Preaching to the choir my friend. Preaching to the choir.

Jaydee, speak of the devil. This was in my spam box just this morning. What could go wrong? You can bet your bottom dollar the lender will be referring to census tract data. Because it is the lenders obligation under various lending rules to do so. The information contained is basically pointless from an appraisers practical point of view. The moment an appraiser even tries to use a proximity based research method over a quarter mile, census data is out the window. Most MLS systems do not even give us the ability to recreate these boundaries for research. See what the hype is all about, from the source itself. What a find, although it’s pointless to even save the link, most appraisers will never have any practical application to make use of this. Is this what the hype is all about, simple percentage expressions and median figures? Give me a break.

https://geomap.ffiec.gov/ffiecgeomap/

My hopeful career as a car salesmen lasted approximately 4 weeks. No matter how many sales I made, wedged out as the non compensated middle sales man, as half went to the initial sales contact which followed buyers for life, the other half went to supervisory sales persons whom managed teams. The only way to get a commission was to bring in new customers, whom you would profit from in turn for life, as long as they kept coming back. The game was to pass repeat buyers to new staff, and profit. Was a great program for old timers and established interests, not so much for new participators.

Unlike real property though, financing was always in the bag, which in turn represented the root cause for so much malfeasance and trickery in the sales process, hidden fees, all of that. When people ask for a sure thing in real estate financing, they’re asking for something which is impossible to honestly achieve. As soon as any parity scheme is implemented there will be a slick as oil salesman capturing every possible benefit, leaving scraps behind for buyers and sellers to argue about what a fair re re re distribution of remaining equity. They see buyers coming a mile away, by the time one gets to the door the salesmen are hands out in front of them so fast, you can feel the draft of the cool air conditioning even while standing outside on a summer day. An appraiser is different than a salesmen. The advocates for increased market equity are confusing what each parties actual purpose should be. If an independent appraiser showed up with a buyer on an auto lot, salesmen would hiss and screech at us like feral cats.

Specifically, one of the important educational goals for appraisers is to understand and educate others on the ‘different types of value’. Market value, income value, value in use. These proponents claiming appraisers are responsible for decreased values have had it too easy for too long, just freely interchanging value types as if there is some absolute there which appraisers never seem to hit the mark. Their argumentative position shortfall, is failure to define what type of value they are supposedly being denied.

Those lower priced properties represent better income value to investors, which is why big hedge funds and investment firms target areas with lower prices for their corporate acquisitions, which drives rental prices up for residents. This decreases value in use factors for residents, since they get less while paying more. Value in market is only realized during resale of the note, be that an open market sale or note restructuring in terms of refinancing. Value in market is not necessarily equally aligned with value in use, as is illustrated with lower pricing areas which if income would be proportionate, buyers would experience better value in use because they’d have more money to spend apart from mortgage payments.

You want to know the secret to the Joneses down the street? You know, the couple with all the fancy toys and big old house, all that flex cash. They probably paid more down or bought at a lower price point before appreciation, they pay half the mortgage payment compared to the next guy. They have a vested interest in not refinancing and not selling, as their value in current use is superior to trading, and their potential income value is also likely substantial should they want to subsidize an additional property acquisition. It is people whom bought more than they could afford, whom are struggling to have value in use, in over their heads with too high of payments whom seem to be drawn to needing higher market value figures to subsidize their lifestyles. That mindset should be appropriately identified as representing greater lending liquidity risk, something which should not be encouraged or promoted.

People decrying low market value figures have obviously skipped the value in use consideration. They’re demanding higher prices, higher monthly payments, and higher taxation to take hold in whatever locale this argument is proposed, which results in decreased value in use. What exactly is wrong with lower prices? I’ll look forward to a more detailed read of this document later. Thank you.

They claim we are biased when we appraise under the sales price, regardless of the market data and facts.

Great Comment. A couple of decades ago when I did residential mortgage work – when my value came in below the sales price i went back and went over everything – expending a great deal of uncompensated time, just to make sure I did not miss anything. I was very well prepared for the onslaught of nasty phone calls from the lender, agents, and even the home owners and buyers. But the good appraiser is penalized for doing good. Seldom did anybody want to know the truth. I sold new/used cars while in college in the late 1970’s. I quickly learned that many buyers liked and bought cars from those that lied to them. Go Figure?

Exactly! Is that based on what the owner thinks their home is worth? If that’s the new acceptable benchmark I’m just going to call the borrower for the value and send a transcript of that conversation to the lender.

At this point the buyer and lender are informed of the risk and then THEY can decide what to do with it. Can’t the bank loan higher than appraisal if the borrower is well qualified? Maybe the borrower will decide to bring cash to the table, if they can’t maybe they shouldn’t get this loan?
STOP making the Appraiser the scapegoat to FIX everything. I’ve done my job.. now ya’ll go decide what you want to do with my information.

But that’s just my opinion, I could be wrong.

Agree! How do you prove a value is an “under-valuation”? Compared to what benchmark?