A Fellow Active Rain Member Said This should be REQUIRED Reading!

HINT, HINT ACTIVE RAIN, WILL YOU FEATURE THIS POST?

In replying to a Members Featured Post on Active Rains Daily Email Drop (Beverly Herdman) 

Understanding the Appraisal  Process
 

Another Member Steve Earnshaw who read my comment said:

  You may want to read this first along with some of the commments made and you will better understand my response. 

MY REPLY:

As a CURRENT Appraiser you can guess that I take issue with some comments made here. Yes, I agree we have to look at the past sales to provide a CURRENT Value, mind you, not a FUTURE Value (which is what a Relocation appraisal essentially does). So the key is to use the most current sales we can. We also use listings to determine where the market is headed, but I do agree many sellers are reaching for the stars and the market does not support this trend. 

1. We have always been required to look at trends. We are NOT form fillers. Some may be, but majority are not. If that were the case why do we have to take more continuing education than most any other profession, similar to Lawyers and Doctors and WAY more than Realtors do, if we are just going to fill in forms for $350.00 to $400.00 a pop. 

2. Appraisers DO report MARKET Value, Not "Appraised value" as one person stated here. However, we better be able to prove our opinion of value in the MARKET. I have always said Appraisers do NOT determine value, the MARKET does. But again if we cannot prove this with very recent sales,  trends in the PENDING sales and Listing trends, then the Underwriters will throw it out PERIOD! Listings really do not get alot of weight because if everyone starts listing high and we place any credence on these prices, we will once again be appraising homes too high. The only reason why lenders want listings to be included is to show that the trend is at or above and not below recent sales. If they are trending downward we better be thinking of a declining market adjustment. Same holds true the other way, but we better have have other factors which support an increasing market value adjustment or it will be rejected.

3. As for appraisers not having the guts to reflect trends in the market. It is all about what we can prove and what the lenders will believe even if we have clearly proven our point! I have for the past few months been noting increasing market trends in certain areas and I have applied an increasing market time adjustment to my sales. I have had some lenders who take no issue with this as long as I prove my point; be it lack of supply, days on market very low, listing and pending sales trending higher, etc. BUT I have also had some lenders that tell me NO the market is not increasing (Where they are getting that information is beyond me as the facts prove otherwise) and to explain why I am adding an increasing time adjustment to my report. I explain it further and whether they believe me and accept the report is Unknown to me. They may just get a 2nd opinion. 

4. Bottom line is this: If appraisers were allowed to analyze and report the market for which they are very qualified to do (sure there are some bad apples out there, but there are many good appraisers) they will report the REAL DEAL MARKET value, which may or may not be the sales price in the transaction. Can be at, below or yes even higher than the sales price. Remember we have NO vested interest in the properties we appraise unlike Realtors who commission is based upon the homes closing. So why would we NOT value the property as the MARKET dictates?

5. Realtors, Buyers, Sellers, unless you are an appraiser you do not understand all the processes that we must employ and the rules including USPAP that we must follow. The last thing we should do is take the sales price and then work our way to that value. If any appraiser is doing that they should be thrown out of the appraiser pool. 

6. As for getting a copy of the Sales contract, we MUST get that as it is required to analyze the sales contract as part of the appraisal report. I would prefer NOT to see the sales contract, but it is a requirement. 

I have been in the business since 1993 and have seen it all. It is no walk in the park as some people may think with their Form Filler comments. We have a license to protect just like you do, we take pride in our work and we do not appreciate lenders, Realtors, Buyers or Sellers trashing the work we do.

We are here to protect Buyers and Lenders from making huge mistakes by over paying or over lending. So please let us protect these people and believe in the work we do. As Realtors you can certainly provide any details about the homes or comps that may assist in the evaluation, but please don't insult our intelligence by providing comps that clearly are NOT comparable to the subject we are appraising. It happens all the time! 

Sorry to rant, but it gets tiring when your profession is continually bashed when all we are trying to do is protect those that hire us by providing TRUE market value.  

** I have seen recently where listing prices are up and in some cases too HIGH UP. There is that fine line that the sellers are testing and once you step over it, well just compare it to the FISCAL CLIFF! :)

Thank you!