The “Property Prices Reach All Time High” Hype
“Property Prices Reach an All-Time High”
Oh really? The subject line is a press release headline put out by a national sales organization.
Do you buy into the hype, or do you actually do local comparable property market research to verify trends?
I just completed an appraisal on a property I appraised 2 years ago. I did a 5 year market study on comparables then, and found the market for that type of property had been DECLINING at that time. I did another 5 year market study on this same property this time around. And guess what? The property values for this type of property are STILL DECLINING.
For this particular one, the land held the highest component of overall value. In fact, the land value was 90% of the overall value. The lender actually called me today and understands, from reading the report, why my OMV is significantly lower than the contract sale price.
It’s paramount that we appraisers take the time to actually do proper market studies, based around characteristics of the appraised property, and not just accept what others say about “all” properties in an area. It means you cannot assume what transpires for “all” actually relates to the appraised property. The two may not correlate, and in fact, may be quite different. This is one jaundiced issue I have with some ‘regression’ programs being touted as the be-all, end-all answer to appraisal adjustments.
Another point of contention with me, and lots of other appraisers, is the extremely poorly designed Market Conditions Addendum, MC Form, as backing for trends. The columns do not properly correlate with one another. So if they don’t correlate, how can an assumption be made that the checkbox we mark is actually accurate for a specific trend? If we weight the cruddy MC Form highly in our reported analysis, couldn’t it be said that the decision we make based on inaccurate information is actually NOT CREDIBLE?
For most lending assignments, the MC Form must be included in reports, but it DOES NOT have to be relied on for trend info you report regarding your appraised property. I say so on the MC Form. But I also include a separate, personally developed and generated comparable trend chart & graph in every report, to which I place ultimate weight on my analysis decisions.
So, be careful about the ‘hype’ you see!