| |||||||||
| |||||||||
Chief Appraiser Blog |
|||||||||
Recent PostsArchivesCategories« Knowing What It’s Not | Home | History In The Making » Market-Tested, Appraiser-ApprovedBy Bill Waltenbaugh, SRA | March 9, 2010 General Mills, a large cereal manufacturer, has been using the slogan "Kid-Tested, Mother-Approved" for years. And why not? It works! It conveys the idea their product is good and desired by their target audience, kids. It also passes the scrutiny of mothers who desire to feed their children something healthy and nutritious. Why buy something good for you if you're not going to eat it, and why buy something tasty if eaten every day makes you unhealthy. Similarly, when an appraiser considers comparable sales, they also need to find market tested properties. In other words, something offered to the open market and, through time, subject to the collective judgments of its participants. This also provides an opportunity to examine the history of each transfer and scrutinize the motivations of the market. It seems each organization has their own slightly different variation regarding the definition of market value. However, practically all mention the importance of "reasonable exposure in an open market." This makes sense, since an opinion of market value is based on objective observations of the collective actions of the market. If a property has limited or no exposure, it's difficult to discern the market's overall motivations. This is why MLS is a favorite data source among valuation professionals. When a property is listed in MLS it is exposed to a large portion of the subject's market. More importantly, it is targeted toward the most significant segment, people who are considering a purchase. However, just because a property is listed in MLS, it doesn't mean it is an arm's-length-transaction. These transfers need to be, if you will, "Appraiser-Approved." One of the ways to verify the incentive of market participants is to study a property's listing history. Most MLS providers allow valuation professionals the opportunity to do just this. Given this chance, the appraiser needs to ask questions such as: • What was the original list price of the property? Answering these questions and applying a little common sense will, when needed, prompt the necessity for additional research and explanation. This can usually be accomplished by calling an agent or another participant in the transaction. General Mills' slogan has stood the test of time because it addresses the clients' concerns. A Market-Tested, Appraiser-Approved report does the same thing. Take the time to thoroughly investigate marketing times and listing history for the subject and comparable properties (listings and sales). Doing so is a step in the right direction toward producing a well documented and supportable report. Topics: Uncategorized | 2 Comments » 2 Responses to “Market-Tested, Appraiser-Approved”Comments |
|||||||||
| |||||||||
March 9th, 2010 at 4:40 pm
I agree that the more data, the more credible the opinion of value. But unfortunately when turn times and fees are being cut time and time again, there is not enough time to do all that we may want. Completing a listing/transfer history for the subject is absolutely necessary. Doing a complete history search for all listings being considered as Comparable sales can add another hour or more to any given assignment and that assumes all data is offered on the web (lots of small counties do not offer this luxury).Conversations with listing Realtors can offer lots of information, but they often times don't have all the answers to the above questions. I am not sure what the answer is….if an appraiser does all that he/she would really like to in preparing a 1004, he/she would be likely to make more as a greeter at Walmart. It is in these times that I envy the general appraiser who seemingly can take all the time it takes to arrive at the answer,with a fee that supports a complete research time.
March 9th, 2010 at 4:41 pm
Market Tested……………I have to say it makes me laugh evertime I see these comments from appraisal management companies as they are the culprets of most of the bad appraisals and appraisal practices I review these days with their required quick turn times. It has been great not being presured on values but the current quick appraisals for management companies is far worse than past presured mortgage values for mortgage companies. Appraisers are not given suffient time to conduct proper appraisals. Most appraisers used to do all the things that management companies are now asking for but stopped doing them as they were not given sufficent time on assignments. Know one is verifying sales, everything is a stock comment, there is no more standard appraisals and appraisers wasting time on the required facy addemdums instead of values, and poor comparables are being used as appraisers have to take photos of what they think are comparables before they even see the subject because there is not enough time to go back out to take the photos of the approprate sales. Congress has done it again; screwed up another industry by taking payoffs from special interetest groups to drive the Appraisal Proffesion into the ground. It has just led to appraisers losing 1/3 of their income to produce far inferior products. I am so glad the majority of my appraisal work does not invlove management companies as I do not want to have to give up the quality of my work so someone can impress a mortgage company with how quick they can turn an appraisal around. I am also pleased with all the review work I am getting due to all the poor quick turn appraisals.