Failure to Communicate
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It’s a line from Cool Hand Luke … a great old movie with Paul Newman. Newman played a prisoner in a jail in the Deep South. The story was all about Luke Jackson, played by Newman, who was sentenced to two years in a Florida prison farm. Well, Luke was a free spirit who didn’t play by the rules and this angered the prison’s sadistic warden. In one memorable scene, the warden said, “What we’ve got here is … failure to communicate“. That line was listed at No. 11 on the American Film Institute’s list of the 100 most memorable movie lines.
Appraisers are interpreters:
Appraisers deal with this “communication problem” every time they do an appraisal. You see Realtors, the MLS and appraisers do not speak the same language. We have to interpret what Realtors say and then translate their language into a language that all the rest of us real estate experts in the world use.
Example#1: Realtors talk “square feet”. Appraisers, lenders, Fannie Mae, Freddie Mac, mortgage brokers, FHA, VA, HUD, underwriters … all the rest of us real estate experts in the world, talk GLA (Gross Living Area).
Example #2: Realtors will say they just listed a 5 bedroom, 4 bath two story in Dreamy Acres. Appraisers, and all the rest of the real estate experts in the world, look at the same home as a 3 bedroom, 2 ½ bath two story with 2 bedrooms and a bath in the basement.
Example #3: Realtors will input a 2,400 sf Bi Level into the MLS. Appraisers and all the rest of the real estate experts in the world see this home as a 1,200 st GLA home with another 1,200 finished square feet below grade.
Example #4: A Realtor will input a listing into the MLS with a mountain view. The appraiser’s interpretation is B;Mtn; a suburban location might be a N;Res: a finished basement might be 1rr2br1.1ba0o (1 rec room, 2 bedrooms, 1 ½ baths, 0 other rooms). Guess what a 4ga4dw means.
Example #5: Realtors have no field to populate in the MLS for “Condition” but appraisers are not given that luxury. We have to give the subject, and all the sold comps, a condition rating of C1 thru C6.
The list goes on and on. You get the point.
Another interesting thing is that a Realtor’s language is “local” whereas an appraiser’s language, of necessity, is universal. A Realtor in Colorado will say a home has 2,753 finished square feet while a Realtor in Florida will say 2,753 sf “under air”. A Realtor in Kentucky would say that the home has 2,753 sf “heated”. Appraisers however, in all three states, will say the home has 2,753 sq.ft. GLA.
“So, what we have here is … failure to communicate” with Realtors and MLS on one side of the fence and appraisers, lenders, mortgage brokers, underwriters, Fannie Mae, Freddie Mac, FHA, and VA on the other side of the fence … all on the same page but speaking in different languages.
This “language barrier” can present problems:
The other day I had lunch with two old friends at Chillys. My friend Hal was a long time Realtor and my friend Jim was a seasoned appraiser. So, we all settled into a booth in the back of the restaurant and exchanged pleasantries, talked about our wives, our kids, and the Broncos.
I casually asked my Realtor friend Hal, “How’s biz?” “Well, he said, it would have been a lot better this month if Jim hadn’t blown one of his deals!” “Uh oh, I said, what happened?”
I just knew, the minute I asked that question, that I shouldn’t have gone down that road. I could feel this pall come over the lunch table.
Hal explained that he had listed this beautiful 4,000 square foot 2 story in Skyview Acres for $535,000. He said the home was built in 1963, had 6 bedrooms and 4 baths, a mountain view, a 2 ½ car garage, a shake shingle roof, and new appliances. Despite all that, Jim had come in $35,000 low which blew the sale! Hal’s face was beet red with anger and Jim’s eyeballs were rolling into the back of his head.
With a lot of trepidation, I turned to Jim and asked “What’s the deal”?
Jim, calmly explained that the appraisal “didn’t come in low, it came in at what the market value was. Hal had listed it too high”. Jim turned to Hal and precisely rattled off the facts: PA 56, EA 50, location Adverse;Industrial, View Adverse/Power Lines, 2S Trad, 3,000 sf GLA, 4 bdrm, 2.1 B, basement 1,500 sf/1000Fin, 1rr2b1.1b0o”. “Furthermore, Jim exclaimed, it wasn’t a 2 ½ car garage, it was a 2gd4dw!!
Well by now, both men had become rather exercised with beads of sweat dripping from their foreheads.
I turned back to Hal and asked, “Condition?” Without hesitation, Hal said, “Beautiful!”
Jim then turned to Hal and said, “Ha! FO!”
With that Hal stood straight up from his table, pointed his finger at Jim and said, “don’t tell me to F***k Off!” Hal then turned and stormed right out of the restaurant.
Perplexed by this event, I turned to Jim and asked, “Condition?”
Jim calmly said, “Yes, Functional Obsolescence, 35%!”
What we got here is … failure to communicate.