Is this possible...realtor and appraiser numbers ...way offffff!!

It's possible that two agents or two appraisers could have different opinions in value that does not surprise me. The agent wants to take a listing and sale your house the appraisers has one shot to get the value right. The agent can always come back and say, I think I missed this we need to lower the listing price. I would say a CMA vs. a full appraisal I would say the appraiser is closer on the market value. But you never know. Take a look at the comps the agent used and the comps on the appraisal report. Compare the two reports which comps are the most similar in design, nearest to you homes location and most recent sales dates. If the agent used older sale or listing that might be where he/she missed it.

I am very interested in knowing what the spread is in Pkm's home too. What price did the realtor come up with, and what price did the appraiser come up with, Pkm?

I ran across this as a link off a Mortgage Fraud site I look at once in awhile..

A petition by Appraisers, thought some might find it interesting....http://www.appraiserspetition.com/

This is the Mortgage Fraud site if anyone's interested ..http://www.mortgagefraud.org/

Of course as I'm driving around mulling things over I thought of a few more 'real world" things that I wanted to add -

1. JR you are correct with the refi vs sale appraisals. The problem that will always exist in the appraisal business (regardless of the HVCC) will be lender pressure. During the run up appraisers were faced with hitting numbers or losing biz, nothing new. Many did and counted on the rising market to cover the gap; fingers crossed for 6-12 months and the market will bring me even. Now of course, we're in the reverse mode and don't think appraisers aren't aware of that and adjusting.

2. I'm not seeing appraisers suddenly traveling hundreds of miles to do work, although I hear this regularly. The Atlanta market is served by two MLS's, county sites and several appraisal data sources; it's roughly 12-18 counties. An appraiser with proper data can live in NW Atlanta and appraise in SW Atlanta - it's a process and that process is based on historical data. The process is the same anywhere - the key is having and properly applying data. I'm being specific to cities and areas with consistent data sources so don't drop ridiculous examples of appraising in AZ fom NY. That worn out mantra of appraisers "not knowing the area" because they don't live in the same zip is BS and simply an agent snivelgram. If that's the case then prove it with tangible and applicable data. I hear it more and more and it's nonsense and it sounds like agents looking for excuses.

3. HVCC has merit on paper but was rushed into service well before it should have been. Many of the skeeve mortgage people from the boom have repackaged themselves and now run HVCC's so go figure. I heard the same thing about the idea of a review but at this point I don't know how that can happen, things are already set up and undoing it now will cost money, time and confusion.

4. The appraisal regs are squelching the rally in the real estate biz. We can move these homes if the appraisers don't have the ability to use their judgement. Micro markets in Atlanta are doing OK but it would be wider and deeper if we could mix skill based opinions in there more. Of course, appraisers are gun shy now as well so few are in the mood to stick their necks out.

5. Refi appraisals are a major issue right now - owners just looking to lock rates are losing homes becuase values cannot be supported. That's obscene as folks paying their mortgages should keep their homes and the industry should do everything they can to ensure that. What's to be gained by another vacant home and another family hitting the streets? Not everyone will be able to refi but the appraisal changes are hitting many good paying owners between the eyes.

6. Despite all of the theatrics about the appraisal and mortgage regs, fraud is still alive and well. How can I do assignments in parts of Atlanta and bring a "shell" in at 6K that allegedly sold a few times in the last year for 200K-300K? This is routine and I know it's not confined to Atlanta.....so as is the case with many government ideas I think the shrapnel will be more lethal than the bullet as it seems to me that many schemes remain alive and well.

Last thig - did we ever get an idea on what the value range for PKM's home is? If it's $1M+ then it's not all that unusual for a spread like that in this market. Higher end homes are a different animal than the lower-middle; big line at that jumbo break. If it's not up there, then that's a different story.

Good thread - hope all of this helps.

Hank Miller, SRA, ABR
Associate Broker & Certified Appraiser
Prudential GA Realty
678-428-8276

7. A good appraiser cares only about the appropriate and verifiable data. Agents and owners always “volunteer” comps and info; that’s great but unless I see it and validate it, it doesn’t exist. Good appraisers have access to data that statistically represents the MLS data for the area and submarket, you agents should try it.

8. Appraisers, like agents, can be nitwits. The HVCC requirement has resulted in reduced fees and “fee shopping” by management companies. It’s not uncommon for appraisers to limit data, resources, equipment and staff to reduce costs. Many are in a total “churn and burn” mode – when fees are cut, volume has to increase so many appraisers are not able to take the time needed with some reports.
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This is what I think is the problem. I feel that the new HVCC rules have hurt the appraisal business rather than help it which was it's intent. Bank ownership of AMC's was suppose to be limited to 20%, but I don't think that is the case. The independent appraisers (the ones that know the local markets) have been pushed out by the AMC's and in exchange, the appraisal quality has gone down. It's not at all uncommon for an appraiser to come from way out of area to do an appraisal. I just read somewhere that NAR (you will love this Dunes) has called for an 18 month moratorium on the HVCC because of the difficulties it's causing in the market and to look into any possible conflict of interest in bank owned AMC's.

Very interesting responses and opinions here on this thread. It's nice to see a well thought out discussion with great responses. I've given you a thumbs up as well Dunes. Thanks for your input into this discussion as well.

A few more comments based on recent posts – again in no order.
1. Any home is worth what others like it are selling for.
2. The market (ie: the buyers) determine market value. The market cares not what you list for, what your agent thinks, what you think, what you paid for it, what you put into it or any of that.
3. If Billy Buyer is the best indicator of value, then there should be few if any appraisal issues…..not so fast. Andy Appraiser is dealing with a new “post crash” environment. Fewer comps, tighter requirements, automated underwriting, the 1004MC form….all limit Andy’s ability to interpret data – Andy has become more of a form filler playing to a computer program that is simply looking for consistency.
4. If Billy gets a “sweet deal” on a home, shouldn’t his appraisal reflect that and be higher than his purchase price? Nope – Billy offered and the seller accepted so that is market price. Andy doesn’t want to alarm the computer review program with something out of the ordinary so typically that appraisal is at or very near purchase price.
5. Conversely, Andy may get an order that shows Billy is being led by an ineffective agent and he sees a contract that’s not close to supported. In that case he will defer to the data and appraise it according to what the data suggests is supported. At this point, the agents begin their war dance.
6. I use contracts as a guide, not gospel. I always look at an accepted offer as the best current indicator of value and I try to get as much credible info on pendings as possible. I have “killed” deals and I ALWAYS call each agent ahead of time to give them an opportunity to support their positions, but it happens. That said – if I’m close I’m writing a solid addendum and deferring to the offer. Close to me is within about 3% - 5%, appraisers (even me) are not that good. I’ll look at the home, comps, trends, area activity…..if things are positive I’ll usually defer to the sale. Nothing chaps me more than seeing an appraisal 1% lower than sale price – total BS.
7. A good appraiser cares only about the appropriate and verifiable data. Agents and owners always “volunteer” comps and info; that’s great but unless I see it and validate it, it doesn’t exist. Good appraisers have access to data that statistically represents the MLS data for the area and submarket, you agents should try it.
8. Appraisers, like agents, can be nitwits. The HVCC requirement has resulted in reduced fees and “fee shopping” by management companies. It’s not uncommon for appraisers to limit data, resources, equipment and staff to reduce costs. Many are in a total “churn and burn” mode – when fees are cut, volume has to increase so many appraisers are not able to take the time needed with some reports.
9. Distressed homes have had and will continue to have a measureable impact on overall home values. If Andy is appraising an average well maintained home, he is not going to comp it to a bombed out foreclosure, that’s not a comp. That home does however, impact the area so he will see that when he analyzes the area trends. You agents need to stop sniveling about that; foreclosures do impact the area, how can that be argued? Andy is REQUIRED to provide submarket trends, foreclosure numbers, days on market, sale to list price ratios and other specific statistical info that is influenced by distressed homes.
10. Andy is appraising that home for the lender; if Harry Homeowner bails Andy’s report is pulled to see what market value might be. He is the lender’s eyes and he has THEIR INTEREST at hand, not yours.
11. Appraisal values are at the mercy of the market – a comp might pop up a week later that changes things. I tell my clients that an appraisal is merely a snapshot of likely value at a specific moment in time – we have to use what’s out there when we visit the home. Don’t bother me with “plans are for a new community…..the neighborhood is doing this or that….” Not interested.
12. Preappraising homes isn’t feasible. It’s a shifting market (#11) and who is paying for them? If listing agents would stop pandering to the whims of a client there would be far more sales (accurate pricing sells homes) and far fewer issues. The buyer selects the lender anyway and they will order the appraisal so unless the seller wants to pay for an appraisal, this really isn’t tenable.
13. Appraised value doesn’t matter if it’s a cash deal or low mortgage? That is flat stupid. A buyer must be an idiot if they get an appraisal below sale price and they don't adjust price. And that buyer’s agent? How in God’s name does a buyer’s agent not do a comprehensive work up and brief prior to submitting an offer? Again, no appraisal is a slam dunk but as an agent you better instill a high degree of confidence in your buyer and do your homework.

The agent used the comps on the MLS and the appraiser may have done a more indepth analysis.

"It wouldn't surprise me if in this climate refi appraisals are coming in low."

I think you are probably right JR, I don't know (Have facts or NAR Data ;) to support anything but the appraisals I have seen do seem to indicate a play it safe estimate. With the declines in value, Foreclosures and job losses of the last couple of years that is understandable IMO.

My areas like a little Island in some ways, when unemployment was/is 12-13% in the surrounding counties it hit 9% here, foreclosures ect. were nothing compared to other counties/cities yet we have still seen some amazing Price reductions and certain properties not selling for long periods of time. (I could give you examples of homes here that started over a year ago at over $200,000 and are now Priced at less than $100,000 still unsold sitting empty. New Townhouse developments with Drastic reductions still unsold ect.

That's not to suggest Homes/properties aren't selling but Prices have dropped across the board for two years now...So an appraisal or an Agents comps from 3-6 months ago would obviously most likely differ and seem in some cases Drastic...In this thread I think I just did typical Dunes.....Seems to be a problem...How do we fix it, How do we fix it, Why, Why, Who did what, Why Why....You've known me for awhile JR just typical want someone explain it to me stuff ; )

As April so correctly stated earlier...Great discussion (For me at least) I feel I have learned some things and I absolutely appreciate it.....Another round of Thumbs up just cause I can...Thanks JR, Alan, April, Patrick, Hank, Bill, Jes, John, Carol, Becky, and especially Pkm for coming to Trulia to share/ask this question....

Appreciation to all for your patience and sharing, Dunes

Naturally there are reasons why an appraisal would be radically different, or just plain WRONG, and maybe bank appraisers where they are use radically different parameters than here or arrive in a cone of silence where you aren't allowed to speak with them or disagree with their proclamation of price. Usually the answer to a problem is the simplest and most obvious. To me, as I said in my first post, Pkm's questions tells me either 1. the appraiser is from another area or 2. The agent is buying Pkm's listing.

Something else no one pointed out (as far as I see) is that appraisals for refis are often not the same as appraisals for a first mortgage. In the past, refis would appraiser much HIGHER than the real value, which is why people got in under water in the first place. How else would a homeowner have taken out 100% of their equity unless the bank was appraising too high and lending 80% to the homeowner. Thankfully as time passes I am hearing less of "what do you mean my home is worth 450,000 I had an appraisal a year ago and it came in at 575,000!?" It wouldn't surprise me if in this climate refi appraisals are coming in low.

"The thing is, if the agent does their CMA correctly, the house should be priced correctly and there should be no problem with the appraisal."

JR, How can I disagree with that comment.. lol

It seemed to me from the comments in this thread and others that was often not the case. Patrick, Hank and others gave reasons they thought that was so which made me wonder about the appraisal thing, just a question/idea...

I did say this when I asked it...Perhaps an ignorant question but I do wonder.....

Which is why I said a second one would be done when an offer is made....the first appraisal would just be used to help the seller have an approximate idea of what the Bank would finance and allow a Buyer to have an idea if the Home could be financed or they would need to bring more to the table..
They are not obligated to Price according to the Appraisal, just like no one is obligated to Price according to an Agents comps..but they may have a much better idea of what the Bank would loan to a Buyer to purchase their property.
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The thing is, if the agent does their CMA correctly, the house should be priced correctly and there should be no problem with the appraisal. I have never had a problem with an appraiser. In today's market, buyers don't want a house that will simply appraise for what they're paying. They realize they are purchasing a depreciating asset, and want to purchase BELOW the appraised price. This is why even if there is a CASH buyer, they USUALLY ask for the sale to be contingent on an appraisal. Most of the houses I sell are all cash, and evey one of those buyers has had an appraisal contingency.

Alan

"Dunes, I don't recommend the seller having an appraisal done in advance... appraisals are only valid for 90 days, and if it closes after that a 2nd appraisal is required. "

Which is why I said a second one would be done when an offer is made....the first appraisal would just be used to help the seller have an approximate idea of what the Bank would finance and allow a Buyer to have an idea if the Home could be financed or they would need to bring more to the table..
They are not obligated to Price according to the Appraisal, just like no one is obligated to Price according to an Agents comps..but they may have a much better idea of what the Bank would loan to a Buyer to purchase their property.

We also discussed the fact that Appraisers are fallible, Bill gave a recent example of that earlier in the thread and it along with the Question is why I'm asking my questions...The 2 appraisals would allow a better review of the appraisal methods used, if continuous disparities occur not explainable by Market changes ect. then perhaps a need for change would be easier to recognize and implement.

The point is, it is the Appraisers numbers the Bank uses whether the appraiser listens to you or not, your numbers do not determine what the Bank will loan. I already said several times that the Agents numbers may be better but they are not the numbers the Bank uses....They use the Appraisers numbers right or wrong..

"but there are still enough people bringing in cash offers, or 50% downpayment offers, where appraisals are NOT an issue" I have to take your word for it as I do not know your market area.

My market Area is one of the higher income areas in the state and I have not seen that to be true here, I do watch my market area closely/actively....
Pricing and being Surprised by Appraisals happens enough here that it does make this topic very interesting to me.

JR....I'm not the one who said it was a problem or gave examples of the different numbers that Agents arrive at vs. Appraisers...I'm just saying if it is a problem (Others say it is) then what numbers should a consumer be paying attention to? To me it is the appraisers numbers since that is who the Bank pays attention to and determines if a loan can be made to purchase or as Alan said a Large down payment/Cash offer.

Some sellers may not want to enter the market with that limited pool of buyers IMO.

Pkm,
You should shop around for your refinance. I know that it sucks that your own lender is pulling this. They could of brought up an estimate on their computer from their property estimator service provider, before the appraisor pulled this. Do they understand that this is a refinance not a cashout or an appraisal to purchase an investment property.

Pkm, if you have good credit and steady income, there should be no problem for other direct lenders (banks) to compete for your good business.

At times appraisers do not challenge the banks, because they will not get any more assignments, the appraisers just go by what the bank wants to see and hear. Appraisers still get paid if your house doesn't even meet your expectations or valid numbers.

If your agent did a correct comp of the area, have the lender send out another appraiser to appraise the house. At their cost, it's not easy letting go of $300-$450 for a shoddy appraisal.

Please keep us posted. This is a two way communication site.

Lets us know what happened, this can help other home owners in the same situation.

Again from my perspective it's fairly simple...Say I'm a seller and my Agent says according to comps a reasonable Price is $250,000 in my market (I think my homes worth $300,000 but the Agents the expert)

I get an offer for $225,000, it's my best offer so I say OK Agent was within $25,000 it varies just an estimate.
Appraiser does his job and says it's worth $200,000/$195,000/$190,0000 or if we use the questioners example $150,000..Banks says (Guess what I'll finance)
Guess what I'm thinking? If I'm the Buyer what am I thinking? about comps and pricing and market expertise..
~~~~~~~~~~~~~
In my experience there is not such a huge disparity in that price range. Where there is a problem is when there are NOT similar houses, such as in a rural area that has been built up. For example, there are some beach communities in my area where you might find a home that should be worth 600,000, yet they are amongst cottages that are in the mid 200,000s.

Also in my experience, the appraiser usually asks me for comps and we compare them at an appraisal. The reason we don't recommend a seller have an appraisal done is because as Alan says, they only use comps from the past 90 days.

The last forclosure I sold, the appriaser told me they are doing the appraisal based on what the home will be worth after it is improved. I have found that appraisers do take the fact that a home is a foreclosure or short sale into consideration.

Dunes, I don't recommend the seller having an appraisal done in advance... appraisals are only valid for 90 days, and if it closes after that a 2nd appraisal is required.

Also appraisers are just as fallible as Realtors. Two different appraisers are just as likely to come up with two different disparate numbers as Realtors.

I'm really not going to "tailor" my market evaluation just to make sure that the appraisal is matched. Yes, appraisals are an issue, but there are still enough people bringing in cash offers, or 50% downpayment offers, where appraisals are NOT an issue. Why would I handicap my seller, by holding back what I feel is a valid market value... on the off-change that the appraisal (which might never come into play) doesn't match up.

Nope, I'll stick with my "knowledge" of the local real estate market, and the fact that I've actually been inside many of the comps (the appraisers rarely have), and will try to give the appraiser (if he'll listen) the benefit of my experience and guidance as to what true comps to this property might be.

Why are appraisals not done earlier in the process? They are not really that expensive and could give the Buyer and seller more to work with..

Why not when a Seller Lists they get an Appraisal at that time allowing them to begin Pricing with an idea of what a Bank will finance for at that time and any buyer knows they will be able to finance..

The Buyer gets an appraisal when they make an offer and now we have comparable appraisals (Allowing for any market changes, time passed ect.) for all parties to use with the Bank if a problem arises..

Is there a reason for waiting and having a Appraisal done later in the process. It seems if 2 were done and there was a huge disparity not explainable by market conditions then the problem would become more apparent/visible in the Appraisal process and fixable..

Perhaps an ignorant question but I do wonder.....

First let me just say this is a great discussion and thank you Pkm for posting the question.

Dunes,

I hear your point and would agree $100k really can't be considered a variance. Unfortunately, your example happens and is why many people think the profession is, well let's just say, flawed ; ). I could go on and on, on that topic and feel strongly that the bar needs to be raised. However, that is a paragraph for another post.

In this specific example, I think the reasonable assumption is someone (either the appraiser or the agent) just didn't do a thorough analysis.

Thanks to everyone for your thoughtful posts,
April Tavares, GRI, ASP
Realtor, DRE License #01742179

"No rational person is going to look at two homes of similar style and square footage and value the one with torn out piping, no appliances, holes in wall and goodness knows what else as having the same value as the home that has been well cared for".
______________________________________________________________________________________

Except that is exactly what is happening. Instead of adding in the cost to bring the foreclosed house up to market value, the foreclosures sale price is being factored in and bringing the market value down of the house in better condition. I've had several appraisals come back where the house being appraised has it all, location, condition, amenities etc. and it was compared to several foreclosed houses. One of the houses had all the copper piping taken out. Condition was not a factor used in the appraisal. All that was used was the sale price. When I brought this up to the appraiser, they didn't want to hear it. Their appraisal was the last word. The sold homes I used were of the same condition, location, and amenities. So what are you suppose to do?

April

"Realtors have been told that short sales and foreclosures were not suppose to be used as comps because they were in a separate category."

That was a comment made by an Agent earlier in the Thread hence my question of who told Realtors this...

I understand what you are saying and you explain it well however what we are discussing here are not estimates that vary but numbers with huge disparities..$100,000 is more to me than the estimates vary, it a huge disparity...A $50,000 difference in the same property by two appraisers to me is more than the estimates vary.

When how it is done and what should be considered is written down it all makes sense and seem logical yet when the process takes place the numbers are all over the place..(I'm talking about the examples given here in the question and thread plus in the Forum on occasion, I have no idea what it is overall but there are suggestions in this conversation that suggest it is a problem)

Again from my perspective it's fairly simple...Say I'm a seller and my Agent says according to comps a reasonable Price is $250,000 in my market (I think my homes worth $300,000 but the Agents the expert)

I get an offer for $225,000, it's my best offer so I say OK Agent was within $25,000 it varies just an estimate.
Appraiser does his job and says it's worth $200,000/$195,000/$190,0000 or if we use the questioners example $150,000..Banks says (Guess what I'll finance)
Guess what I'm thinking? If I'm the Buyer what am I thinking? about comps and pricing and market expertise..

From a Realtor's perspective in answer to Dunes' question.

No one has told me that Foreclosures and Short Sales cannot be considered as comps. In fact, in an appraisal class just the opposite was communicated.

If the comp being used is in a distressed condition, it is reflected in the value. To me, it is common sense. No rational person is going to look at two homes of similar style and square footage and value the one with torn out piping, no appliances, holes in wall and goodness knows what else as having the same value as the home that has been well cared for. However, distressed homes will be used as a baseline if it makes sense to do so. When it makes sense to do so, the home in superior condition will be valued higher as the appraiser will use their judgement to reconcile the differences. Also, even if the home being reviewed is in pristine condition, but is in an area of many distressed homes, that home's value will be less than if in a neighborhood of great homes. Again, common sense. Remember, we are talking market value, which is what someone is willing to pay. Who will want to pay top dollar for a home surrounded by homes that aren't well kept?

There are four elements that determine value: demand, utility, scarcity, and transferability. Then there are many thing that influence those elements such as physical characteristics, economic influences, and government regulations. Economic, social, environmental and government infuences are dynamic and always changing thereby creating change in real property values constantly.

There is a strict process and procedure that an appraiser will follow, but the whole process is not an exact science. Judgement comes in to play when determining the dollar value of those elements which have a bearing on value. The definition of an appraisal is an unbiased estimate or opinion of the property value on a given date. It is an ESTIMATE. Therefore, numbers will always vary.

All that being said, the lenders need to base their decision on something and right now the appraisal which tries to capture market value is what we have.

April Tavares, GRI, ASP
Realtor, DRE License #01742179

Hank,

You are probably right about some agents not knowing how to properly put a value on a home, but I wouldn't say most agents. I would also say that some agents that have been in the business for a long time are still using old school ways and mentality for pricing and need to restructure how the price for todays market.

Here is what I have a problem with. Sold homes are the most important guide to use for pricing. You can put a house at whatever listing price you want, but what houses are selling for is what counts. But the sold properties that are used should compare in all areas to the house you are trying to price.

The problem with factoring a foreclosure is this. A sold price for a foreclosure is not necessarily the value of that home but instead what the bank could get or settled for. Very rarely have I seen a foreclosed home that doesn't need to have money put into it. If the house wasn't a foreclosure, or if it didn't need money to bring it to livable condition, then the buyer may not have been able to get that house at the price they did. If a foreclosure sold for less than market value, it is possible that an appraisal may have appraised out higher than the sale price. If a buyer paid cash for a foreclosure doing an appraisal wouldn't matter. What shows up are sold prices that may be skewed or have altering factors. So really the sale price is a false figure being factored in and bringing the prices down.

I don't have a problem with low appraisals. Realtors give a suggested listing price. If it's an overpriced listing, you're going to know from either other agents showing it or from the buyers before you get to that point. If someone does come in with an offer in an overpriced listing, the appraisal is going to put that into check. What I do have a problem with is when the appraisal does come in low and I can show how I came up with that price, why doesn't the appraiser take that into consideration? Their appraisal report is the final word, and many times you can show that what they used as a comp is not a good comp.

This market is unlike any market most of us (realtors and appraisers) have seen before. I think that there is some room for improvement on both sides. I don't think that there should be blame on either side but rather cooperation by both sides.

Oh well, tough question....

I will make it short for you!

a) Appraisers work for the bank! Not for YOU!
b) the Realtor works for YOU, an is trying to get you the best price for your home, makes sense?

Now Realtors often look at the location, curb appeal, flow of floor plan, upgrades inside and outside, in other words they look at your property with the eyes of a potential future buyer, and more often than not the Realtor has seen many more homes in your area (either by having listed some, shown many to potential buyers and have previewed a million of them during brokers open houses!)

Appraisers may not always be familiar with a particular area as they work all over states usually on behalf of banks!

So with having different guide lines and different reasons for the outcome, the Realtor may discard some
listings as comps because they do not fit, the Realtor may adjust some comps up or down to compare them to your property...... the appraiser has his/her own guidelines and wants to make sure to stay within the safest range of property values in the area....

Does this make sense to you...
Feel free to e-mail me if you have any other questions...
Edith Karoline - YourRealtor4Life!
Working always in the very BEST interest of her clients....
EdithSellsHomes@gmail.com

PS If you know of anyone moving to the larger Chicagoland area, of someone who lives in Northern Illinois thinking about buying or selling real estate please refer them to me for first class real estate services, I promise. EdithSellsHomes@gmail.com

It's mentioned by Hank in his post that .."Most scream about foreclosures, short sales, distressed sales....if they are comparable they HAVE TO BE CONSIDERED. If they are not comparable they are still indicative of the area value trend."

It was mentioned earlier..." One reason is that appraisers are using more foreclosures and short sales as comparable properties."

I guess what I'm still stuck on is I am not suggesting everyone can or will come up with the same numbers but a $100,000 difference or as Bill pointed out a $50,000 difference between two Appraisers when the numbers are so important to the process of buying and selling.

A couple of Questions..

1. If it is known that Appraisers use Foreclosures and short sales to arrive at their numbers and those are the numbers used by the Banks then it seems logical that Agents would follow suit in order to be closer to the numbers produced by Appraisers so the buyers and sellers they represent have a more realistic idea of what the Bank will finance...

So if the reason they are not doing this is..."Realtors have been told that short sales and foreclosures were not suppose to be used as comps because they were in a separate category."

Who told them that and why?

2. If this is True..."Appraising isn't rocket science; it just gets in the way of many agents as it doesn't fit with their idea of the business." as Hank says then why do you have something like Bill relates..

"We recently had two different appraisers appraise the same property with the appraisals coming in more than $50,000 apart. "

If Appraisers can't be closer in some cases than $50,000 on the numbers the Bank uses then why would there be an expectation or criticism of Agents for having the same problem?

Bill's example is not the first of it's type discussed in this Forum.
I'm just a dummy on the sidelines but it seems everyone (Appraisers & Agents) are proving this is most certainly not Rocket Science but maybe more like the Lottery...Pick a number and Hope.....

For the Buyer or Seller their hope of buying or selling often depends on those numbers which can have a Huge impact so how is it to be expected for them to have confidence in either the Appraisals being accurate or the Comps provided by Agents as guidelines for Pricing being realistic....It seems to be another You can't fight City Hall scenario for the Consumer (Yeah it's messed up, but you can't do anything about it) because once the Bank settles on a number provided by an Appraiser...game over...or get another appraisal and hope this time the numbers go in your favor as a seller or get another appraisal and hope they go in your favor as a Buyer or ......

In the meantime two Professions say the other one is this or that but even within the Professions they often can't produce numbers in the same ballpark...Yet they each tell the Consumer their method is better than the other and the Consumer should look to them for Realistic Numbers...

It's definitely not Rocket Science

Appraising isn't rocket science; it just gets in the way of many agents as it doesn't fit with their idea of the business. The experienced agent goes to the RECENTLY SOLD homes first, then runs stats, then run pendings, then calls the agents for info on the best comps and maybe rides them. Think and work like an appraiser, have the guts to tell clients the truth and you'll have fewer problems.

In this case, I doubt both agent and appraiser were looking at the same sold comps. This smacks of an agent looking to hook a seller then start the "the market is soft we need to move the price down" nonsense. The appraisal gave you an idea of what the market supports at this time - IN THE LENDER'S EYES; and those are the ones that count. Any good buyer's agent will run solds so you might as well get in that vein. If you chase the market the house will sit, the market is always right.
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Great post, Hank! I live in a resort area where a large number of the agents are either trust fund babies or multiple pension retirees who don't have a clue about pricing--which is why the DOM for our micro area are like 6 years while the rest of the island is 18 months. Most of these agents don't have a clue as to who the buyer for a home is, what exactly it is they do for a living here in the boonies in order to afford this house, nor do they ask themselves "will this home appraise". They are still living back 4 - 6 years ago when couples outbid each other in the car driving back to the office and everyone refi'd their primary residence or took out 103% mortgages to buy a second home. Sadly, these agents are the ones who will survive this market, because they have a source of income that allows them to pretend they are real estate agents and hang out at open houses eating lunch.

The disconnect between appraisers and agents has been and always will be there. I wear both hats having owned and operated large appraisal shops in NY and Atlanta and as a broker in the Atlanta area. I still do select review work and a steady diet of Fannie Mae work....and work with agents trying to get them to wise up when dealing with their listing clients. Rather than blab on, I'll just bullet point MY OPINIONS on all of this - and those opinions are bed rocked by 20 years of this business. In no particular order -

1. Most agents are inexperienced and will list an outhouse just to have a listing. Consequently they will tell a seller what they want to hear rather than what they need to hear.
2. Most agents have no idea how appraisers view property, what constitutes a comp, what is expected of appraisers or how the review and underwriting of appraisals is conducted.
3. Most agents have zero clue as to what constitutes living area, how appraisers measure homes, what constitutes adverse external influences, how workmanship and quality are judged.....
4. Most agents have no clue as to the current requirements for comps, especially in a declining market.
5. Most scream about foreclosures, short sales, distressed sales....if they are comparable they HAVE TO BE CONSIDERED. If they are not comparable they are still indicative of the area value trend.
5. Most agents have no idea of what the 1004MC form is or what it's used for.
6. When faced with a "low appraisal" most agents do little more than snivel, bad mouth the appraiser and throw the kitchen sink at them hoping something sticks.
7. While throwing the kitchen sink, most agents cannot even present a cogent argument supporting their positions AFTER being given specific guidance on what appraisers need for a comp to be considered - I know from experience.
8. Most agents have never actually SOLD or ANALYZED real estate and have never been in a real market as we're in now. Consequently, they're finding out that there's more to this business than showing up for closings. Having to actually complete research, write position papers, present arguments and win influence is beyond the scope of most agents - they just cannot do it and their clients (often their unfortunate friends and family) suffer for that.

Appraising isn't rocket science; it just gets in the way of many agents as it doesn't fit with their idea of the business. The experienced agent goes to the RECENTLY SOLD homes first, then runs stats, then run pendings, then calls the agents for info on the best comps and maybe rides them. Think and work like an appraiser, have the guts to tell clients the truth and you'll have fewer problems.

In this case, I doubt both agent and appraiser were looking at the same sold comps. This smacks of an agent looking to hook a seller then start the "the market is soft we need to move the price down" nonsense. The appraisal gave you an idea of what the market supports at this time - IN THE LENDER'S EYES; and those are the ones that count. Any good buyer's agent will run solds so you might as well get in that vein. If you chase the market the house will sit, the market is always right.

Tell this listing agent to prepare a comprehensive analysis of your home with active, pending and closed sales....all on a grid. Tell them to measure it out; get the square footage calculated along with a sketch. Ask them where they pulled the data and if they physically ran the homes from the curb. Introduce the appraisal and ask this agent directly why it's so different and how the two numbers could possibly be so wide apart.

The appraisal industry is a mess right now and there's no shortage of issues in this house...the recent changes are an overcorrection and they are squelching the slight recovery. Bottom line is that appraisers have to use historical data (closed sales) and the current market is always a little ahead....but understand that with automated underwriting, reduced fees and increased requirements, appraisers are dropping out and those still in are getting crankier by the day. Working most of the nitwit agents out there doesn't help!

Oh - just a real world example - Bill Eckler (in this thread) is selling my mother in law's home in FL for me and we just had the appraisal come in 9K under contract. I reviewed it as did he and there's nothing to do, it's a sold report and we're adjusting things to reflect the appraisal. We're not happy about it but the appraiser has good comps, that's the market and the objective is to sell the house - and sell it we will.

Hank Miller, SRA, ABR
Associate Broker & Certified Appraiser
Prudential GA Realty
678-428-8276

Finding a difference of opinion between an agent's CMA and an appraiser's appraisal are becoming common place. We recently had two different appraisers appraise the same property with the appraisals coming in more than $50,000 apart.

The selection of what comps to use is a subjective act that can cast great differences on the out come. The large volume of short sales and foreclosures has impacted and will continue to impact the RE market in a manner of uncertainty. One of the problems that exists for agents and appraisers is how to deal with these distressed sales.....that clearly do not reflect the true local market.

Good luck

I've had the situation where a neighbor went for a refi, and the house came in very low. I looked at the houses the appraiser selected, and they were not comparable. This appraiser was from out of the area. i supplied comps to the neighbor and he brought them to the appraiser and they did change the appraised price. On the other hand, the appraiser could be right in this case and the agent could just be overpricing because they think they're going to get a listing.

OK Dunes,

Now I know where you are coming from. I don't think that this question has any solution, just an understanding maybe. Let me clarify one thing. Realtors have been told that short sales and foreclosures were not suppose to be used as comps because they were in a separate category. The fact is they are being used but we just don't know who is or isn't or if they are or are not.

IMO I still think that you need an agent to provide you with the market conditions and expertise to properly price your home for sale. This is an ever changing process and we are going to have to adjust as we go along I guess.

i would seriously look at the comps that were used. As an agent, we use SOLD comps only. Active listings mean nothing. You can market a property for 1,000,000 doesn't mean you will get it,,,,,, if worth 700k. Closed only and in this market prob. no more than 6 months back. The appraiser should not be using foreclosed or short sale homes as comps. They are distressed properties and not sold because the seller wanted to sell or a true..... picture of the market price. in my area, they are not included in the comps. if for some reason I see a foreclosed property in the comps, the property must be excluded and another property in its place. I would check with appraiser to see if they used these properties in the comps and also be sure that agent used closed comps.

Patrick, I was responding and giving an opinion based on the question and these comments...

"This is very common lately for appraisers and realtors to be off on what they believe the market value to be. Appraisers are coming in a lot lower. One reason is that appraisers are using more foreclosures and short sales as comparable properties. Foreclosures and short sales are affecting the market but many times the condition of these homes do not compare to what is on the market. This is becoming a big problem and the appraisers are not taking into account what the realtors used for comparable properties."

and...".I understand that appraisers are all about the numbers and are looking at this from a different perspective."

It suggested to me (perhaps I'm wrong) that there were some differences that Agents were aware of in how the numbers were being determined. If you are aware of the differences I thought an Agent might adjust...

Which takes me to...As a non-pro it seems to me that in this scenario since it is the Appraisers determination of value that is the one used by the Banks.... Then it is the Agents who are Pricing incorrectly....
____________________________________________________________________________________

FYI I interpreted "incorrectly" as the same as wrong. My bad?

Perhaps the word ( incorrectly ) was the wrong one to use but what I meant was if one way of determining value was to change then it seemed to me it was the Agents method because it was the Appraisers numbers actually being used to determine financing..

The question is about a $100,000 difference, Agents are always telling people in this Forum about the value of their comps for determining Price and Use it as an FSBO's overpriced their homes because they can't do comps like we can....

But if the comps are undependable because they differ from the appraisals by as mush as $100,000 or $50000 or $25000 then some buyers and sellers are not playing in the Banks ballpark from the get go...

Patrick I can't even come up with a Good suggestion on Joans suggestions to improve the RE industry thread so I'm pretty sure I won't come up with one on How to know what Appraisers are thinking ; )....That's a question for an Appraiser.

If I was Czar I'd just order someone else to fix it..lol

Dunes,

A lot of time the appraisals are in the ball park. I have seen these appraisals come back too high as well. The problem is that they are all over the board. How do I project what an appraiser may say?

When I give a seller or buyer a market analysis of a home, I look at similar houses, in similar condition and in the same location. I take the sold properties, current and off the market. I evaluate all the data. Many of the homes I have seen and know how they compare. Now because of current market situations, I will factor in foreclosures and short sales but I add or subtract depending on the differences and come up with what I feel is a fair market value. This has to be what I tell my clients. I can't possibly predict what an appraiser may come up with. So how do I adjust the price I came up with for an unknown? If I did that I would be doing an unjustice for the client.

Now if it was known what appraisers were doing then I would say you are right and adjust accordingly. But I have know idea how that appraisal is going to come back. It could be low, high or right on the money.

So I know appraisals in some areas are coming in low, but it's not a for certain every time. Therefore I must do the very best job I can and give the client the best answer based on my data and experience.

April..Thanks for "I agree with Dunes" I'm wrong so often that seeing those words are pretty exciting for me; )

Patrick

I think as we often do we agree about the properties should be looked at and appraised to determine a fair value...I do think you worded what I'm trying to say very well..

"I believe that you are saying that the lenders are approving loans based on what the appraisers are telling them and they will give the loan based on the appraisers value. So therefore we should tell our clients a value based on what may get approved by the lender not what we thing the value is."

The Deal for the Buyer and Seller depends on the Financing the Bank will agree to, so to me it seems more important for them to be given a number that falls in the Banks ballpark so they can play the game with realistic expectations..

Thumbs up for everyone for the civil and informative info/views shared by all...I have one more opinion...This thread so far is what Trulia should be all about....

That Dunes Guy

Pkm,

Lots of great advice here. I agree with Dunes. In the end the estimate of value that matters most is the one that is provided by the Appraiser. The Appraiser is trained and most have hundreds of appraisals under the belt. Their appraisal is what the bank will rely on,

That being said, no one is infallible. Appraisers make mistakes and so do agents. I will give you a recent personal experience that left me scratching my head. I am representing the buyer and the appraisal comes in at the agreed upon offer price. After the home inspection, it is discovered the builder put the wrong sized windows in a couple of the bedrooms. The windows installed were too small and did not meet egress requirements. We went back to the seller (builder) and renegotiated the price since new windows would need to be installed. The offer price was lowered by $40k. Because of the new price, the bank required that another appraisal be completed. The second appraisal came in at the new sale price. Nothing changed with the home and only two weeks went by between appraisals. On the flip side, I am sure there are appraisers out there that can give you wacky stories about us agents.

In the end, it is an estimate of value. Ask your agent to give you the details on the comps used by them as well as the appraiser. Look at the distance from your home. A good comp should be within 1 mile of your home (closer the better) and ideally should not be older than 6 months (less than 6 even better). These two factors can make a tremendous difference in the final estimate being provided.

Hopefully, you have been able to pull some useful information out of these posts.

Good Luck with your refinance and potential sale!
April Tavares, GRI, ASP
Realtor, DRE License #01742179

Hey Dunes,

I've told you before not to make me think you know what it does to my head.

I think I see your point. I believe that you are saying that the lenders are approving loans based on what the appraisers are telling them and they will give the loan based on the appraisers value. So therefore we should tell our clients a value based on what may get approved by the lender not what we thing the value is.

My point is this. We as realtors are pricing the homes based on market conditions, location amenities etc. The appraisers are using general data to come up with their value. We are not overvaluing the home, just using better more precise data.

I advise my clients that the home is going to have to appraise out, but I can not make them take a hit because they may get an appraiser that will come in low. I have to put a value I think is what the market supports based on my data.

This system of appraising has always been this way. What is new is all the foreclosures and short sales that are affecting the market. These homes are an exception to the rule but are being incorporated into the appraisals and throwing off numbers. Yes they factor in and affect the market but they are not the norm and not exactly accurate representation of the market. If these were not factored in the values would be truer for the average seller.


____________________________________________________________________________________
As a non-pro it seems to me that in this scenario since it is the Appraisers determination of value that is the one used by the Banks.... Then it is the Agents who are Pricing incorrectly....
____________________________________________________________________________________

FYI I interpreted "incorrectly" as the same as wrong. My bad?

Patrick

I never said the Appraisers numbers were right nor did I say the Agents numbers were wrong.

I am saying it is the Appraisers number is being used by the Banks (right or wrong) and that determines what the Banks will finance (right or wrong.)

So when a Seller sells or a Buyer buys it is the Appraisers determined value that will be used to determine financing (right or wrong)...

I'm not saying it's right or fair or done correctly or better just that at this time only that the Appraisers determination of value is the more important value to the buyer and seller, so right or wrong for a seller or a buyer that is the value they need to know ....

Giving a higher value even if based on a better system of determining value will mean little when the buyer goes for financing or the seller prices their home to sell at a price the bank will not finance......

You make a great case and I agree with you about how it should be done, but at this time it is not being done that way by the banks and they provide the financing which affects both the Buyer and Seller so like it or not those are the numbers they need to know...right or wrong..IMO

My point is not that Agents are incorrect, I just question the value to the client of the Agent being correct when the Bank still uses the appraisers value for financing a purchase.......

What service is an Agent preforming for their client if they give the client a much higher number even if they are using a better method when the Banks do not use that number to determine financing?

Right or Wrong what the Bank will finance Trumps what you and I may consider a better way of determining value. Just my opinion....

PKM
Have your agent give you a printout of the comparables along with the statistics of the sales and recently sold properties to back up your agents comp.
At times banks hire appraisers and they are green in experience, a client was buying a second home and his lender sent an appraiser and appraised the property with negative equity. My client talked to his lender and showed them the comps and had a new appraisal done (and not paying for it).
The second appraisal came in with positive equity.
To make a long story short you most likely paid for the appraisal and deserve a correct appraisal.
Contest the appraisal with your lender.

Wishing you the best of luck,
Jes Sierra, B.Sc.
Realtor®

There is value added to a home other than the walls, ceilings and floors. If that was all the criteria needed to put a value on a home, then every 4 bedroom 2 bath home should be priced the same. But that's not the case. Location, amenities, condition and even demand factor in. The realtors are the ones who deal with this everyday and know local markets. The structure itself can and is a starting point but then each individual structure needs to be adjusted accordingly depending on what it has to offer.

Agents actually go and look at houses to see how they compare and add or subtract value accordingly. Many appraisers don't see the insides of houses or know where they are located. How can you tell a seller that has a very nice home that their house has the same value as a foreclosed house that needs $50,000 in repairs to it.

I understand that appraisers are all about the numbers and are looking at this from a different perspective. But the truth of the matter is that the other factors do play a role in what a house will sell for. There is not going to be a large demand for a house that is on a busy street backing up to a warehouse emitting a plume of smoke. The outside factors here affect the value of that house no matter what the structure is made out of. It could have the finest of everything but if there isn't a demand for it the value will go down. Now that same house is located in center of town near schools, restaurants and shopping and the demand goes up. Basic economics of supply and demand. Same structure different location different price. The value is there or not but the two values are not the same.

Now not all houses are priced correctly and sometimes the comps used by the realtor are wrong comps. But sometimes the comps used by the appraiser are wrong as well. To say the appraisers must be right because that's who the bank uses isn't a fair statement. If there is a large discrepancy between purchase price and the appraisal, then something is not right and there should be a second look at the numbers to see where the discrepancy is. What's happening is the appraisers are not doing that. Theirs is really just an opinion just like the realtors is only an opinion except their word is final. So why should the seller suffer because of that?

I have also seen this go the other way. A house that should never have appraised at what it did sold for far more than any other house in the area and wasn't nearly as good as the other houses. That didn't set off any red flags though.

The sold houses set the market value. Realtors and appraisers should be looking at the same comps. Just because the bank hires the appraiser doesn't automatically make their numbers right. If there is a large discrepancy then everything should be reevaluated from both sides.

I have to agree. Your agent should have enough knowledge to understand what your property is worth in today's market. The lender is going to pay attention to the appraiser and will consider the forclosed and short sale properties also in their analysis.

Pending sales and in certain cases even active sales are consdered in coming up with the value of your property; condition, amenities and other factors. A knoweldgeable agent will consdier all areas in the market because that is what the lender wants to be made aware of so that they can also be protected to what is the true value of the property.

Becky Strauss
Realty World Strauss & Associates
Broker ID #01202596
Cell: 408-718-2667
Fax: 866-805-6434

The Banks use the Appraisal when they refinance or finance a loan to purchase.

As a non-pro it seems to me that in this scenario since it is the Appraisers determination of value that is the one used by the Banks.... Then it is the Agents who are Pricing incorrectly....

You can talk about apples and oranges but the bottom line is it is the Appraisers numbers that the bank pays attention to, so working to make the value determined by Agents closer to that of the one determined by Appraisers seems to make more sense than expecting them to adjust to the Agents figures..

What Service is an Agent providing when they do comps, then tell a client your house will sell for or should be priced at and the bank says NO we won't finance that Price? Especially if the difference can be as large as the one in the Question..$100,000?

In this Market this seems to be a case of (What is) being far more important that (What should be.) to the Consumer/Client..Am I missing something here?

It's not that I don't agreethat the Appraisers may need to reevaluate how they determine value but until they do then isn't it better for the client to be given a comp/price that will be more in line with the Appraisers since theirs is the one used by the banks?

Patrick,
You're right! Especially about those properties under O'Hare (I live in Palo Alto, CA, but grew up in Hinsdale). Agents do tend to get on the ground and look at the condition of comps while appraisers will usually do just a desk review. That is my point - agents deal with the complete property, appraisers often look too much as just the bottom line.

John,

I agree with you to a point, however, I have had on numerous occasions houses in center of town and great condition (new roof, newer mechanics, all the bells and whistles etc.) compared to foreclosed houses where the appliances are gone and in some cases the copper piping removed. They should be comparing apples to apples not apples to oranges. In the cases where that's all there is to compare, then they should factor in condition.

Appraisers used to call us and ask what comps we used when they were having a hard time or not coming up with the same figure. Now they won't listen to us or let us get a second appraisal. I've shown an appraiser a house from down the street that closed just a few weeks before I received a contract on one of my listings, that sold for more that what mine appraised at. The house was smaller and in beat up condition. Not that either one is right, but we should be working together on these. Not all appraisers are familiar with the areas they appraise. Pretty decorating should not play a factor in pricing, however, a house that's on a busy street, backs up to railroad tracks or is in the flight path of O'hare should factor in. You also can't compare a foreclosed house that hasn't had running water, electric or maintenance with a move in ready house. Both realtors and appraisers should consider this when pricing a home. Everything is subject to opinion, but there should be a checks and balance system in place when realtors and appraisers are so far off.

In general, Patrick is right. But this disconnect can cause a big problem with it comes time to sell. As you probably know, banks don't care what an agent says, they use the appraiser's value to evaluate financing. Selling over the appraised value often requires the buyer to bring more cash to the deal, which can kill it.
The core issue is that agents and appraisers look at a property differently. An agent's job is to present a property to the buying public that looks unique and desirable, regardless of it's condition, size or location (even when the house is a condition/size/location lemon, the agent has to make lemonade).
It's said that all sales are made primarily on emotion, which is also true in real estate unless you are a cold-hearted, numbers-only investor (like me). An agent's job is to present a property that generates an emotional response (desire) that will cause a buyer to want to pay more for a property than an appraiser might say it's worth (appraisers are also numbers-only people, though most aren't cold-hearted). Unless there are massive holes in the walls, the appraiser is going to appraise a house for the same value regardless of whether or not the walls are painted a pleasing, neutral color or painted cherry bomb red throughout. An agent will try to get a higher price if the seller is willing to clean out clutter, tone down the red paint, and mow the lawn each week.
As a broker, I often ask an appraiser for a pricing opinion before I suggest a listing price to a seller. I can't escape the fact that even if the place looks like the Taj Mahal, comps are going to drive the appraised value and the buyer is going to have to rely on that value for financing. For properties I estimate to be worth over $1.5M, I'll ask two appraisers for an opinion. You may want to do that, too. Again, the bank is going to listen to the appraiser, not the agent.

This is very common lately for appraisers and realtors to be off on what they believe the market value to be. Appraisers are coming in a lot lower. One reason is that appraisers are using more foreclosures and short sales as comparable properties. Foreclosures and short sales are affecting the market but many times the condition of these homes do not compare to what is on the market. This is becoming a big problem and the appraisers are not taking into account what the realtors used for comparable properties. See if your agent can find out what properties the appraiser used compared to what your agent used.