All Forum Posts by: Phillip Dwyer

I've had good luck with the networking organization called BNI. LeTip is a similar networking org. These groups force you to focus on refining your ability to explain what you do in a short period of time. This is a great way to build a referral network.

Chris Clothier I read the same article online. Congrats on the coverage.
This thread has been a great dialogue. Thank you Chris and J Scott for the opportunity to discuss this issue. Appraisals will always be a hot topic in a volatile or changing market. It's not likely that I'll change the minds of the other debaters, so I'll end on one last thought. Appraisers are hired by their clients to help the client solve a problem or question by developing an independent and unbiased opinion. Naturally, when parties to a transaction that have incentive for something to happen (commission, profit) or not happen (i.e. foreclosure, bankruptcy) have to deal with an appraiser that has specifically been tasked to give an unbiased/independent opinion (the appraiser doesn't care if the deal happens or not) there will be many times when the parties to a transaction will be disappointed. In theory, appraisers should only care about completing the best appraisal possible under the assignment conditions. Since we're all human (for now) appraisers are still susceptible to be skewed by events that occur during the process. However, I think most appraisers take their role seriously and professionally, and try to keep the other parties at least at arms-length.

J Scott, I respect your opinion as well. I'm really enjoying the back and forth we've got going here. Unfortunately, my wife is calling for me to get the to-do list done. I'll be back for more soon enough.
Enjoy your weekend!

J Scott was it not your choice to drop the price to $107,000? This was not the only choice. You could have held firm, you could have offered concessions, you could have held out for a stronger offer, etc. If you knew there were 50 other buyers out there, why take the first offer that you know will have issues? If demand is really that strong, then there should be a buyer that can close at $112k.

Back to the definition. The first line mentions most probable price. It doesn't say "THE price a buyer and seller agree upon." It says most probable.

Try the online public records if your area has that.

Rob K, I like your example of a recent deal you just landed. I would guess in the Warren market that homes that were selling for $10-$15k a year ago to mostly cash buyers are now selling for $15-$25k to mostly cash buyers. How are appraisals holding this market down?
In scenarios similar to your example where a few cash offers are relatively close to the finance offers, cash often triumphs for many reasons: The seller doesn't have to wait as long to close; The seller doesn't have to pay concessions. Many times a seller that accepts a financed offer ends up contributing to closing costs, and the seller has more holding costs while the deal takes longer to close. So the few grand that the seller gives up on the front end could actually net them more in the long run. This is especially true if the seller is an investor that wants to use that money to fund the next deal.

J Scott the definition of market value you mention above is not the one used in mortgage finance transactions. I've attached the definition used in appraisals completed under Fannie/Freddie and HUD standards. This definition is included in the body of each Fannie/Freddie form appraisal report, so you can verify this the next time you read one.

"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 passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised, and each acting in what he or she considers his or her own best interest; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions* granted by anyone associated with the sale.
*Adjustments to the comparables must be made for special or creative financing or sales concessions. No adjustments are necessary for those costs which are normally paid by sellers as a result of tradition or law in a market area; these costs are readily identifiable since the seller pays these costs in virtually all sales transactions. Special or creative financing adjustments can be made to the comparable property by comparisons to financing terms offered by a third party institutional lender not involved in the property or transaction. Any adjustment should not be calculated on a mechanical dollar for dollar cost of the financing or concession but the dollar amount of any adjustment should approximate the market's reaction to the financing or concessions based on the appraiser's judgment."

Steve Babiak you actually made my point for me. In your example, the market moved based on the participants of the market, not appraisals. You're right, at some point the appraisals will reflect this, because they are reporting what is happening in the market.

Chris if your theory were correct, then prices would never go down either. In your explanation, prices would stay stagnate for ever.
Appraisers don't generate the data. It's extracted from the market. The market moves on it's own terms.
While I wish appraisers had the power to move the market (I'd make a lot more money), this just isn't the case.

One contract price does not determine the market. There's a difference between the terms price and value.