Mary's Blog

Mary~

I enjoyed reading your post about the appraisal situation in your neighborhood. Boy, as a REALTOR®, I have a very difficult time determining true value! Here in Miami, Miami Beach, Aventura, Sunny Isles- we do indeed have more than our fair share of foreclosures.

It seems that many agents are bsing "opinions of value" on the asking prices set forth by short-sale and REO listed prices. The "normal" seller has a snow balls chance in hell of competing.

I like your comment; "Appraisers do not determine the value of your home...Let me repeat this. Appraisers DO NOT determine the value of your home.....The MARKET DOES!"

Thanks!

Thanks Mary, excellent post.  When this mess started, our local appraisers were telling us that they didn't count foreclosures as comps to determine fair market value.  Things have changed a lot since then.

Excellent, Mary!

You are spot on again!
As a Realtor, it's very difficult to price peoperty at this time. In the mountains, we have declining property values due to 2 factors: Limited sales AND foreclosures.

A house and 20 acres would have brought $650,000 2 years ago- but in today's MARKET- it would be lucky to bring $399,000. Now when I take a listing, I encourage my sellers to go ahead and PAY a licensed appraiser- so that we get a true picture of market value and no one is "spinning their wheels."
I don't want to spend MY advertising dollars on a property that will not sell. And I have been encouraging folks that do not have to sell- NOT to.  Crazy- but true!

It IS a Buyer's market and it's a great time to buy.
I caught Donald Trump on a news show the other day and the question was "What's the best investment right now?"

HGis answer "Real Estate."
BUT- then he followed that with- yes- go DIRECTLY TO THE BANK, THEY ARE DYING TO GET PROPERTIES TAKEN OFF THEIR BOOKS!

Not so, Donald. People still need Realtors to work with banks as their advocates.
We go to special trining courses on REOs and foreclosures- and know that the banks WILL take less than what they are teling BUyers. They also force people to buy "a pig in a poke" and don't allow inspections, turn on utilities, etc.

I always enjoy your blog, Mary-

Keep up the good work- and KEEP ranting!
I do it more and more these days- It's a good business practice and most of the time, it's therapy!!!

Mary - this is really helpful information, since there is lots of talk and rumors about what is going on with appraisals these days. We clearly see areas where I am where there are very few, or no, foreclosures, and other neighborhoods where the bulk of the sales of these distress sales. Thanks for sharing your knowledge and perspectives with us. Keep it up!

Jeff

Mary--It is nice to read an appraisers point of view. Though few want an appraisal to take into account the neighborhood foreclosures, as you pointed out, if the neighborhood is full of them, you cannot avoid taking this information into account. I try to advise buyers to be cognizant of the number of foreclosures in a neighborhood because it will affect the value overall. Your post seems to validate that argument.

Mary - Great information for all of us to keep in mind. Although no one likes competing or pricing against foreclosures, they are driving the marketing right now.

This was a very interesting and enlightening post! I will certainly consider home values more carefully and not take a first appraisal as the last from now on.

Mary this is a great post for EVERYONE to read!  I try to tell my clients that appraisers and BPO agents are told not to use REO comps unless no other data is available, and it's hard for them to understand when their home is not in foreclosure... but you said it perfectly. A lot of neighborhoods are REO driven right now.

I'm going to print this and use in in my listing presentations if you don't mind?  I think it hits the nail right on the head with precise clarity!

For some reason my first comment was flagged as spam?   Hmmm.  Not sure why...

The biggest problem in my area is the over abundance of inventory that is either a foreclosure...REO or a short sale. When I do a CMA for a client not in that position...they generally want the value projected higher and I simply cannot because that 75% of them aren't a normal market priced property. they get pissed at us and the neighbor because we have to sell it lower than what they think they would get...that we are bringing down the neighborhood values when it's not our fault. The value that those homes got weren't correct in the first place and now it's causing everyone else to suffer. It makes not sense if you'll never get any offers unless it's valued at or below. buyers have that presumption unfortunately.

Hi Mary~ I really enjoyed seeing a appraisers perspective for a change.  Thanks for providing this insight for all of us!

I really enjoyed and appreciate your post. Excellent information here. This explains a lot and we do get arguments from sellers when shorts sales or foreclosures counted when appraising their house. This explains it. Thanks again. ~Rita

This is a very important article.  It deserves 2 gold stars.

I have found that listing agents are not using foreclosure or short sales in CMAs when providing valuations to prospective sellers.  That may make some sense in some areas, particularly in rural areas where there are few foreclosures. 

However, when I do market valuation for a buyer, those foreclosures loom, especially since many of the homes we're showing are foreclosures and short sales. 

Fact is, in some of our market areas in some price ranges, foreclosures and short sales ARE our market. 

Mary it's good to hear from an appraisor.  Whew....lots of good points.  Here in Phoenix we're flooded with foreclosures so there are many neighborhoods that appraisors have to use them as comps.  Other areas, not so bad, in fact pretty good.  It'll be interesting to see how it all shakes out this next year.

Anna Banana, Phoenix AZ www.annabananarealty.com

Mary: not sure I buy the use of foreclosures under any circumstances. They are by their very nature  DISTRESSED sales NOT indicative of true value regardless of the quantity.  This is wreaking further havoc as we have buyers ready to pay a retail fair value, only  to be BLOWN out of the water by BAD appraisals.  We fight, but once the bank sees a number, it is almost impossible to recover.  This has created a tailspin effect where the majorityof the  buyers use CASH that needs no appraisal and buy cheap, thereby driving prices further down.  Don;t misunderstand, I am taking advantage by being one of these buyers, but the entire market suffers.  I have a hard time believing that a foreclosure should EVER be used as a comp for a retail sale.  Our county appraiser certainly agrees!! But again his (or her) job is to keep (taxable) values as high as possible !!

Mary - it is great to read about this subject from an appraisers point of view.  Thank you for the information.

Hello ALL!I am so happy this was FEATURED and that you were happy to hear it from an appraiser's perspective. I really felt it would help everyone, so feel free to re post this or copy it and send it on.

Thank you ALL for your wonderful comments, I am so happy to help you out in this tough market. I know it has to be H E _ _ for many of you dealing with foreclosures that ARE defining your market. I do not envy your position.

So go ahead and hire an appraiser in your area and let US be the heavy for your sellers who just do not want to believe what you are trying to tell them! Go ahead and copy this post if you want and show it to them!

Again thanks for all your nice comments and I am happy to be the Appraiser Representative on AR! :)

"One thing I want to make clear! Appraisers do not determine the value of your home...Let me repeat this. Appraisers DO NOT determine the value of your home.....The MARKET DOES!"

Excellent point, I work frequently with an appraiser who is our board president this year and he uses the simple phrase, "It's the market."  And that's exactly what it is.

Good information to know Mary, thank you.  Many sellers will be relieved.

Mary-thank you for spelling this out very clearly.  I've tried to explain this to both buyers and sellers.  Our neighborhoods vary greatly and when I see a seller owned listing priced well above the foreclosures, when they are the predominant sales I wonder what the agent is telling the owners to come up with that price.

Well constructed message loaded with valualble insight from another professional perspective. THANK YOU!

Mary, Lot of good insight. Thanks for helping us understand your business a little better.

Hi Mary,

You post is very well written and very informative. At times I think some agents expect the appraisers to perform magic. It's obvious to all we're in a bumpy spot in the road right now and maybe for a few more years ahead. Seems like the same thing when it comes to qualifying for a loan, the redundancy is amazing.

For me personally, I can't ever do enough to provide accurate data for the appraisers I meet at properties. I'll turn over every rock I can to come up with as much as possible. Then hopefully the appraiser can just verify the info for him/herself to confirm the value paid by the buyers.

Thank you, Mary. One comment I want to add is that not all appraisers are experienced and knowledgeable in a particular area ( same thing goes for Realtors), and sometimes they use comps that are not the best match.  Even on a refinance, some don't ask questions about improvements, therefore they make assumptions about property condition "then and now" that may not be correct.

Mary,

What you've described is happening in my market.  A recent sale I financed, the comps were all short sales and reos.  they have become the market here in Boise.  I know several Realtors who tell me their clients are only interested in looking at reos or short sale situations.  Even on a recent refi, I had my appraiser bring the value in, only to have it cut 40k by Met Life's appraisal review. 

Mary,

     Very well written and informative - thanks!  Glad to hear you acknowledge that us Realtors DO get inside and get the full picture ;)  Also happy to see that you are one of (I hope) many assessors who will not cave to the big banks and perform your duties honestly and with integrity.  I am fortunate that our area does not see a whole lot of foreclosures and short sales. 

     Some day, when I get enough points, I WILL re-blog this!

Mary, Wow, that's great news about not using foreclosures, unless they over run the neighborhood.  I loved your statement saying the market determines the value of a property.  AMEN!    Good for you, standing your ground against the lenders.  Yes, the worm has turned now, hasn't it?

 Thanks for the great info. It's good to know we have you to stalk down if we need advice, lol.  You'll regret saying that :) 

Very good points and well presented. Good job!

-Tre

Mary,

Good info.  In our area the heaviest activity is in reo or short sales. If a seller wants to sell they must compete with those, so they have to be in the same price range.

Ver good post - I've always thought that appraisers who tried to do an honest job had a tough time of it.

Here in our rural area even tougher - because no 2 homes are even remotely alilke. They have to make a ton of adjustments and with those adjustments there's room for a whole lot of error - especially when they're getting pressure from the lender.

Historically, foreclosures in our neighborhood have pulled down prices on everything else until they were sold. Then prices/sales bounced back. 

Strangely, while always known as a depressed area, we aren't seeing an over-abundance of them right now - and not too many short sales, either. Perhaps because we didn't have many buyers who qualified for and wanted the crazy loan programs of a few years ago, and we did have some lenders who refused to put people into homes they obviously couldn't afford.

The other side of that is that Agents are telling me not much is selling - possibly because sellers are refusing to lower the prices.

I'm glad I left real estate to become a full-time copywriter. It's MUCH less stressful!

Best success to all of you appraisers and agents who are dealing with the current mess!

As to the markets,

as a buyer's agent, foreclosures and shortsale opportunities will definitely be leading the pack for quite some time.

As a seller's agent, realistic opportunity will have to include the knowledge of foreclosures and shortsales in any pricing scheme.

And then..........after all that messing around, it'll come down to whether or not the buyer will be able to get financing ---- that will be the final tally master.

As Mary said, the banks are looking for low ball valuations.

Excellent information!

Sounds good to me, our values are holding up pretty go over the dive of last year. I will be glad when the foreclosures are gone.

As an appraiser and a realtor, all I can say is, Mary....You Rock!

Mary-

fantastic post (neighbor!)  congrats on being featured and getting this info out there!

Great post Mary. I fully agree with you, especially because I work in an area that has predominantly short sales and REO's. Sellers who think they can sell at retail value are not being properly advised. What are retail values anyays in a declining market. Why would anyone buy a property that is $75,000.00 more than other similar distressed homes in the area.

When I attended property appraising school, we discussed this same topic in detail. When all things are equal as far as lot size, square footage, type of construction and neighborhood, etc,  a buyer is more likely to purchase the cheaper fixer-upper, to then add her/his own taste.

Granted, some people do not want to to perform any type of work whatsoever; nevertheless, I feel most people do enjoy getting a really good deal on a home and taking their time making it theirs by adding their own touches. Now, why should there be a vast difference in price from a distressed property and a retail one? In some cases, I have noticed the short sales and REO properties might even be nicer than the retail properties.

If the distressed property in a given neighborhood is an isolated case, then by all means, utilize what is the norm in your comps, within reason. In today's environment, such is not always the case in many areas. In South Florida, where the prices were hyperinflated and people overpaid for their homes to begin with, why would anyone pay retail price, regardless on how nice the property might be. We may not have hit rock bottom yet, and as a buyer, I would be completely insane to purchase what I think might be a good retail deal today, to only see a $30K decline in value the following year.

As a Buyer's Agent, I should have enough experience, foresight, education and information to give the very best advise to my customers so they make the absolute best investment decision. If it means utilizing distressed properties to formulate my CMA, then you can bet that is what I will utilize! And I complete agree, the Buyers determine market value.

I concur with all that has been said. It is extremely refreshing to hear the point of view of an appraiser. Sometimes we (as agents) are put in a very difficult position, especially if the property doesn't appraise. In my market, a lot of what has been selling has been foreclosed or short sale properties. This makes it very difficult to get "normal" properties to appraise, especially if there haven't been any normal sales in the neighborhood.

Foreclosures and short sales have definitely skewed the market. In our area, we have also had a lot of situations where the builders of new construction spec homes can't sell the properties so they rent them out. The result is that now not only the market to sell homes is totally skewed, the market to rent homes is also totally skewed and rents have declined.

A tough situation all around.

Judy Luna

Mary!  Congrats and well done!  I wish you had a sixth spot to post your blog here, but alas, it's good that everyone else gets a good chance to read it!

Mary....Like everyone else has said! What a great post! And I too will give you some credit by including a copy of your post in my Seller's Presentation Kit I use at listing presentations!

And it's true what one person said about where the appraisers come from....It would be like sending an appraiser from Midtown Atlanta out to do an appraisal on a lakefront home on Lake Lanier.....PLEEEEEEEZ! Do they really know what they are doing?

I had an appraisal done last year on a townhome condo, and he appraiser did not give any credit for the fact that this unit had a veranda and private entrance from the courtyard....the precise reason people liked (and pay) for these homes....condo living with the look, feel and access of a home. We won (to our Sellers delight) a hefty increase in the original amount!

Thanks for your insights into this most important part of the real estate process!

Thanks for your post.  I thankful was a broker who never pressured the bank but I knew a lot who did.  It is a sad state we are now in but the blame in my opinion lies with the loose lending criteria. 

Hi Mary; You have written a wonderful post explaining why and when an appraiser will use a foreclosure as a comp. Thanks!

Mary: Very informative post here. Lots of great information.. Thanks for taking the time to share

Mary, great info and thanks for the clarification. As a side note, people can keep the lawn/yard clean of a home right next to them and it goes a long way towards community morale which translates into increased selling prices every time! Take back your market!

Mary - Thanks for the informative post. As an agent in Scottsdale/Phoenix, we are seeing our share of short sales and lender-owned homes. One of the challenges I have been seeing is smaller neighborhoods with a small number of homes for sale and minimal turnover being impacted by 1-2 foreclosures, even though they represent only a small fraction of the total homes.  

Maryn ~

On spot - thank you for a very honest viewpoint of what is most important.  In today's real estate market we here in the Portland / Lake Oswego area have a few pockets but it should not dictate an up or down spiral.  Your very refreshing truth speaks volumes about your integrity.  Thank you.

Roberta

Lake Oswego Home Sellers

Mary-- Sellers often ask me "do they really use foreclosures to value non-distressed properties".  Thank you for all the clarification on this. 

Great post!  "We report...they decide" - true that we are just reporters in the market!  Very good points!

Mary:

Great post.  It goes hand in hand with one on one with one of my recents posts.  My home is worth what?  From now on, when I get the phone calls from stressed home owners, I will give them this post.

Thanks, Tere

Great post, Mary -

Banks scared - yes - I have seen appraisals come in fine; bank gets scared and has another one done which inevitably comes in lower and financing gets all balled up.  We scramble - so much fun.

Question:  If the market sets the price and we have a buyer who has offered to purchase a specific home for a specific price and the seller has accepted the offer - - haven't they just set the market?

As realtors, is there anything more we can do, after we are under contract, that appraisers find helpful and informative to your process in these oddball times?

Great post.  I knew that banks were directing the show even years ago and have heard numerous stories to support this.  It's good to know what's going on especially in GA.

Mary -

First of all, well written post. 

It is difficult for homeowner's to understand how their homes have lost so much value, but you are right... Neither you nor I determine the value the market does. 

Thank you for sharing your knowledge and expertise with us.

Mary,

   A super post.  Well written and extremely informative.  Great job on getting a Featured Post.  There is a lot of great things to add to my local marketing reports after reading this article.  I'll be calling my local appraiser and asking a couple of questions based on your information regarding our Virginia Beach area.  Once again great job.

Scott 

Mary - This was a very informative and much needed post at this critical time. In my area, it is hard to tell from the MLS what properties are foreclosures (unless explicitly stated in the comments), so when I am doing CMA's for clients, it is almost impossible for me to take them into account. All I do know is that the values in our town have been depreciating along with the rest of the country, and the foreclosures are a big part of it now.

Thanks Mary for a great post!  It certainly painted a clear picture of how the appraisals are being done today.  I have encouraged my sellers to have an appraisal done when the area has lots of REO homes and short sales.  I don't have a lot of confidence in my CMA's anymore! 

You are right on the money when you say..."Appraisers do not determine the value of your home...Let me repeat this. Appraisers DO NOT determine the value of your home.....The MARKET DOES!"

Please keep these informative posts coming!

Mary, Great article. The best part is " The appraisers don't determine the value, the market does" . I know in Virginia Beach the appraisers try their best not to use foreclosures or do take it into consideration. I think the worst thing that has happened to the appraisal industry is the process of banks ordering appraisals through a nationalized appraisal services. They are shopping appraisals to the lowest taker so in a lot of cases we're not getting the best or most qualified appraisers. We're also finding the experienced appraisers are turning down requests because the appraisal service wants them to do the appraisal for 50% less than their normal fee. Recently I had an appraisal assigned to an appraiser who had just moved to our state and had received her license through reciprocity. The problem was that the property was a 2 unit condo on the beach which is not a common property in the state where she was from. How does this help the transaction along??? I've spent 14 years building up my mortgage business with PROFESSIONAL appraisers who do a great and honest appraisal. We're now at the mercy of the Nationalized Outsourced Appraisal company. Just one more problem for the whole industry.

Your right Mary.  It is "sad but true" as far as home owners falling behind on there payments.  The banks and lenders will have to negotiate better terms for the home owner.  

The truth is that a property is only worth what someone is willing to pay.  Foreclosure pricing and non-foreclosure pricing is being set by the buyer and the sellers needs. 

Good post Mary, I do a lot of BPOS and can't tell you the number of times the asset manager has come back saying 'your numbers are too high/low' Well if they wanted a particular number, they should have done it themselves. Comps are comps and those numbers don't lie. They either sold for a certain amount or they didn't. I am seeing more and more valuations come in below what the home could be built for too. Appraisers, agents, banks etc. The upside of this is the fact that when inventory sells down, due to the skimpy number of housing starts and lack of building activity, the prices will rise again. Hopefully, not to 2005/06 levels though. There needs to be some realism here too.

Your flip-flopping on the issue. The banks are dictating?? Well then that takes out the 'unbiased' part of your job as an appraiser doesn't it.  Who cares what the banks think about the market - there job is to lend money and they obviously don't do that right either!  The market is what it is - where it is.  I get upset when there are no other comps but foreclosures because right now that is all that is selling.  There was an odd comment at an office meeting recently where one agent said that 'it is our job to keep prices up for the sellers'.  Huh?? Where is that rule in life? Buyers set the market just as you say - there is nothing that Realtors or appraisers can do about the slide downward.

Hello All, thanks for all your comments and by the number of them it is very clear that this is a very real and troublesome issue. This is why I wanted to put it out there so there was no confusion about how appraisers SHOULD be conducting property valuations.

Lyn: I am not flip flopping. I am just telling it like it is, as part of my post I stated I have lost business because I will not let banks dictate to me...just to clear this up. I agree we should care less what banks think, but they are our client and appraisers must walk a fine line! This is why the NEW HVCC which takes effect May 1, 2009 was developed in part. Which leads me to Dave's comment

Dave: Bingo on the AMC's(appraisal management companies). Due to the New HVCC regulations, which I did write a post about here:  http://activerain.com/blogsview/492320/How-the-New-Fanne-Mae-Freddie-Mac-Appraiser-Regulations-HVCC-will-affect-YOUR-business banks are going with these companies to distance themselves from the appraisal ordering process. This is a problem as you noted for many reasons.

There may be a way out of this. Our appraisal software company Alamode has the Mercury Networkwhich will act like an AMC but NOreduction in fees. In this world you get what you pay for and yes the AMC's want to pay us 50% of our fees. I only work for a few of these companies for this very reason. 

 If interested in the Mercury network for your lenders send me an email. You can have your lenders sign up, set up their own appraiser fee panel and then send appraisal requests which will go to those appraisers the banks select and still comply with HVCC.

Lynda: I quote: "For me personally, I can't ever do enough to provide accurate data for the appraisers I meet at properties. I'll turn over every rock I can to come up with as much as possible. Then hopefully the appraiser can just verify the info for him/herself to confirm the value paid by the buyers."

In answer to this point and some other questions here, sure if you have sales especially recent ones that are not showing up on FMLS or MLS or was a private sale that you know about that we many not have access to as it has not yet been recorded, then we will accept this information no problem, however, appraisers have access to the same information you do and we do not just verify and confirm what Realtors have provided to us. Sure in essence whatever a buyer pays and a seller accepts determines market value, but sometime we are dealing with UNINFORMED or uneducated buyers out there and just because the sales price is $200,000 that does not mean we will make the appraisal work and appraise the property for $200,000. It could be lower or higher!

We appreciate your help, no doubt, but we are still not to be swayed one way or the other by the sales price, we must make sure that the information Realtors have provided us are truly comparable. I have recieved sales and listings from Realtors many times and sadly they are far from being comparable to my subject property.

Thanks again for all your commentary and I am glad that is has been helpful!

Mary

Congratulations on being an ethical appraiser.  It is refreshing to hear someone who stands up for what they know is right and true for them in the market!!  It is sad how the banks and more specifically the people who represent the banks want what they want when they want it for no regard to the reality of the situation - putting a square peg in a round hole.  I think that if more people worked like you do, Mary, then at least a larger group of responsible decision makers would be hearing the truth and not just what they want to hear.  Good luck in your endeavors!!  Best, SM 

I appreciated your post.  However, there is more.  First hand experience.  In the middle of a refi. Using Countrywide, which I would not recommend to anyone.  They orderd the appraisal.  I recieved a call from the appraiser, he lived and worked on the other side of the state.  I made some calls.  They cancelled that one and ordered another, this time using a local appraiser.  The appraisal came in $100,000 lower than a recent CMA, which was based on recent sales in our nieghborhood. I wanted to challenge the appraisal.  Here's where the clincher comes in.  Their polocies do NOT allow anyone to challenge the appraisal.  The company who does the appraisal is owned by Countywide.  Is it just me of does something smell bad here?  For more on this whole fiasco check out my blogs.  Caution: Only those with a strong stomach should look at that blog.  Oh.... almost forgot, the first appraiser was cancelled but showed up anyway. He called my office and told me that I was a "no show" and that he would send in the pics he took.  I informed him that he had been cancelled and asked, "if you call me a no show do you get a fee anyway?....... silence on the other end......... "well, I get a trip fee". 

Does anyone out there have any sense of right or wrong any more?  Is there anyone acually more concerned with ethics and morals than they are with the almighty dollar?

You Wrote... Appraisers do not determine the value of your home...Let me repeat this. Appraisers DO NOT determine the value of your home.....The MARKET DOES!

I think we could use some bumper stickers that say this =) 

What is sad is that there are agents that ignore the comps if they are "distressed sales"... foreclosures, short sales etc - because they feel the property sold below market value. Hmmm, I still don't follow that train of thought at all. Thats like saying we shouldn't use any relo properties either because the owner's needed to move out of state.

Property News Today is an international news website. We are looking for local property professionals to become on-the-spot reporters.

Are you a property professional?

Our property professionals create and cover a wide range of topics, from local to global, and comment on the top news stories of the day. Anything and everything in the world of property is featured.

If you are an estate agent, realtor, mortgage broker, or local property developer, sign up and become a reporter today.  It only takes a few minutes to sign up and then you can post your news on the site. We proofread all articles before they go live on the website.

The benefit to you is that our visitors get real local news as it happens and you get to promote yourself and your brand at no cost. Call it a free PR service to reach 1000s, if not millions, of potential customers.

You can post videos and news, and blog about what you think is relevant in the world of property.

Join our team and post your article. We want to know what is really happening in your local property market.

Subscribe via email or RSS, browse our archives, or find Property News Today on many off-site destinations like YouTube, Tumblr, Twitter and Facebook!

Patricia: Love, love that idea on the bumper sticker!

L.J.There is definitely a SNAKE in the woodpile on that story! With the new HVCC coming along, the only way you will get a new appraisal ordered is if the first one is determined to be FLAWED. So you can protest, you just have to have good documentation to back it up.

I just learned today though that the National Brokers Assoc is suing over the HVCC, so stay tuned!! I will keep you posted

"The National Association of Mortgage Brokers (NAMB) filed a complaint against the Federal Housing Finance Agency in February 2009 regarding the Home Valuation Code of Conduct (HVCC), claiming the HVCC will force mortgage brokers to rely on lenders and their affiliates to obtain appraisals for customers, drastically reducing the ability of brokers to provide consumers with an efficient cost-effective means of obtaining a mortgage. 

The suit claims this will disrupt the established business practice of mortgage brokers, decreasing the efficiency of the marketplace and increasing costs to consumers."

  I think it would be wonderful if our local MLS would/could do automated CMAs for us based on the information we typed into the system and on the market for that particular address/date.  That, in effect, would save us a lot of time racking our brains for what we think could be the best comps.

I 2nd what you said about the comp situation in relation to REO sales.  I also want to point out that other value issues can also influence which comps the appraiser might use.  As a certified residential appraiser & agent I realize that sometimes its just not easy.  Say you have a neighborhood with a few REO sales, but most are still regular sales.  However; the REO sales are typically in less than avg condition while the regular sales are at least avg if not in good condition.  This is not uncommon.  Then you get an appraisal assignment in that neighborhood for a homeowner who has a house in need of some rather significant repairs.  Which comps are the most similar to the house you are appraising?  Yes, probably the REO sales, even though the one you are appraising is not an REO.  One of the main principals found in appraisal is called the "principal of Substitution", which states that a buyer will not typically pay more for a property than what they can get an equally satisfying substitute for, or something like that. So if you were a buyer in that neighborhood looking for a house to buy & fix up, would you pay more for the regular one that needed work just because it was not a REO?  There might be other considerations, but probably not.  The appraiser would probably want to include non-REO comps in the report too & adjust for condition. 

Some of these value issues we have to deal with in this rapidly changing market are not always easy.  Sometimes we have to put different hats on while doing our analysis so as to see things from different perspectives.  But never forget the principal of substitution.  It will guide you through some tough analysis. 

Craig Chapman, certified residential appraiser / agent,  Mesa  AZ  accessappraisals@msn.com

Craig: Of course, absolutely I totally agree!

Many do not realize just how much analysis goes into one single report especially in today's marketplace. They see us inspecting the home and leaving thinking that was the easiest $300.00 or $400.00 dollars that appraiser made....but I am quick to advise that my inspection is just the tip of the iceberg. What comes after that in order to put together a credible, USPAP compliant, non-misleading report is the HARD part and takes much longer than the inspection process, I know you will agree with that!

Great post Mary!

This information is invaluable for anyone regardless of whether they are buying or selling.

Congratulations on your featured post status.

Well deserved!

I can truly say there has been a ton of compelling and well-thought out posts on here. I do feel that we, as real estate professionals cannot determine value, as the market always dictates that. I fully agree with the Principal of Substitution noted here by Craig, as I also stated in a prior post on this blog.

Other factors to consider are supply and demand, and competition, which are a basic principles in economics. Further, we also need to consider the line between the costs associated of owning a property vs. renting, and where is that breaking point. We are not the price keepers, rather facilitators in ensuring a fair and equitable process for all parties concerned.

Best Regards,

Tony

It is very hard to determine value for many reasons. Market Value is not only based on other comps.  I find it depends on the buyers motivation. If someone has a deadline to get moved they will almost always pay more. Investors will always pay less. If Appraisers could tell not only what was paid but who bought and why, it would make a lot more sense. I'm quite familiar with the car business and you have Retail, Broker, and Dealer prices. It's quite common to have a 40% spread on the same vehicle. Houses are becoming the same way. Investors with cash can get a bank bargain on a ditresees property and when it gets posted as the selling price and used as a comp it hurts the value. I know there is no simple solution but somehow adjustments must be made to the system. Maybe Appraisers could give a Retail Owner Occupied Price and a sell it today Investor Price opinion. Then the Lenders could decide how much to lend based on who is buying.

Just a Thought........

Dale: In today's market many times appraisers are called upon to give a "fire sale" value in other words lets say the typical days on the market for a home is 120 days (that would nice!). They want the typical market value and a 30 day market value for a quick for fire sale.

Also when we appraise property if foreclosures are not influencing values significantly,we do try to use what we call arms length transactions involving true market value, which means you have a willing buyer, a willing seller, who do not know each other and under no undue duress involved ie; impending divorce, foreclosure, have to move due to relocation, etc. and the home has had adequate exposure on the market.

I agree the reasons for the sale and the buyers involved ie; investors can have an impact on the value of the home and we should understand these circumstances and find out if there were any extenuating circumstances involved.

So what you offer as a thought is already being incorporated in our day to day appraisal tasks and it really depends upon the needs of our client as to which approach we are going to take in the appraisal report.

Thanks again to everyone for your great discussion here and commentary, I can see it really sparked some interest.

Mary Thompson - Your Active Rain Appraiser!

Here in FLordia they have definitely gone in paranoid mode. 3/2/2 1500SF Houses that were selling for $180 K, now getting offers for $90K, don't sell because some appraiser only gives it $45K..

Great information.  I'm incorporting parts of it into my listing presentation.

MIKE: Fantastic IDEA!

Mary Thompson

www.marytappraisals.com

Mary

I have a problem I hope you might help me with. I have been searching all over the web for answers and came across your blog. HARP..We qualify for Harp as we have not been late on payments and Fannie has my mortgage. We just applied to do the refinancing in order to get the 4.8% fixed and get off the 6% 5 year arm. We took the arm for one reason. Our home in Florida had a pending contract when we purchased this one. We paid 370,000 and put 70,000 down in August 07. I am in Paulding County Georgia. 2 days after we closed here, the deal there fell through! That was 18 months ago..My husband is still there and I am here busting it in order to pay 4,500 in mortgage payments. The arm was fine, since we figured after the sale of the house in Florida, we could decide if we wanted to drop that junk and refy or not. Anyways along comes HARP. I pd 350.00 for an appraisal and she was out last week for about a half hour. We bought through Wells Fargo and had been looking for  a year around here to buy. We knew the market had fell and we were comfortable figuring it didn't fall below the 295,000 we owe.

Yesterday the appraisal came back at 257,000! and I blew a cork! I owe 295,000 and needed that in order to qualify for HARP, I knew property values had dropped but there is noway I can accept that it dropped 30+%! My Home being a custom built home 3200 sq.ft. in the 350,000 range can not be compared to a 250,000 2000 sq.ft. cookie cutter builder grade home, you just can't adjust for that correctly.

Everything in paulding county that I have searched says 10-12% drop, so I knew we would be fine. After looking at this appraisal, we find she used the house across the street that sold in Aug 08 has a foreclosure for 245,000. not only is it a foreclosure but it is a Builder grade home on 3 acres that needed about 30,000 just to fix back up. Ours is custom built on 3 acres by the builder who built it for himself. It is solid and has all the upgrades. She also used one up the street, another builder grade that is on the market for sale at 250,000. She used 2 others that are up for sale and 2 that sold in August 08. I am not in a neighborhood where everything is cookie cutter. We are on one street and everyone has acreage and all homes differ. There really is no comps that even can be used on this street. All the homes she used sold or are for sale, for less then 250,000 and they are rightfully 250,000 homes. I have no problem with that and don't degrade them in anyway. They are neighbors and everyone keeps their houses up, if they don't all the woods hide them.

In Aug 07, the comps that were used on that appraisal were 350,000 to 400,000 and homes that were up to a couple miles away as we are in the woods and there isn't allot of homes within the mile. BUT those houses reflected more of what my house is. My house is not a 250,000 home!

After looking this over some more, I see her description of mine is wrong also. She has marked 1 story, I have 2, she marked 1 fireplace, I have 2, she marked Public GAS, I have Electric, she marked sewer, I have septic, She marked fiberglass baths, I have marble, She marked pull down stairs to attic, I have walk in through standard size doors, she marked frame siding, I have Hardiplank, She marked Screens/average and I don't even have screens, they are on order but she don't know that. She gave me 2,000 for upgrades, I would assume that covers the granite counter tops and custom solid Oak Cabinets..are you kidding me?

So my thought now is if she can't even get the description right how on earth could the appraisal be right? Why weren't homes in the 300,000 to 400,000 price range used? There is a huge difference between a 250,000 home and a 350,000 home and it's just not all about square feet. I have 3200 heated and 1900 in the basement. If you use the dollar cost for that, it comes down to 80.00 a square foot, less then all her comps she even used. I have 8 rooms, 3 bedrooms and 2-1/2 baths, hardwood and tile floors, nice smooth ceilings, no popcorn, crown in every room even on the porch and around the outside of the house. Bathrooms and Kitchen had been upgraded in 06-07. I am just so livid over this. This is our retirement home, we are not selling, we are staying here. BUT I needed the 300,000 in order to refy. I was a Realtor in Florida back in the 90's before all the boom and I know everyone thinks their house is worth more then it really is. Like I said I thought realalistically it would have dropped to 325,000 or somewhere around there, but 257,000 is a insult to my intelligence here, and there is noway homes have dropped that much in paulding county. Yes there is allot of foreclosures, the bulk of them are the lower end homes, that do not affect the higer end as much and they aren't even around me. Our mortgage guy is the same one that we used when we bought the house in Aug 07 and he was shocked, he has not seen one come in this bad. He was scared to even call me over it.

I just feel she did not do this appraisal correctly, given the comps and the wrong info in our description and want to know what I can do about it? There has to be something, this is basically certified by her to be as accurate as possible and it isn't even close.

What is my recourse here? I can not afford to miss out on this HARP program for this reason.

Sorry so long, but I am still fuming! When it comes to messing with my family or my money, I don't take it to well!

Thanks, Marilyn

Great post Mary!

I can't find the certificaton regarding the issue of "distressed" properties; however, in the definition of Market Value, on the AI form, the number one item is that the "buyer and seller are typically" motivated.

In a bank sale, the seller ususally is not.