of MV talks about "... the buyer and seller, each acting prudently, ..." as if the appraiser were to focus on the actual buyer and seller, as of the effective date. As of an given effective date, there can be only one seller, the actual seller, who invariably takes the highest offer, assuming he judges the buyer to be sufficiently credit worthy. And the buyer would be the one making that offer. But then we have to make sure the buyer is acting "prudently", meaning that we believe that it is not likely he could get a better deal elsewhere. Then they throw in "the most probable price that a property should bring ...".

again, you think buyers and sellers have no clue what they are doing and that simply isn't true. currently, due to low inventory, we still have a seller's market. marketing times are typically less than 30 days and i have seen more and more in single digit days on market. talk to a local agent and ask them about multiple offers on properties and if the sellers always take the highest offer. i'll save you some time - they don't. a slightly lower cash offer can be accepted over a higher financed offer. many sellers don't want to accept an FHA offer due to the added requirements for an FHA sale, and those offers are typically higher due to the lower down payment requirements and the ability to roll in closing costs on the loan.

Of course if you are appraising for a refinance, there is no buyer - only hypothetical buyers. As of the effective date, you have a seller who isn't interested in selling. For all you know the actual seller has no intention of selling until he can sell it for a much higher value than it is worth at the effective date of appraisal.

which means nothing to me as the appraiser for the refinance. i don't care if they want to sell higher or use the refi to take a trip around the world.

You are effectively defining an "average" or typical buyer and seller for this kind of transaction. And you average the adjusted values and typically give it the most weight for the final value conclusion. And this is typically your support for a transaction between a hypothetical buyer and seller for a hypothetical transaction.

if all the comps are exact model matches with no adjustments, sure you could average them out to achieve the opinion of value, but i can count on one hand how many times i have averaged adjusted values to come with an appraised value and still have fingers left. it's pretty sad that an SRA is advocating for averaging values in an appraisal. averaging is not part of my support.

The whole goal is to predict what the property would sell for, if there were a typical seller interested in selling the house and some typical buyers interested in buying under the constraints of FNMAs definition of MV.

if your statement is true how could you possibly say we are predicting a future value since the opinion of value in the appraisal is for the effective date only, which has already passed when the report is completed, and not a future date?

 

[Mike Kennedy]

Look at it this way, appraisers are happy to get within 5% of the "true" value of a home. Let's say they can do that. But house prices surge 40% in one year or sink 15%, due to economic conditions. Where does that put the appraisers 5% accuracy?

Reasonably reliable ON the Effective Date of Appraisal.

 

[RCA]

why do you constantly assume all buyers and sellers are ignorant, uninformed and not acting in their own best interests? you have stated this time and time again and it just simply isn't true. if it was then prices would be all over the place for similar housing, and we know they typically are not. we are not attempting to predict anything. we are giving our opinion of value for one day in the past based on historical data.



again, you think buyers and sellers have no clue what they are doing and that simply isn't true. currently, due to low inventory, we still have a seller's market. marketing times are typically less than 30 days and i have seen more and more in single digit days on market. talk to a local agent and ask them about multiple offers on properties and if the sellers always take the highest offer. i'll save you some time - they don't. a slightly lower cash offer can be accepted over a higher financed offer. many sellers don't want to accept an FHA offer due to the added requirements for an FHA sale, and those offers are typically higher due to the lower down payment requirements and the ability to roll in closing costs on the loan.



which means nothing to me as the appraiser for the refinance. i don't care if they want to sell higher or use the refi to take a trip around the world.



if all the comps are exact model matches with no adjustments, sure you could average them out to achieve the opinion of value, but i can count on one hand how many times i have averaged adjusted values to come with an appraised value and still have fingers left. it's pretty sad that an SRA is advocating for averaging values in an appraisal. averaging is not part of my support.



if your statement is true how could you possibly say we are predicting a future value since the opinion of value in the appraisal is for the effective date only, which has already passed when the report is completed, and not a future date?

On Quora they have a feature to block and/or mute members who are "bad actors", members who defy logic, alter context and meaning, make nasty comments, and are simply impossible to carry on a rational discussion with. It's a great feature. For this forum, I guess, I just have to respond with a paragraph like this. You are hereby blocked --- if only you could be "muted".