Good on you, the form reports are to protect the FORM writer and that isn’t the appraiser. Tooo many differing reasons for value estimates to deal with a single format

Amen Chris,

Don’t use a form report with exacting box’s.

Maybe the lawyers correct, but maybe he’s not, shouldn’t we be prepared to argue in our report.

Well said Chris. You hit the nail on the head!

I have to tell you, out here in PA, a head reviewer for national lender  I taught, says he still see the worse appraisals. He thanks me every time I talk to him for teaching him the right way to do appraisals.

For all you non rounders….wait till have to sit in front of a lawyer and explain to a judge!!! You will get your ass handed to you ! We learned how to round in elementary school….remember ? Boggles the mind !

This morning’s paper reported a fire in downtown gutted a small furniture store to the point of tearing it down.

I won’t keep that file any longer as it represents an Uninspected property based on others information. This was for a MORTGAGE house in Spokane.

A recent Seller had carried back a First and wanted to sell the paper at a discount. There was no access from a friendly party.

“Back to the future”

We will see this kind of financing in the future because of; Buyers credit, growing interest rates, sellers greed, unjustified pricing, 1031 exchanges etc.

There was a strong market for discounted NOTES, the limits were from potential individual lender-investors. returned for commercial properties would range from 12 to 18% with payoffs from 3 to 7 years..

These transactions required the appraiser to analyze cash flow as well as underlying values Sellers were offered NET amounts, varying from hard costs coupled with rounded discounts.

I agree.

In the 1960’s FHA included allowable costs ($450) in financing sales. These allowable costs came to be included with the sales price and effected a compounded price increases welcomed by all. Until the failures in 1965.

Hopefully the world continues on

Mike, I think you are spot on in your analysis.

I’m fine with decreasing numbers as well, though disagree that we have gotten rid of the very worst yet…They are the ones still out there doing $175 full appraisals…or running the companies that specialize in $175 fee to appraisers.

Don, All should round. If for no other reason than not writing a misleading report by inferring a degree of accuracy that is simply not possible to attain in a market. ALL adjustments are supposed to market impact not merely some exact number produced by automated calculators, or appraisers that never learned about market-significant numbers. I’ve had cases, where the smallest adjustment made, was $100,000 because in those price ranges anything smaller wasn’t demonstrable.

With 32 years as an appraiser with 6 years full time before that as an agent, I never once saw a market-derived adjustment, ie one that replicated market perceptions that were exact to the dollar. It’s possible they exist, but I’ve never seen one dictated by the market rather than dictated by an appraiser.

As to which direction, absent a market dictate (and they DO exist), follow typical math rounding conventions. One example above was a cost-based estimate of $7,500…nothing wrong with rounding up to $10k at all – maybe the appraiser got three estimates or a range given to him/her. Up to their discretion as to round up or down…  We have all allowed ourselves to be pushed around by “UWs” far too long. (or those that pretend to be UWs). The whole point of rounding is that estimated numbers are not exact market reactions so much as they are market approximations.

Agree there are many ways to approach problem resolution.

If you are truly influenced by the securing offer in your analysis, why round, Why  Round down, Round up?

If you discover the seepage pit is on the next door property from a credentialed engineered.

Aren’t you bound to offer two values? One with costs, including odd amounts, the other one discounted for the awkwardness.

Lots of differing problems, lots of differing solutions. Only free thinking appraisers with lots of experience can be relied on to save the LOAN for a competing lender. That myriad of experience makes a difference for competing lenders.

Interest rates are increasing, competition among lenders also, guaranteed loans are being challenged. A lender with a justified appraisal in his file DOES justify your fee

Offering and doing the best we are capable of illustrates our WORTH, but only if we charge for it.

I’v done foreclosure appraisals in the past and the lender never had a copy, original or any thing resembling an appraisal, probably because it would have been incriminating.

Otherwise I concur with Mike, the question remains “which way tooo round up or down”.

A buyer can be winning negotiator, a seller can have a remarkable property, after all FMV is an impossible definition

Abdur, Of course our numbers have been dropping because before the last crash every realtor, brother, sister, cousin had an appraiser license. They did not want to hang when things got tough and they couldn’t make a quick buck. We got rid of the non-serious/bad ones and now we are at a good level. I personally do not want an over abundance of appraisers.

AVM = Bubble = Crash

Bill, I appreciate your thoughts. I appraised in the Sacramento Area of California and many of the tract home communities I appraised in didn’t show wild swings among competitive properties. I was getting concerned with how close Zillow got on a number of valuations I did.

The easy work is going to be eliminated. It’s inevitable. It’s the hard truth.

Also, context is king. The underwriter has to decide how much variance and uncertainty they are willing to tolerate. You transformed 4% into a specific dollar figure, but its still just 4%. 4% of a $500,000,000 development deal is a lot of money, but it still is only 4%. It’s all about perspective. If underwriting is fine with a 5% swing in either direction, then that’s their risk model.

I don’t know any appraiser who claims to be more than about 4-5% accurate. Again, if you are appraising within a tract home community with a bunch of model matches and maybe a 1% variance in sales prices, then, yes, we can be 1% accurate; but then, so would the AVM.

I don’t believe human appraisers will ever quite go away, but our numbers have been dropping nationally for about a decade now and I don’t realistically see that trend reversing itself.

2055 was a poor form suggesting a level of analysis rarely ever actually achieved or performed. Usually inappropriate for the specific property involved. If ALL that is desired is a drive-by then bring back the original 704’s (NOT the later versions). At least they didn’t pretend to be more than they actually were.

When lenders are whining to Congress and Regulators about high fees and delays, they dont admit their own part in taking old, highly efficient LIMITED forms and LIMITED processes and then over complicating them so that they could pretend they were ‘real ‘ appraisals rather than exterior drive bys only.

Mike, Absolutely concur re failure to round results. How can any appraiser be that lazy (or worse yet, that ill-informed?) At a minimum it suggests competency may be an issue. It’s also like a neon arrow saying “DOUBLE CHECK EVERYTHING CAREFULLY-AMATEUR HOUR.” Rounding is not a new concept. If common sense and generally accepted sound appraisal practices are not sufficient reason for appraisers to avoid doing this, then USPAP compliance should be.

Pretending to be accurate to a $1.00 is misleading. At minimum appraisers, PLEASE start rounding to $1,000 and preferably to whatever your markets show as ‘market significant’ numbers. In many markets, that may mean the smallest recognized adjustment could be $10,000 or even more.

Agree 100% re hybrids. They are ALL crap. No exceptions. As for the AVM above, any ‘client’ that uses it is a damned fool. There is insufficient unredacted data to double check the results but look at the range of sales prices for an indication of data credibility.

Those tract homes in CA you speak of Abdur, often vary significantly (+/- $100,000) at the time of sale, and of course can become wider or closer in value weeks, months, years, or decades post purchase. Again, its the powers that be that want the appearance (today, tomorrow, next decade) of homogeneous homes, but in reality from day one of purchase homeowners improve, or fail to maintain their homes that ultimately drives the true market difference ($$) at the time of a future sale.

Lastly, with higher prices in CA (My typical area +/- $900,000), that same 4.2% variance you spoke of results in value swings approaching $40,000 in my area.

Seek the truth.

Seek the truth.

AVMs will really hurt appraisers in areas of homogeneous tract home subdivisions. I appraise primarily in the Portland, Oregon area and we don’t have tract home subdivisions like many places in California (where I started appraising). The data up here is a mess many times, so appraising is harder.

Any appraiser surrounded by cookie cutter homes really needs to think about the long-term. AVMs will first eat up most of those valuations and then start coming for the harder stuff.

I fear it is all but inevitable appraisers will continue to decline in total numbers and the ones left will be the ones that are essentially data scientists working on gnarly and complex valuations.