Do you think appraisers typically make fair reports?

Question

I"m just curious. Do you think appraisers typically make reports strictly from data or do you think personal bias play a factor. Example: most sales data for a house is public record and do you think you get the same value for a house with a mortgage as you do with clear deed? Do you think a personal bias to neighborhood plays a role? Or do you think a cautious approach is taken over the entire industry because of previous bad appraisals a few years back that created the collapse. Just a topic for discussion. Thoughts?

Peter C. · Answer

@Dwayne Jones

In my experience it's extraordinarily biased. I've known appraisers who pick and choose specific comparables to anchor towards and specific price point. They actively fight against appraising at a high value, and, as others have said, can be frustrating to deal with.

I have seen instances where I see them do comparables 6+ months ago in an extraordinarily hot market (like Seattle recently), when obviously prices have gone up since then.

Levi T. · Answer

No worries.

You can absolutely operate like that, as long as they are coming in at the contract price or above when you enter and exit. With the type of deals I'm doing, they should be coming in much higher when we enter. We've done a lot of deals this year, crossing the 3.2 million mark this week, so I'm just looking at it from 30,000ft type thing.

Jason Hirko · Answer

@Dwayne Jones Appraisals are one of the most frustrating parts of my business - but it is an imperfect science and a lot of it is based on personal judgement, so I understand it. I have appraisals happening every day and appraisers that I prefer working with. But even my favorite appraisers sometimes send me a report that makes me scratch my head.

Dwayne Jones · Answer

Levi T. I respectfully disagree with some of your assumptions. You can't do good deals if you can't get the fair market value to close on the sale or purchase end. Also, you can have overpriced housing all day and if you can't get a mortgage based on the sale price because of appraisal value no closing happens. Even on cash deals most people want an appraisal or at least check local comps. I do agree most of the overpriced housing was caused by greed and unrealistic mortgage guidelines. Thanks for sharing.

Dwayne Jones · Answer

@Russell Brazil Thank you for your feedback and based on your statement knowing how to work with an appraiser shouldn't be an issue if you present yourself as a professional and respect the process. I'm very familiar with what goes into an appraisal and items that create value. But there are too many instances where the descretion of the appraiser is allowed due to lack of nearby comps or personal perception of the neighborhood. I built two identical homes four miles apart within four months and got values $55K different and when I got the appraisal report I told the appraiser. He said I should have told him before. Why? If the information is available why not be fair. Same company different guy.

Russell Brazil · Answer

If you are not getting good appraisals on a consistent basis it is because you don't know how to work with the appraiser. This is a skill that is hard to come by unless you are a full time agent who is working with appraisers 2 to 3 times a month. You have to understand what goes into their report like the condition adjustment scale, quality of construction sale, how to pull the proper comps for the property (which can be different comps from actually valuing the property), how to value certain features in comps with the appraisal in mind, knowing what features can created price adjustments and which ones don't.

Levi T. · Answer

There is a bit of the good old boys club with appraisers, your in or your out type thing with Dodd Frank, so they run the numbers by the books and don't get risky out of fear of losing work themselves.

I only do commercial loans. In most cases I have seen them appraise a property at the contract price. In fact, I have bought a lot of properties this year and they all came back at the contract price, except one. All these deals where $25,000 - $45,000 under market. Only one appraiser came back with a price that was above the contract by like 10k. Take it with a grain of salt, it is what it is, keep doing good deals and it really wont matter.

"appraisals a few years back that created the collapse" appraisals did not create the collapse, over priced housing and national greed created the bubble which had to collapse at some point and did. Now we are waiting for natural appreciation over time to slowly return us to them prices, it's been 10 years, we are getting close in some areas.Best

Do you think appraisers typically make fair reports?

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