A Push to Artificially Raise Property Values
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A new press release from Class Valuation, one of the largest US based AMCs, scampered across my office threshold on 5/17/22.
You can read it here in this link: Class Valuation Appoints EVP Of Valuation Modernization – NMP
But if you don’t want to muddle your brain cells very much, here are the highlights:
A new CV Executive Vice President has been hired to “focus on removing bias from the “equation” in appraisals.” I added the quotes. What the hell does that mean? What is this thing known as the “equation” in appraisals?
The release further says the EVP “will help Class Valuation play a role in removing bias” in appraisals.
OK, if truth be told, what exactly is the ‘bias in appraisals’ that must be removed? And if done, exactly how will that be accomplished? I’d really like to know, so please do comment below explaining what this is.
It’s actually a push by non-appraisers to eliminate the Sales Comparison Approach and using nearby properties as comparables.
It further states that CV “remains vigilant in driving scalable processes to offer continuous feedback to our partners with valuation gaps that are under or over the contract sales price.”
So let me see if I understand this: if the appraiser does not appraise the property at the contract price, no matter how ridiculous that might be based on market evidence the appraiser has researched, the appraiser is at fault. Because now a “valuation gap” exists that must be revealed to the CV ‘partners’, i.e., the CV lender clients who hire CV to ‘manage’ appraisers. If such a “gap” exists, wouldn’t that normally be explained by the appraiser in the report? Well maybe not, which it should be!
The final point of the news release is the newly appointed Class Valuation EVP will “…help eradicate bias in the system…”.
That’s just peachy and I’m waiting with baited breath to find out exactly what the “bias in the system” actually is. If you know what it is, please tell me.
The actual truth to all this ‘bias’ stuff is revealed in this PAVE Action Plan presentation slide from a HUD representative that was shown at the AARO Conference in San Antonio, TX this past weekend. Look at the right side of the slide:
The house symbol in the upper left says “Theof a home.”
Think about that for a moment. PAVE folks are going off the rails. They apparently believe the target market value is the CONTRACT SALE PRICE if the home is being sold. That’s what appraisers are being judged against.? The image to the right shows the appraised value vs the ‘presumed’ market value. This is where the
The PAVE line of thinking is the appraiser is at fault if the appraised value is something other than the contract price, normally meaning ‘below’ the contract price.
When you really begin to analyze this PAVE Action Plan against what Class Valuation has revealed, you can see the fallacy in what’s being promoted.
Most folks who study history know that nearly everything (especially financial) is cyclic, roughly every 10-20 years. In the last financial crisis running up to 2008, and earlier around 1998, appraisers were accused of overvaluing properties, which actually was encouraged by multiple players including the GSE’s using coercion and intimidation. Now the effort is AGAIN to have ‘us’ artificially raise property values. But the push this times seems to be “only for certain people.”
Guess what. The financial cycle, with a different ‘twist’, is repeating itself. Class Valuation and PAVE are among thethis time.