Accuracy of Appraisals Is Spotty, Study Confirms
Hank Miller a broker and appraiser in Alpharetta, GA does a fabulous job highlighting today's "appraisal challenges". There is no magic number, and if you ask 5 folks to appraise a home you will most likely get five different numbers. This could even be if you gave them the same exact comps to use.
A recent seller who was a relocation seller had two appraisals done on their home. I met both appraisers there. The two numbers came in 11% apart on a $500,000 home. So, yes, we ended up with appraisal number 3! Interestingly enough, the home sold really quickly.
The challenge is the number of variables. Does the appraiser know folks jumped at the chance to buy the home, had a bidding war and put it under contract in days? The intangibles are huge and often the challenge to getting a good appraisal. I feel a lot better if the appraiser truly knows the area, verses the one who just drove 30 miles to see the house!
There is no majic in appraisals, but they are not going away anytime soon. DARN.
Enjoy!
"...At the extremes, in 121 instances, the appraised value was more than double the sale price, and in 132 examples, the
appraisal was less than 70 percent of the sale price. It is like a game of horseshoes and throwing grenades,” the authors wrote of the results. “This study confirms what many of us have thought but heretofore have only known anecdotally: that appraisals are not very accurate. Close is good enough".
Wow. The NY Tiimes released this detailed study of appraisals completed on commercial loans that went bad. It's very alarming as the "help" from Washington continues to do little except to cause trouble. The horror stories of appraisal issues on the residential side continue to flow like a raging river; the creation of AVM's have driven veteran appraisers away from the retail side of the business. Looks like the same nonsense with shopping for fees instead of expertise is entrenched in the commercial side.
John Cicero, a managing principal of the appraisal firm Miller Cicero, said: “It is a broken profession in a lot of ways. The appraisal industry has become commoditized, where lenders see appraisals as simply a commodity to be purchased by a vendor and where more emphasis is placed on the price of an appraisal than the expertise of the appraiser.”
For example, Mr. Cicero said, in the past lenders would often have long discussions about the project and the appraiser’s qualifications before hiring. Now, it is more common for lenders to use an online bidding system, where they issue a request for proposals from appraisers and often choose the least expensive. “They actually refer to us as vendors submitting a bid, not educated professionals who are providing an important service,” he said.
It amazes me that nothing is being done despite the obvious and clear adverse impact of AVMs. It seems clear that on the residential side, AVMs have resulted in nothing positive. On the commerical side, the article intimates that the next shoe to drop could be the size of one that Shaq would wear.
Hank Miller
Associate Broker & Certified Appraiser
Atlanta Communities Real Estate
678-428-8276 direct
hank@hounddogrealestate.com
www.hounddogrealestate.com
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