Appraisers Adjusting for Declining Market Conditions. Is it true?

Real Estate Broker/Owner with Tutas Towne Realty, Inc and Garden Views Realty, LLC BK607690

Poinciana regression chart


Hi folks. I wrote a post over two years ago titled “Let the Games Begin”. In this post I was pointing out that Poinciana was beginning to be a declining market and that Appraisers were making downward adjustments for this. It created quite the stir.

For whatever reason there were many who commented that felt this was not happening and would never happen. Well… was and it is.

I reviewed an appraisal today where the appraiser made a downward adjustment of $150 PER DAY on the recent sales.

Downward adjustment

Just to give you an idea of how this works. One of the sold comparables that was used closed in November. The adjustment was -$20,000!! The same house had a pool and it was adjusted -$8,000.

So what do you think about that? $8,000 for not having a pool and a whooping $20,000 for being a 5 month old sale. Have you seen this in your market yet?

****The chart and data in this post was provided by Richard D Ferris  Florida State Certified (FHA) Appraiser






Copyright © 2009 | All Rights Reserved  



Posted by


Join Our Facebook Fan Page Check Us Out On Google+ Follow Us On Twitter


***I am NOT an Attorney nor do I play one on TV. Click the button below for my Bio.

The BIO for Bryant Tutas


 Tutas Towne Realty, Inc handles Florida real estate sales, Florida short sales, Florida strategic short sales, Florida pre-foreclosure sales, Florida foreclosures in Kissimmee Florida Short Sales, Davenport Florida Short Sales, Haines City Florida Short Sales, Poinciana Florida Short Sales, Solivita Florida Short Sales,  Orlando Florida Short Sales, Celebration Florida Short Sales, Windermere Florida Short Sales. Serving all of Polk, Osceola and Orange Counties Florida. Florida Short Sale Broker. Short Sale Florida.

 Copyright © 2017 | All Rights Reserved


Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Richard D. Ferris 04/17/2009 12:50 AM
  2. Suzanne Martin 04/17/2009 03:15 AM
Florida Osceola County Kissimmee Poinciana
market conditions
market data

Spam prevention
Show All Comments
Ruthmarie Hicks
Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605 - White Plains, NY

Thank you!  B.B.  For confirming what I thought I was seeing - but was told I wasn't.  I had a couple of appraisals that were definitely waaaay off what any comp I could find (including contracts and pendings where the agent was kind enough to enlighten me.) but some people kept telling me I was wrong.  Trouble is, I come from a world of science and statistics and I ALWAYS look at the numbers and the numbers didn't add up - no matter what I did. Should I send them your link - or just let them continue to think I'm crazy?   So yes, we have it here.  But not the way you do - not as extreme.

Oh - and excellent use of a scatter plot with trend line.  The former genetics statistician in me was very happy.

PS - its nice to see TLW back and commenting....I was worried for a while.

Apr 18, 2009 02:46 PM #148
"The Lovely Wife" (Broker Bryantnulls Wife) The One And Only TLW.
President-Tutas Towne Realty, Inc. - Kissimmee, FL


I'm thinking it would be a good idea for YOU to enlighten THEM. If they still don't GET IT send them over to this post. It's public so they can have it right in front of them. Good luck :)


Apr 19, 2009 12:11 AM #149
Kathleen "Kat" Bryce
Kathleen Bryce, Inc. - Fort Myers, FL

Great discussion!  I think it's important that we each learn more about the others profession and requirements thereof..  I would like to address John Keene's comment "... market value is what someone is willing to pay for a home, right?" and I know that many Realtor's share that definition of Market Value.

Now let's look at Fannie Mae's definition of market value the one that Appraisers are required to use when writing Appraisals for Mortgage Finance Transactions. "The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus"

Notice how the Appraisers definition of Market Value includes the need for both the seller and buyer are acting in there own best interest, are KNOWLEDGEABLE and that the price is not affected by undue stimulus (like foreclosure). 

I would like to address each in order.  If the buyer is acting prudently then they will try and purchase property at the best price.  Now I suggest that a buyer that is acting in their own best interest will have saved up a down payment, will have a clear idea of how much they can afford and will not need to have the listing price increased to cover 3%-6% or more in seller concessions or kickbacks?  Especially in a depressed marketplace?

The buyer and seller are knowledgeable.  How do they become knowledgeable?  Buy attending many open houses? By looking up sales that have closed in the neighborhood in which they are interested?  Most likely not, most likely they are listening to their Realtors who have done an CMA for them.  And this is a great tool in which to educate your buyer.  But are you totally honest with your buyers and sellers when creating your CMA?  I have 'killed' a deal back in the boom days when the purchase contract was for the brokers own condo unit that they planned to flip. The broker owned 4 units that were listed at $20,000 more than the 10 other identical units in the complex. Were the buyers knowledgeable or acting in their own best interest when the contracted to pay $20,000 too much?  Yes, there was nothing SPECIAL about the brokers units, other than the broker was the buyers agent.  I have a deal on my desk today, the buyer is under contract at $100,000 to cover a 6% seller concession.  List price was $96,000.  The subject is in average to below average condition. The only sales that would support this value were rehabbed homes that were 5 years newer.  Even a model match but better condition sold for $75,000 5 days ago.  The Appraiser has identified 4 other active listings with prices offered in the $80,000? Is this buyer knowledgeable?   I profess that I am not "Killing" this Realtor's deal, I'm only writing the obituary...  The buyers agent is not acting in the buyers best interest to push this one forward in my opinion, the buyer will be upside down the day they move in at $100,000 FHA financing.  Is THIS buyer knowledgeable and acting in their own best interest?

Now let's address "the price is not affected by undue stimulus" Do Bank Owned properties(REO's) fall into this category? No! Do Short Sales fall into this category? No!  In both cases the seller is typically just trying to unload the inventory.  So no, these sales do not fit into the definition of Market Value by Fannie Mae.  Why do Appraisers use these sale?  This depends on the marketplace of course.  But lets go back to the first to.  The buyer is acting in its own best interest and is knowledgeable.  So the question the Appraiser and Realtor must ask themselves, will this knowledgeable buyer pay more for home that is a traditional arms-length transaction when there are other properties in the marketplace that are available for much less but are REO's or Short-Sales.  If the answer is a resounding Yes, then use of those types of comparables in a report by the Appraiser to determine value is inappropriate.  But if the answer is No such as my marketplace as there are 1,000's of brand new homes available that are REO's, then the use of such sales is mandated as they do influence the value of all.  What if the answer is maybe?  I suggest a more in depth research of the marketplace is required.

I hope this gives the community some insight into the Appraisal Problem.  How can we work together as professionals so that neither is blind sighted by a "low" Appraisal.  The Realtor who's deal was "killed" and the Appraiser who is hated for "Writing the Obituary"

I've very much enjoyed following this conversation.

Kat Bryce
Florida -St.Cert.Res.REA RD-4424
Associate Member of the Appraisal Institute

Apr 19, 2009 02:16 AM #150
Kathleen "Kat" Bryce
Kathleen Bryce, Inc. - Fort Myers, FL

I would like to put this example to the community for input.  My Realtor friend called to tell me about a low Appraisal on one of her deals and wondered if I could help her out.  My initial research was not very promising.  I made this up and forwarded to her.

Chart of Fort Myers Homes in GEO area FM02 4-2009

What do you think?  It show some sign of recovery first quarter of 2009.  For what is worth the buyer had to keep trying and the deal did not close.

Kat Bryce
Florida State Cert Res REA RD-4424

Apr 19, 2009 02:26 AM #151
Kevin Appraiser

My things have sure changed once the influence of the realtor, loan orginator, and banks have been taken out of the equation.  Oh that's right it's illegal now to influence a appraiser.  In the past, get the value or you don't get any more work.  What do you thing the value would be.  Kill one deal every sales agent in the office is talking about you.  They then told the loan orginator you had better not use him or you won't get any more of our business.  What do you think the appraisers did.  They have been pushing value for years, which helped in the escalation of prices.  Got to keep the sales agents and loan orginators happy.  Let the crazy talk begin.  It's just crazy.  Realtors really ought to take some appraisal courses.  It might help you understand one and where those crazy adjustments come from.  Also you would be able to have a intelligent conversation with the appraiser, not just screaming at them.  I like the agents that can't explain how they came up with a asking price other than that's what the seller needs or wants.

Apr 19, 2009 04:41 AM #152

Isn't interesting that the people loaning money don't value a salesmans opinon.  Wonder why that is when they have money to gain out of there opinion.  Never trust the person making the money.  They are what you call, bias.

Apr 19, 2009 06:26 AM #153
Kathie Burby
Coldwell Banker Mother Lode Real Estate - Sonora, CA
REALTOR, SFR, Tuolumne County Real Estate Guide

Bryant - Great subject. I for one am glad appraisers are doing there job. Thanks to all the appraisers that included graphs for the areas they work in their comments. It was the best look at local markets in different areas I have seen in a long time. While prices are diffferent in the different markets trends do appear, all markets began the decline roughly the same time and the month of March 2009 shows an increase in sales. What data charts like these don't reflect is who the buyers are - we are seeing an increase in investor buying in our market. Prices in our market are now at 2002 - 2003 levels which more accurately reflect their worth.

Apr 19, 2009 09:13 AM #154
Kathleen "Kat" Bryce
Kathleen Bryce, Inc. - Fort Myers, FL

Kevin Appraiser.. How has your comments contributed to this discussion?  How have your comments made a change for the better, for our Profession?  For the Real Estate Industry?  Making general negative comments only dilutes what up until now has been a very healthy conversation. 

Tell us why the Realtor's yell at you.  What do you wish the community would do to understand us better.  Or what do you desire from Realtor's rather the yelling?  Please.


Apr 19, 2009 09:15 AM #155
Sonya Loose
Modern Realty - Beaverton, MI
Selling Waterfront in Gladwin & Midland County

Well appraisers in my area now have to attach a report to the appraisal because we are in a declining market.  The funny part is that we are coming out of it and are now declining much slower than before.  I'm just thinking this should have been done much sooner.  Homes that sold in my market 1 year ago would not sell for that price today so an adjustment would be expected.  If that is the reality of the market than the lender is deserving of the true picture.

Apr 19, 2009 10:55 AM #156
James Evans

When a subject property is located in a neighborhood that is declining in value. The appraiser should search for comparables sales that are as recent as available. If no recent (less than 60days- old) comparable sales are found, the appraiser must adjust for market conditions to reflect this trend. The appraiser must also adjust any active listings used to reflect list to sales ratios if any, this might be a positive adjustment in areas with excessive REO listings that actually bid up.

All appraisals as of April 1st, 2009 will require the new form 1004MC which addresses a more thorough market analysis. So the neighborhood section and sales comparison section must or should correlate to the results of this new form.

Apr 19, 2009 06:24 PM #157
Kathleen "Kat" Bryce
Kathleen Bryce, Inc. - Fort Myers, FL


Thank you for your contribution.  May I suggest that the Appraiser should ALWAYS use the most recent sales available despite the current market conditions.  But I will argue that and older sale that is comparable properly adjusted for market conditions is a better indicator of value than just recently closed SALES.  Yet, you wouldn't think this when one submit's their carefully completed report to the bank.  Especially the difficult assignments where their may be 7-9 comparables in the report as the property was a bit unique in the market place.  First thing that will happen is the underwriter will stip the report for two sales that have closed in the past 90 days and within one mile.  Often those may be the REO properties that you will see in the reports.  Fortunatly I do little lender work so I am able to use true comparables, not just sales that fit into the underwriters check boxes. 

The requirement to adjust active listings is a client specific request.  I seldom do that.  For what should I apply the typical list to sale price to?  The original price, the current price?  Is the current price reasonable or does the seller have their head in the clouds?  Too many factors their to measure, I just don't adjust the actives.  I may adjust the pendings if I can get enough information on them.  Again I don't do work for lenders very often.

Only FNMAE, FHA and VA appraisals will require the 1004MC form.  Get away from lender work and their is no need to fill form, however my MLS Rapattoni offers this form as part of their service and I've been utilizing it as it offers yet another perspective on the market to the research and reporting that I've been doing for years.

Appraisers, what's in your report?

Kat Bryce
St.Cert.Res.REA RD4424

Apr 19, 2009 10:55 PM #158
Jerry Hill, Network Real Estate, Inc., Little Rock, AR


I haven't seen or heard of that kind of thing happening in our market and really hope that we don't.  Those are some pretty drastic adjustments, even for this market.

Apr 20, 2009 04:54 AM #159
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Well this turned out to a great discussion.

Thanks to everyone for participating and a special thanks to all the appraisers.

Hopefully this post has helped everyone to understand more thoroughly how the appraisal process works.

Good job!!!!

Apr 20, 2009 09:19 AM #160

Yes, I've seen it happening.  Where more homes have sold in a comp market to investors under foreclosure, the occupied resale gets the bad end of the deal.  Good for investors, bad for the families who need to sell and get top dollar.

Apr 20, 2009 10:19 AM #161
Richard D. Ferris - Clermont, FL
Florida State Certified (FHA) Appraiser

Hi Byrant- congrats on 162 post so 163!

I am so glad to have been part of this discussion....even if the focus and center of it!  I have had good feedback from this - and today, I even got an FHA appraisal order from one of the followers here!   THANK YOU for the business and thank YOU Bryant for the expsore, and a connection I will value for years to come!


Richard D Ferris -
Fl St Cert Res REA #RD4088

Apr 21, 2009 10:49 AM #162
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Very cool Richard. I just posted this over on my main blog at as well. That blog is more consumer orientated so maybe you'll get some business from there too. I really appreciate all you did on this post to educate our peers. That's what it's all about. If I can ever assist you in any way give me a call. And don't forget your favorite Poinciana Broker when talking to those asset managers :)

Apr 21, 2009 11:12 AM #163
Greg Cook

Welcome to SOCal's world. If foreclosures are part of your market they "are your comps". I posted a couple of months ago on the Market Conditions Addendum for FHA appraisals and got a big "YAWN" but it seems more markets are starting to feel our pain.

Real world example: An inspired asset manager dictated a list price of $214,900 on a home in our area that easily comp'd at $270,000. The rationale was too "promote some interest". Needless to say it worked. There were 63 offers with the winning offer at $305,000. FHA appraiser brought value in at $270,000. However, review appraiser (everything out here is being reviewed) cut the value to $240,000 based on the low list price.

Value can also be cut be underwriting and underwriters are making a habit of asking for additional comps no more than 30 days old and then relying on newer comps if they are lower.

Moral of the story? A deal isn't done until it closes!


Apr 22, 2009 04:02 AM #164

We were informed months ago of this happening but don't forget it's not just ForeClosed Homes and Short Sales it's also all the AUCTIONS that are going on in the area.  This also is bringing down the price of many of the homes. 

Apr 22, 2009 11:53 PM #165

We have had two houses in the South Texas Area appraise for exactly $20,000 below the sale price.  One of them appraised $2000.00 under the tax appraisal district value.  After much hasseling we found out that the appraiser was using the last 3 sales in the neighborhood and the those were 1000 s.f. smaller.  The bank took the price and not the s.f. price so we had to sell a home for the same price as one that was smaller.  So is this the appraiser's fault or the out of state bank who said that is how they do it in Nebraska.

The 2nd home which i also the one that is under the tax appraisal also took older homes and made comparisons because that is all that sold in the area.  We were never allowed to talk to the appraiser so we don't know why he did this when we found newer comps to work with.

So I think the world has just decided to plan for the worst and put it on paper now.

Apr 23, 2009 07:10 AM #166
Liz Syvertson-Davis

This is interesting reading.  I didn't even make it through all of the comments!  Don and Richard, I do not use short sales or bank owned properties when trying to determine market value for an appraisal.  Short sales and bank owned properties are stressed sales and not good indicators of fair market value.  I go to other neighborhoods if necessary to find the most recent similar sales available, and explain that I did not use bank owned or short sales in the report, but note if there are some in the immediate market area...

Most of the reports are just plain ugly out there right now!

Apr 30, 2009 02:00 PM #167
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?


Bryant Tutas

Selling Florida one home at a time
Ask me a question
Spam prevention