Purchase Season Protection
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- Bias in Automated Valuation Models - February 28, 2022
Our function as an appraiser is to estimate the market value…
Sale Season 2017
We are entering the sale season and the market is beginning to pick up. The velocity of the upcoming sale season will hinge on inventory; currently there is an obvious shortage in many submarkets. Be prepared to handle challenging scenarios. Strong demand and low inventory can lead to multiple offers and escalation clauses. Market predictions for this year forecast a higher volume of sales from 2016. Keep the following USPAP Standards as well as the Definition of Market Value, as defined in your report, in mind when contemplating purchase appraisal assignments.
- Standards Rule 1-3 (a) states that an appraiser must identify and analyze the effect on value of economic supply and demand as well as market area trends when he/she is developing an opinion of market value.
Comment: An appraiser must avoid making an unsupported assumption or premise about market area trends, effective age, and remaining life.
- Standards Rule 1-5 (a) states that when the value opinion to be developed is market value, an appraiser must, if the information is available, analyze all agreements of sale, options and listings of the subject property current as of the effective date of the appraisal. The corresponding comment is found in Standards Rule 2-2 (a)(viii):
Comment: An Appraisal Report must include sufficient information to indicate that the appraiser complied with the requirements of STANDARD 1. The amount of detail required will vary with the significance of the information to the appraisal.
The appraiser must provide sufficient information to enable the client and intended users to understand the rationale for the opinions and conclusions, including reconciliation of the data and approaches, in accordance with Standards Rule 1-6.
When reporting an opinion of market value, a summary of the results of analyzing the subject sales, agreements of sale, options, and listings in accordance with Standards Rule 1-5 is required. If such information is unobtainable, a statement on the efforts undertaken by the appraiser to obtain the information is required. If such information is irrelevant, a statement acknowledging the existence of the information and citing its lack of relevance is required.
Market Value – Refer to page 4 of the URAR form, the Certifications Addendum page of the non-lender form or the Certification section of your narrative report for the definition of market value. Paramount to this definition is the context established in the first phrase – “The most probable price”.
- Market Value – The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus.
Our function as an appraiser is to estimate the market value of the real property in a manner that is independent, impartial and objective. If the subject sells in 1-3 days, was it listed below market or is there a shortage of inventory? If there are multiple contracts per the listing agent, request them for review and summarize your analysis in your report. Regardless of your conclusion of value, whether it is above, below or at the contract price, you need to summarize the results of your analysis in a way that enables the client and intended users to understand the rationale for your opinion of value.