Buyer in Watercolor

this thread is starting to remind me of on old george Burns saying that went something like...what people want is sincerity, and if you can fake that you've got it made.

to borrow a phrase from the early 1900's which might be called the buyer's lament: "In 04-05 we trusted in 07-08 we busted."

Appraisers were nothing but the market's Biyatches according to their testimony before the Senate Banking Committee in June 2007:


http://banking.senate.gov/_files/hummel1.pdf

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First of all, Shumer is on the committee that this was presented to and he is on a bent against WAMU for what he claims is appraisal steerage from a couple of e-mails of so called evidence. Secondly, in Hummel's testimony he states loan officers signed ordered and signed off on loan decisions, but Brokers made up 71% of the industry that pressured appraisers???? (Tells you something about his statistics)
Mortgage brokers do order the appraisal from Bank approved lists, but NEVER has any sign off ability of any type, the underwriter at the Bank does. This guy sounds like a girly man, I'm sorry. Boo hoo, someone told me they wouldn't send me business if they didn't get the value. The appraisers I have done business would never violate their code of ethics and standards of practice. I'm not saying there weren't guys like this, but if you weren't one of them, get a backbone already.
The only idea that Hummel presented that made any sense was enacting Federal regulations regarding intimadation and coercian.

IMO a sale is a sale is a sale. I don't care WHY they had to sell it, or the method of selling, it is still a sale. All the different conditions and variables just sound like fuzzy math to me!

IMO a sale is a sale is a sale. I don't care WHY they had to sell it, or the method of selling, it is still a sale. All the different conditions and variables just sound like fuzzy math to me!

Scooter, you make a point, but an Appraiser has other standards to which they must adhere, and they are the ones who do the appraisals. An appraiser might reply to your idea of a sale is a sale is a sale, with the following thought to ponder. What if a mother wanted to sell a property to her loving son, at a discounted price. She bought the Gulf front property in 1970 for $30,000 and now similar properties sell at $3million, but because she loves her son and doesn't need the money, she agrees to sell it to him for $1 million, making a ton of profit, and getting her son a heck of a buy. Should this sale, which is non-arms' length, be used as a comp for an appraisal?

Yes, it should be factored in and I should be given the son's phone number .

I realize that an appraiser must take into account many variables and shouldn't use anomalies. My point was that if you pick and choose your data to reflect what you think it should be you won't get a true comparable either.

I always understood from RE training that the value of a piece of property is created by what a buyer is willing to pay. The appraiser is hired by the bank to determine if the contracted price is valid. The value is set by the buyer. An appraisal is simply the process of creating an opinion about value by the use of accepted practices.

That is the way that I understand it, too. The appraiser is calculating the "appraised" value of the property. The subjective nature of appraisals is the reason why you will typically get three different values for one property, if you hire three different appraisers.

Therefore,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,318 sq ft in Watercolor is a comp because that is what someone offered and that is what the Seller accepted. If the builder was attempting to reduce his inventory, that's great. All of Walton County is attempting to do that. Should we wait until our inventory is substaintially reduced to start calling these transactions comps because they are selling for under what they used to? This is liken to, but maybe not as bad, Nortel stock selling at $89 per share and a few months later I picked it up at .64 per share. It is reality.

Therefore,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,318 sq ft in Watercolor is a comp because that is what someone offered and that is what the Seller accepted. If the builder was attempting to reduce his inventory, that's great. All of Walton County is attempting to do that. Should we wait until our inventory is substaintially reduced to start calling these transactions comps because they are selling for under what they used to? This is liken to, but maybe not as bad, Nortel stock selling at $89 per share and a few months later I picked it up at .64 per share. It is reality.

I agree that the $318 could be used as a comp but if a buyer presents a contract for a home in WC to his bank for $500 sq. foot, the $318 will not be looked at. Why? The buyer is making claim that this property is worth more because he/she is willing to pay more. The appraisers job is to now find comps using accepted practices that will work for this transaction with the new claim of value. It is very subjective.

I, too, agree that the $318/sf is a comp. When Thicket Circle closes in a month or so, it can also be used as a comp, and will look much better. I love how people get so hooked on the price per sq ft, that they forget to look at other factors like the total purchase price and type of building structures. Folks, it isn't all about the sq ft price. I will also remind you that there is much difference in the price of Mahogany flooring and cheep yellow pine. Add to that, the variance in all materials, design and quality, and you can have a wide range of costs per sq foot.

In the novel Real Estate for Dummies, it talks about an error in CMA's is often too much emphasis on Sq. footage price.

In the novel Real Estate for Dummies, it talks about an error in CMA's is often too much emphasis on Sq. footage price.

Isn't that more of a handbook? Or is it different from all of these?




I could go on, but nobody likes a beaten dead horse.

I think I'll go buy that today.

Almost forgot to add that the house, 12 Thicket Circle, closed yesterday at $1,005,000 ($393 per sq ft). 72 Thicket Circle is pending, and I'm guessing that it will hit at least $393/sf, if not a little more.

The dummy series are really helpful from computers to the bible. I found the RE one was just some simple basic knowledge that we all forget about sometimes.

The "Market Value" of a piece of property is met when a buyer is willing to pay a price for a property which equals what a seller is willing to sell it for... WITH NO UNDUE DURESS.

A lot of sales today are DISTRESS SALES (where the seller is under duress). Appraisal guidelines, when using the Market (Sales Comparison) Approach to value properties, specifically address that distress sales are not valid comparables. Period.

This does not mean that every sale today, where a seller is losing money, is categorized as a distress sale.

But properties sold at auction to avoid foreclosure, etc., are clearly distress sales. Also properties sold because the seller's back is up against the wall financially, can also be categorized as distress sales. I think the sale of the $318/sq. ft. property being discussed would easily qualify as a distress sale for obvious reasons (perhaps the agents should have stated that it was a DISTRESS SALE rather than saying that it should not be used as a comp.)

There is good, logical reasoning for not including distress sales in a Market Value Appraisal.

There are also many other adjustments that an appraiser will make when preparing a Market Approach appraisal... to equalize for differences among the comparables that he/she is using. Some of these adjustments may not be readily apparent to a novice and can include whether the property was sold with favorable financing (say, owner financing, which would tend to make the property sell for a higher price)... or if the buyer paid full cash, which may cause the seller to offer a price concession because they know that the contract is not contingent on financing, and it may close more quickly.

Appraisers will attempt to equalize for everything... and they are provided with strict guidelines that they must follow. If they must go outside those guidelines, they must notate and justify it in writing in the appraisal. All large loans are also scrutinized by a secondary, "Review Appraiser," from a different company whose job it is to make sure that the appraisal falls within the guidelines and that there are no obvious inconsistencies.

With all of that said... Is the industry flawless? No.

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But properties sold at auction to avoid foreclosure, etc., are clearly distress sales. Also properties sold because the seller's back is up against the wall financially, can also be categorized as distress sales. I think the sale of the $318/sq. ft. property being discussed would easily qualify as a distress sale for obvious reasons (perhaps the agents should have stated that it was a DISTRESS SALE rather than saying that it should not be used as a comp.)

There is good, logical reasoning for not including distress sales in a Market Value Appraisal.

There are also many other adjustments that an appraiser will make when preparing a Market Approach appraisal... to equalize for differences among the comparables that he/she is using. Some of these adjustments may not be readily apparent to a novice and can include whether the property was sold with favorable financing (say, owner financing, which would tend to make the property sell for a higher price)... or if the buyer paid full cash, which may cause the seller to offer a price concession because they know that the contract is not contingent on financing, and it may close more quickly.

Appraisers will attempt to equalize for everything... and they are provided with strict guidelines that they must follow. If they must go outside those guidelines, they must notate and justify it in writing in the appraisal. All large loans are also scrutinized by a secondary, "Review Appraiser," from a different company whose job it is to make sure that the appraisal falls within the guidelines and that there are no obvious inconsistencies.

With all of that said... Is the industry flawless? No.

Good info, SablePoint. I'd like to point out one thing. You cannot look at only the price per sq ft, and know if a sell was a distress sale. You might have a pretty good idea that it was the case, but many people sell for different prices for different reasons. That line of notes in the MLS is supposed to be reserved for tangible information, pertinent to the sale, according to the MLS. If a listing agent really wanted enter the info to most accurately convey the sale, she might add something like: "Bank forced sale," or, "sold for $300,000 below seller's purchase price." The idea is to be accurate, and not give a bunch of fluff. I, too often, see remarks like, "great sale, Sally," and that gives no tangible information about the sale. Appraisers and other Realtors, need to know specifics, not generalities.

Good info, SablePoint. I'd like to point out one thing. You cannot look at only the price per sq ft, and know if a sell was a distress sale. You might have a pretty good idea that it was the case, but many people sell for different prices for different reasons. That line of notes in the MLS is supposed to be reserved for tangible information, pertinent to the sale, according to the MLS. If a listing agent really wanted enter the info to most accurately convey the sale, she might add something like: "Bank forced sale," or, "sold for $300,000 below seller's purchase price." The idea is to be accurate, and not give a bunch of fluff. I, too often, see remarks like, "great sale, Sally," and that gives no tangible information about the sale. Appraisers and other Realtors, need to know specifics, not generalities.

I agree SJ. The price/sq. ft. is an entire other issue that has nothing to do with whether the seller was distressed or not. When I stated that it was obvious that it was a distress sale, I referred to what I consider to be obvious... it was a builder selling below cost. An appraiser, however, before declaring this a distress sale, should interview the appropriate parties to determine and document the facts.

The discussion on this board using price/sq. ft. as a basis of value sometimes borders on absurd. It's discussed as if that's the only determination of value. Whether a house is furnished or not, for instance, could conceivably add $25 or $50/sq. ft to what a buyer is willing to pay for a house (furnishings are not supposed to even count in the valuation of real property, but we all know it does reflect the ultimate sale price)... not to mention all of the other REAL PROPERTY assets/enhancements that make a house more or less valuable and desirable...

In the novel Real Estate for Dummies, it talks about an error in CMA's is often too much emphasis on Sq. footage price.

I think that is because some realtors don't know any better...it is hard to compare a property on paper unless you have visulalized the property to know the true amenities and updgrades. I know some realtors just use the printouts from the mls solds and that can be such a disservice to the home seller.

The "Market Value" of a piece of property is met when a buyer is willing to pay a price for a property which equals what a seller is willing to sell it for... WITH NO UNDUE DURESS.

A lot of sales today are DISTRESS SALES (where the seller is under duress). Appraisal guidelines, when using the Market (Sales Comparison) Approach to value properties, specifically address that distress sales are not valid comparables. Period.

This does not mean that every sale today, where a seller is losing money, is categorized as a distress sale.

And what do appraisers catagorize the value when they are "bullied" into "hitting the numbers" or risk being blackballed? Will that be catagorized as being appraised while "under duress?"



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In the novel Real Estate for Dummies, it talks about an error in CMA's is often too much emphasis on Sq. footage price.

Hah! I got a good laugh out of this for a little bit. I thought you had made a good joke calling it a novel. Like it wasn't anything like the real world. Anyhow will this "distress sale" list as a qualified sale at the pa site? If so then I as a buyer would want my agent to find another such distress sale for me to buy. I should think two years ago noone was "distress selling" at discounts.

And what do appraisers catagorize the value when they are "bullied" into "hitting the numbers" or risk being blackballed? Will that be catagorized as being appraised while "under duress?"
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Shel, do you personally know any appraisers that experienced this or are you citing what you read from the Senate testimony and maybe other on-line sources?

Having seen, reviewed, and ordered hundreds of appraisals, excessive duress has not been my experience. Bank approved appraisers stay on approved lists because they are conservative and find the best comparables so as not to have excessive adjustments for their final reconcilation. All of the review appraisers within the firms have advanced degrees and extensive continuing education in the appraisal sciences.
For some time during the refinance frenzy it could take a firm 3-4 weeks to get an appraisal back since they had more business than they could handle. If you had more business than you could handle, you had the luxury of being selective of your clientele. Some banks did not have an approved appraiser list but had a "blackball" list, but not the way you describe it. Blacklisted because they submitted appraisals that were basically crap, and would be tossed back if it was pulled for review prior to a bulk sale. More than often, I had appraisals that came in under value on purchases, and I've dealt with dozens of them, so they had no problem with NOT "bringing the value". There were times where with a unique property calls were placed if a property was undervalued. Case in point I had a buyer contract a condo that was converted from a movie theatre. The first appraiser came in significantly lower than the second one who had prior experience with appraising another purchase in the same condo.
The appraisers I talk to regularly tell me they are slightly embarrassed by some of the industry whining and lack of professionalism surrounding the "we were the industry biatches fairytale". I'm not saying they didn't get the occasional calls from peeved realtors, brokers or homeowners who saw their castle reduced to a realistic house.

Sometimes I just can't figure you out. On one hand you're criticizing appraisers (or the whole entire real estate industry) and at other times like this, defending a segment of the industry.

I still like you though.

Hah! I got a good laugh out of this for a little bit. I thought you had made a good joke calling it a novel. Like it wasn't anything like the real world. Anyhow will this "distress sale" list as a qualified sale at the pa site? If so then I as a buyer would want my agent to find another such distress sale for me to buy. I should think two years ago noone was "distress selling" at discounts.

Just having a little funn! If I was buying right now, I would be looking at distress sales. Most buyers are asking to find the best deals right now. Not all distress sales are the best deals. It helps to know and understand values in the areas you are looking at.

I agree SJ. The price/sq. ft. is an entire other issue that has nothing to do with whether the seller was distressed or not. When I stated that it was obvious that it was a distress sale, I referred to what I consider to be obvious... it was a builder selling below cost.

As I mentioned, I know the seller. What if I told you that one of the sellers was an attorney, rather than a builder? Would that be new information which might change your thoughts on the sale being distressed? I'm not saying that he wasn't distressed, but I'm saying that the comments need to stick to factual info regarding the sale.