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Would You Kill The Deal?

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NC Appraising

Senior Member
Joined
Apr 28, 2006
Professional Status
Certified Residential Appraiser
State
North Carolina
Subject listed for $261,000. DOM 3. Four offers 260, 267, 268, 270. The agent sent all of the contracts. He sells a lot in the neighborhood and honest guy.

Contract price $267,000.


Unadjusted sales range 243,000-263,000. Most of the sales are dated. All have DOM of less than 6 day's and are selling above list price. Market is appreciating at 8-11% per year. Very low supply of homes,, no active listings.

If I did not make market condition adjustments, most would have been 6,000-15,000 under contract price.

I admit, without the other offers, I would had put the appraised value at +-261,000.

I am the second appraiser.....first one came in low. Did not ask for the other offers.

If I were reviewing this one, would I think the appraiser was inflating the value? Probably.

But...if I come in low, and it sells to the other two offers that were above the subjects list price, I have eqq on my face.

So what do I have here? Contract price is market value with comps looking pushed or below the contract price?
All market participants are just wrong? Most homes are going under contract within 6 day's....agents are reporting that buyers are just making high offers due to the low inventory, multiple markets and are not even researching prior closed sales. Not enough time too. May loose the deal if they don't act quick. Is this still market value?


I'm I reporting the market, making the market or if I kill the deal saving the market?
 
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Terraform

Senior Member
Joined
Aug 29, 2006
Professional Status
Certified Residential Appraiser
State
Florida
I do not think you are killing a deal by supporting the highest price the market has paid in the recent past, IMO the buyer will secure the necessary funds to acquire the property for a greater price than what is supported by the market.
 

George Hatch

Elite Member
Gold Supporting Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
California
i don't kill deals. I only write the obituaries. If that deal is dead then it died before it got to me.

Just kidding


Each of those comparable sales has a sale/list ratio. There are surely other less directly comparable sales in your neighborhood and they have sale/list ratios. They're probably all getting 4 all-cash offers at higher prices. There are probably some unsold actives in the area that will serve to establish the upper limit of value.

You look for the answers to these questions and develop your opinions accordingly. If the contract price exceeds the adjusted range then quantify by how much and say it that way.

You don't want to lose sight of the point that the assignment does not call for you to express your opinion of the highest price the market will support, but what the most probable price for that property will be. In terms of average/median/mode, what would the mode be if you put this property in front of a dozen buyers? If your client wanted "highest value the market will support" then they should have asked it that way. In writing.
 
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timd354

Elite Member
Joined
Jan 11, 2008
Professional Status
Certified Residential Appraiser
State
Maryland
Subject listed for $261,000. DOM 3. Four offers 260, 267, 268, 270. The agent sent all of the contracts. He sells a lot in the neighborhood and honest guy.

Contract price $267,000.


Unadjusted sales range 243,000-263,000. Most of the sales are dated. All have DOM of less than 6 day's and are selling above list price. Market is appreciating at 8-11% per year. Very low supply of homes,, no active listings.

If I did not make market condition adjustments, most would have been 6,000-15,000 under contract price.

I admit, without the other offers, I would had put the appraised value at +-261,000.

I am the second appraiser.....first one came in low. Did not ask for the other offers.

If I were reviewing this one, would I think the appraiser was inflating the value? Probably.

But...if I come in low, and it sells to the other two offers that were above the subjects list price, I have eqq on my face.

So what do I have here? Contract price is market value with comps looking pushed or below the contract price?
All market participants are just wrong? Most homes are going under contract within 6 day's....agents are reporting that buyers are just making high offers due to the low inventory, multiple markets and are not even researching prior closed sales. Not enough time too. May loose the deal if they don't act quick. Is this still market value?


I'm I reporting the market, making the market or if I kill the deal saving the market?
If you have good support that the market is appreciating at 8-11% per year (and it seems like you probably do if all of the Comps have a DOM of less than 6 days and all comps have sold above list price) then you would be negligent if you did not consider that information and include it as part of your analysis. It seems from your comments that you actually think that the contract price is supported but you are hesitant to go there because you are afraid of looking like you pushed value...sorry, but being afraid of looking bad is not a legitimate consideration that should influence your value conclusion.

BTW, you cannot control what a reviewer is going to think in any case....If such an appraisal came across my desk and the appraised value was adequately supported within the report, including a good explanation of why the appraised value is above the unadjusted sale prices, I certainly would not think that you are bad appraiser or value pusher. However, some idiot reviewer might, but you cannot control that in any case
 
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Terraform

Senior Member
Joined
Aug 29, 2006
Professional Status
Certified Residential Appraiser
State
Florida
I hated when lenders were requiring upward time adjustments in 2004-2007 based on annual appreciation without any support for month to month market adjustment. I was making 10% time upward adjustments per month of age of sale without any market support and they gobbled it up, shame on me!
 

timd354

Elite Member
Joined
Jan 11, 2008
Professional Status
Certified Residential Appraiser
State
Maryland
I was making 10% time upward adjustments per month of age of sale without any market support and they gobbled it up, shame on me!
I don't know why you would have done that....hopefully now you know better
 

A K

Elite Member
Joined
Jul 31, 2013
Professional Status
Certified Residential Appraiser
State
Maryland
I hated when lenders were requiring upward time adjustments in 2004-2007 based on annual appreciation without any support for month to month market adjustment. I was making 10% time upward adjustments per month of age of sale without any market support and they gobbled it up, shame on me!

10% per month without any market support? :rof:
 

George Hatch

Elite Member
Gold Supporting Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
California
Prolly a typo. 1%/month was common in some markets back then.
 

timd354

Elite Member
Joined
Jan 11, 2008
Professional Status
Certified Residential Appraiser
State
Maryland
Prolly a typo. 1%/month was common in some markets back then.
It does not really matter whether it was 1% or 10% if the appraiser was applying an unsupported adjustment just because he was pushed into doing so by the lender....either way that is very problematic
 
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