Why can't the number hitters see the inevitable?

[Tim Hicks (Texas)]

I don't know about your area, but the number hitters are out of control in this area. I despise AVM's, AMC's and FNMA, but the number hitters are just supporting their existence. Every time I read their propoganda, I apply it to my area and they are right. AMC's say they take the biased appraiser selection out of the mix. This is not true all of the time, but it does take away "appraisal shopping". The AVM's proclaim that they don't manipulate the comps the way appraisers do and they give values instantly. This is true to an extent, unless any of the subject data or comp data is bad, which is a far greater percentage than they will admit. FNMA states that over 98% of all appraisals hit the sales price, so why bother with an appraisal. Good point. None of these options come close to the reliablity of an appraisal if appraisers would do their jobs correctly and efficiently instead of chasing the almighty dollar. Time and time again, I see, hear and smell appraisers throwing guidelines to the wind and hitting that value to keep their client happy. I actually heard a mortgage company manager tell a loan officer one time that the appraisal was the easiest controllable figure in the mortgage process and that if worked correctly the appraisal can cover customer costs (pmi, closing costs, etc.). That remark alone, makes me realize that many of my competitors just make better "business decisions" when it comes to the appraisal process. Somewhere along the line, I could have sworn that we were taught our very purpose was for the protection of the lender and the consumer, but it seems to have tranformed into the protection of the loan officer's commission and out future work flow.

I guess you can probably guess I got trumped by almost $100,000 today. There was nobody around to vent to, but my keyboard. My assignment was for a completed 2,800 SF new home in a gated addition with an attached two car garage, attached 2,100 SF airplane hangar and a pool. I am just small time appraiser with a lousy 11 years experience, but woudn't you think there would be a little functional obsolescence on a 2,100 SF hangar and a pool. I had five sales (three new homes with granite counter tops and hard woods like the subject, two re-sales) all within one mile within the subdivision all within 100 SF of the subject property in living area. None of them had hangars and there were no sales with hangars within the past three years. All five sales ranged from $260-320,000. All had similar lot values. I appraised the home for $335,000, higher than all five sales because of the hangar. Then, the phone calls started, the original (pre-construction, appraiser not on their list) appraisal was for $433,000 and I have killed their deal. Then, they faxed me the original appraisal and wanted me to use his comps. None of the sales had a hangar, only the last sale (#6) was from the addition and it was 800SF bigger, a lake front home with double boat docks, etc and a land value over double the subject's. All five of the other sales are over 10 miles away, none less than 800 SF bigger and two other lake front homes. It seems to me that a person shopping for a 3,600-4,100 SF home just would not be interested in a 2,800 SF home. Now, the borrower is a major airline pilot and he says I am an idiot and no nothing about what his home is worth and the original appraiser knew what he was doing. The loan officers have slipped into that "I don't know, I'm not an appraiser, but he supports his value, too" phase and I am spending my day defending my value. I am not a god, I could possibly have under valued the property a little because I have no "hangar comps", but I seriously doubt I am $100,000 off. Somehow, I doubt the other appraiser is losing any sleep at all.


vent, vent, vent, anger, vent, vent vent, anger!!!!

Oh, while I am venting I noticed in some other posts that appraisers were using the old "willing buyer and willing seller" debacle in reference to hitting the sales price. Does nobody believe in the "willing seller, uninformed buyer, both agents want their commission" scenario? In this part of the country, there are very few "buyer's agents". Most agents are both working for the seller. If you are using the most recent sales, there are no older sales that support the value, and there are no listings that support the value, it is possible that the property is over priced. I have never seen a home buyer that did not think their house was worth more than they paid for it, so the willing buyer is always willing. I can understand a 1-5% variance and I believe that most appraisers will not come in $1,000 low without searching everywhere for that $1,000, but when you are substantially lower than the contract price, and you have comparable sales to support your opinion, tell them the truth. Isn't that what we are paid to do? If it wasn't, what are we needed for anyway?

End of chapter one.

 

[KD247]

Tim,
Our only hope is to stick with the clients that really want our best estimate of market value. Unfortunately, we're going to have to watch from the sidelines as more compliant appraisers get rich.

Maybe someday appraisers will be hired by the client who's actually bearing the financial risk. That would shake things up!

I get lots of appraisal requests from brokers I've never heard of. At least a few times a week I'll be blunt and say "If you want me to ignore data that doesn't support your value, you'd be happier with someone else". This isn't hard, because I have more work than I can handle. But, I can see how lots of appraisers would be tempted.

If you've made the choice to appraise in a professional manner, all you can do is stick to your guns amd defend your position. I assume that you developed some indication of the hanger's value based on the older sales you mention. If you've done your job properly, the reader should be able to easily see that the other appraiser's value is poorly developed.

Now, repeat after me - "Considering the current contract price as one of several pieces of data is not the same as aiming for a qualifying value". The contract price is an actual instance of the event we are trying to predict. That doesn't mean that the contract price -always- reflects a typical buyer. But if seller’s agents and compliant appraisers hoodwinked uninformed buyers with any kind of frequency, why don't we see example after example of older closed sales with prices that are clearly beyond a given neighborhood's normal price variance?

Sorry, I'm just not buying the idea that a compliant appraiser and a contract-considering appraiser are cut from the same cloth.

Hope that Chapter Two of your story includes the part where the underwriter rejects the other appraisal and they end up using yours for a refinance at a more secure value.

Koert

 

[David Mullen]

As time goes on, there are fewer and fewer honest agents and lenders for us to work for. They are subject to the same pressure that we are. That is, that if they don't make the deal, they don't get paid. They either go along with everything bad that is going on, or their crooked competitors will put them out of business. That is not an excuse for them but simply the reality of todays world.

The imposters calling themselves appraisers making all the deals that come their way have the same choices. If you look at them closely, their only qualifications for another job would put them right back at Kmart where they started. They dread that thought so they continue to play the game and make all the deals.

The people that this business really needs are quickly being replaced by this type of individual because there is not much, if any, reward for honesty and competence in this business.

There are still some areas where honest appraisers can survive but it appears that they are mostly small outlying area and as work decreases over the years, they too will have competition from outsiders and they will know what we have been talking about here for years.

 

[carol milder]

All it takes is a dip in the economy and a boat load of foreclosures for
sanity to return to this industry. Where there is room for fraud, fraud exist...these "hit the number appraisers" will not be around to do the foreclosure work, they don't know how to do find market value without a pre-determined number to shoot for ...
I love appraising! Carol
P.S. to Tim
When your gut says that your number is reasonable and the other number is just wrong ... that it is one of the ingredients that make a good
appraiser! Honesty and integrity is what we have at the end of the day,
your business will always prosper because of your integrity!!

 

[GordiaA]

Tim,

I understand your frustrations. I work in the Altanta, GA market, and it is a everyday problem here. I've been an appraiser for four years, and I'm considered to be a "bank appraiser" (VERY CONSERVATIVE). I consider myself to be a honest appraiser. It's very hard to talk to a new appraiser when it comes to the pitfalls of our industry. They will focus on the volume of work that they'll receive if they can hit the numbers, but they fail to consider the penalties for the inflated values that they are giving.

The lender's believe that the AVM's will be their saving grace, but in our market there are areas inwhich the AVM's will kill them. We are experiencing a lot of gentrification in Atlanta, and the "investors" are following these area. It is only a matter of time when they will realize that the bogus 20% downpayment is only a part of the 200% increase in the actual value provided by the AVM's due to mixture of values in these area. This is when the appraiser will be their best friend again.

If we just stick to the right path we will succeed.

 

[Joe Birrell (NY)]

Tim:

Good rant, I agree 100%. Our problem is that we are working with a different definition of market value. Everybody else uses the current definition: "any price the seller, real estate agent, builder, and/or loan officer wants it to be" Most appraisers are using the current definition
and could care less about the inevitable. Appraisers continue to be the great enablers (at reduced fees). They should at least charge a fee based upon the percentage of value and make money in the process, but they are simply to dumb. Hell, fraud is fraud, what's the difference.

The hell with all them is my motto.

 

[Daniel Williams]

Just did an order in the small Southern Illinois town of Pinckneyville.
1300+/- Sf, ON the main drag across from bank, beside florset. It was built as single family, converted to Law office, now converting back to Single Family.

Current owner bought for 20K (yes 20 thousand) JUST over 1 yr ago. Owner estimates it is worth 50K cause thats what other appraser told him. Not bad eh.....150% in one year! Asked the owner if he had copy of old appraisal stateing 50K.........he replied no....I never did get a copy. Go figure, my guess is the LO KNEW how baltent the apprail was and did not provide copy to him. I wanted to see how the other appraiser adressed the Zoning/location. This area has NO zoning but is clearly in a bussness/comercial setting (which I WILL disclose) At BEST this guy has a 25K+/- home with a HBU of commercial...............glad this was a COD!

 

[AC King]

Sorry to disagree with the majority of opinions expressed above, but as I often do, I see the situation a little differently.

The principle of substitution requires that one finds similar sales for a sales comparison approach to value. If one does not use homes associated with, adjacent to or inside hangars, then one can not reasonably support any opinion of value regardless of the sales used for comparison. If a pilot wants a home with an attached hangar or a home inside a hangar, no amount of available homes without similar facilities will substitute. If one only eats apples, no amount of oranges at any price will satisfy the hunger for fruit.

I notice you are in Crowley, TX. Have you researched the hangar/homes or homes near the runways in Frisco, Midlothian or DeSoto. You may wish to reconsider your opinion of value based on sales comparison unless you can find "substitute" properties. MLS will more than likely not have this type property listed. It may require considerably more research and personal visits to homes near runways for specific data on this type property.

Good luck, and before cementing your opinion of value, do consider the substitution theory. The cost approach, as manipulative as it is, may be a preferred approach to value where no true "comps" exist.

 

[Anonymous]

AC,
I know I'm not going to change the way you
do things down in Texas and I didn't ever
take a logic class, but I think your use of
negative reasoning (if there isn't something
then nothing else will substitute) just doesn't
make sense.

As was said in an appraisal class I took
20 years ago, if cost were value then
builders would have constructed something
on every square foot of land in america.

Is that what they teach you in MRA? Don't
underwriters in your area draw a line through
a $40,000 hangar?

elliott

 

[Blue1]

Tim,

I just did one assignment on a property that sold in May of 2001 for $383,000. The SAME appraiser (that did the sale in May) appraised the property in January 2002 for $545,000. (Let's see....8 months later it's worth $162K more?) No Way! The second appraisal used sales 16 to 20 miles away! MY appraisal (Done in February 2002) used sales within 1 to 3 miles away and came in slightly above the sale price. In addition, the GLA was reported to be 4,363 sq.ft. by the other appraiser. I measured the home at 3,500 sq.ft. and verified it through the County Assessor and also have a copy of the original permit. If this is not fraud, I don' know what is.......I am receiving a ton of grief for not "hitting the 500K value" that the other appraiser got. I am not going to budge. In fact I think there's enough evidence to turn the "other appraiser" in to the board. This is what we have to do to "number hitters."