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RubberStamp

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....I guess we really do bring it on ourselves....

So I'm selling a crappy little house I was renting out and made the mistake of accepting a mortgaged offer  - I thought I was going to be selling to an investor in this market but it came so quick and at ask. 

I've seen a lot or reasons for not coming in at contract price.  But this one takes the cake.  The appraiser made an across the board negative adjustment of $3000 for fireplace on a $70,000 home. She used the chimney as confirmation .. so even just a chimney for your furnace cost my house $3000 (about 4.5% of the value of a home is in the chimney??).  This is btw more than she adjusted for the difference in central HVAC and none. This adjustment knocked her value $2000 below the contract price.  This excludes the 3 or so comps nearby she could have chosen without a fireplace that were even $10,000 higher than mine and similar. 

As the seller I can't make much of a stink.. its like pushing on a string.  But I do work for this lender and it is  really tough not to try to get some answers. 


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Bobby

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Inquire why the available comps (better comps?) were not utilized when they are available.  Bracketing is relevant and would probably erode the adjustment...  (based on what you said)
I find it hard to find properties not meeting or even exceeding contract price in this market with very limited available listings.
Must have been a VA AI appraiser...
Or play hard ball and make them bring cash for the difference.  Shouldn't take to long to find another buyer.

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treskirkland

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Reply with quote  #3 
It sucks to be on the other side!   I'm an agent too and I've seen a couple of bad appraisals on my deals in the past.  
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Nomad

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Reply with quote  #4 
I’m an agent as well and on all my listings and personal deals I am present when the appraiser arrives to make sure he/she is not skippy and also give them a quick run down on how to do their job.
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RubberStamp

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Reply with quote  #5 
Nobody has any cash in this neighborhood unfortunately except investors. 

There's money to be made it real estate but man is it a pain in the ass.  I bought real estate back when stocks were flat as a pancake but since Trump..  I've got to up my stock trading.  Stocks don't have a leaky water heater valve.

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MVA2001

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That does suck. I was going to say something witty like ‘it’s been a cold winter!’

True story, I remember my instructor in 1997 for my 90 hours lamenting on how stupid it is to even make an adjustment for fireplaces in Atlanta

They are decoration, and have no purpose or required utility.a $40 portable floor heater from Walmart has th same utility

To make OP’s point even more so, you NEED air conditin8ng in the south. Window units do not have the same utility as central air

Presuming it’s worth it, you can push all parties for an ROV citing material defect in the report due to the heavy line item adjustment for FP

I’ve never know a renter or buyer at the 70k price point to walk because of lack of a fireplace.......

Hope it works out for you

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nogava

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Reply with quote  #7 
Zestimates adjust $500 for a fireplace.  That's the going rate here in GA.  Same for decks.

But my mentor was awesome.  So I don't do that.

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Meatloaf

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The fireplace adjustment is easy to prove.  Just go to a new subdivision and look at the "upgrade" price.  

Buttttt..... That only works for new construction.... As soon as you drive that sucker off the lot the fireplace adjustment goes to zilch.


BUTTTTTT.... Imagine a large custom built home with ceiling beams, viking appliances, imported mahogany ash wood trim and crystal door knobs.... without a fireplace.  Trust me, an adjustment is necessary.

So... Its all relative.  I have a couple of subdivisions where I can show that a fireplace adds about a grand.  That being said, I do generally note whether a house has a fireplace or not but I don't generally make an adjustment.

In my area "game day" patios have become all the rage.  It isn't a patio at all but for some reason my market continues to call a damn porch a patio.  They are porches with an outdoor fireplace... and it does make an impact on value and marketability.

As far as RS's issue that's an easy one.  Just call the appraiser up and tell him he is wrong.... Tell him that the state is going to request his workfile and he better have some data to support the adjustment.  Then offer him a few sales that accurately reflect the subject.

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RubberStamp

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Reply with quote  #9 
Quote:
Originally Posted by MVA2001
That does suck. I was going to say something witty like ‘it’s been a cold winter!’ True story, I remember my instructor in 1997 for my 90 hours lamenting on how stupid it is to even make an adjustment for fireplaces in Atlanta They are decoration, and have no purpose or required utility.a $40 portable floor heater from Walmart has th same utility To make OP’s point even more so, you NEED air conditin8ng in the south. Window units do not have the same utility as central air Presuming it’s worth it, you can push all parties for an ROV citing material defect in the report due to the heavy line item adjustment for FP I’ve never know a renter or buyer at the 70k price point to walk because of lack of a fireplace....... Hope it works out for you


Thanks.  Well we all know by frequenting this board that appraisers will dig in like a tick..   and since I'm not on the loan application it is going to be a real tough road.  But to think that $3000 5% adjustment..  just so you can NOT make contract price?  Even with it.. the range of the comps topped out $5000 above my contract price.  But she "averaged" and came in low.  If they did the typical $500 (still unprovable) and she makes contract price. There's zero inventory right now over there..  This is the best deal this guy is going to get.  And its only going to get worse.

So many things wrong.. I've gotta use it as a karma cleansing experience I guess.

Both me and the seller lose.  I came down $2000 but I have a great contractor who was going to fix all of the issues they found.  But instead, I'm fixing only 3 minor things so it will cost the buyer about a grand.

It's only fitting this happens to an appraiser..  the agents are laughing I know.

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Bobby

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Reply with quote  #10 
Quote:
Originally Posted by RubberStamp


Thanks.  Well we all know by frequenting this board that appraisers will dig in like a tick..   and since I'm not on the loan application it is going to be a real tough road.  But to think that $3000 5% adjustment..  just so you can NOT make contract price?  Even with it.. the range of the comps topped out $5000 above my contract price.  But she "averaged" and came in low.  If they did the typical $500 (still unprovable) and she makes contract price. There's zero inventory right now over there..  This is the best deal this guy is going to get.  And its only going to get worse.

So many things wrong.. I've gotta use it as a karma cleansing experience I guess.

Both me and the seller lose.  I came down $2000 but I have a great contractor who was going to fix all of the issues they found.  But instead, I'm fixing only 3 minor things so it will cost the buyer about a grand.

It's only fitting this happens to an appraiser..  the agents are laughing I know.


In this market, you (the owner) are in the driver seat.  I'd find a new buyer, unless you just want out of the property.  $2K-5K is a lot of money to ignore for a poor appraiser... 

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RubberStamp

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Reply with quote  #11 
Quote:
Originally Posted by Meatloaf

As far as RS's issue that's an easy one.  Just call the appraiser up and tell him he is wrong.... Tell him that the state is going to request his workfile and he better have some data to support the adjustment.  Then offer him a few sales that accurately reflect the subject.


I hear ya! There was a time when I would have fought harder.  There are so many things to factor.  Being winter my carrying costs can be $400/mth just for heat and water..  so by prolonging all of it I could lose possibly the best buyer at the moment and have to carry that through winter.   It is also not a perfect house.  Then there's the fact that the buyer incorrectly thinks this is to their advantage..   So you'd have me punching holes in the report and the bank making little effort with the buyer's approval. 

I also considered that I'm very thankful nobody has done that to me.  She may be wrong but hopefully not crooked.

After a quick calculation .. it was best to concede and move on.

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RubberStamp

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Reply with quote  #12 
Quote:
Originally Posted by Bobby


In this market, you (the owner) are in the driver seat.  I'd find a new buyer, unless you just want out of the property.  $2K-5K is a lot of money to ignore for a poor appraiser... 


Darn right.  But I pushed back on the repairs and saved about $750.   Then I factor in keeping that thing heated through winter.    Yeah, I just want out.  Before the cockroaches come out :-)

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Meatloaf

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Reply with quote  #13 
Quote:
Originally Posted by RubberStamp


I hear ya! There was a time when I would have fought harder.  There are so many things to factor.  Being winter my carrying costs can be $400/mth just for heat and water..  so by prolonging all of it I could lose possibly the best buyer at the moment and have to carry that through winter.   Then there's the fact that the buyer incorrectly thinks this is to their advantage..   So you'd have me punching holes in the report and the bank making little effort with the buyer's approval. 

After a quick calculation .. and it was best to concede and move on.


Dude... Every day you come on here preaching about how the sky is falling and how everything is going to crap.  Then you are handed a handful of crap and what do you do?  You act like a pussy.

Stand up for yourself.  If you just accept this crappy report then you are admitting that it is acceptable.  This is the cocksucker that is taking food off of your plate with some BS appraisal methods.

You need to be more of a man.  Turn this dude in... take him to lunch and explain to him how to do an appraisal... call the lender and tell them if they don't take this POS off of their list, then you are going to report them to the department of banking and finance for their complacency (he was probably the lowest bidder).

DO SOMETHING!!! Otherwise you are just another pussy too afraid to lose a deal.  Remember every time you had your ass handed to you and all the phone calls and harrassment you dealt with for coming in under contract??? This bastard needs the same treatment.  This time, you can produce some relevant comps and if he doesn't use them, then turn his ass into the state and tell every realtor, lender, everyone just how ignorant he is.

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Nomad

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Reply with quote  #14 
I wouldn't waste my time turning him in.  Just refuse to lower the price and let the lender and the buyer know that the appraisal is unacceptable.  Tell the buyer their lender needs to order a new appraisal from a person with more experience and if they refuse to do so, tell them they need to find a new lender and that you will extend the contract to accommodate the extra time needed due to gaining new financing.
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Meatloaf

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Reply with quote  #15 
Just make the threat... It doesn't matter if you do or don't, but get the chump shaking in his boots.  When he realizes he has a real appraiser after him he will be a little more shaken than the average know nothing home owner.
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RubberStamp

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Reply with quote  #16 
Quote:
Originally Posted by Meatloaf
Just make the threat... It doesn't matter if you do or don't, but get the chump shaking in his boots.  When he realizes he has a real appraiser after him he will be a little more shaken than the average know nothing home owner.


ML - in the grand scheme a $2000 discrepancy can be explained away in so many ways.  It will become a he said she said.  There is enough sales data for her to make her case and enough for me to be equally right.  Its more just a really strange way to come up $2000 short.  Just really surprising. 

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Meatloaf

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Reply with quote  #17 
Quote:
Originally Posted by RubberStamp


ML - in the grand scheme a $2000 discrepancy can be explained away in so many ways.  It will become a he said she said.  There is enough sales data for her to make her case and enough for me to be equally right.  Its more just a really strange way to come up $2000 short.  Just really surprising. 


If you make a $3000 across the board adjustment with no supporting data or explanation provided then you got some explaining to do.

At the very least, question them on their support for the adjustment.

Don't be a pussy.  Or is it too late???

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RubberStamp

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Reply with quote  #18 
Quote:
Originally Posted by Meatloaf


If you make a $3000 across the board adjustment with no supporting data or explanation provided then you got some explaining to do.

At the very least, question them on their support for the adjustment.

Don't be a pussy.  Or is it too late???


Too late.  I knocked my losses down to about $1000 and called it a day.  I am thinking about questioning her after it is all closed based on the principle of it all.  In line with what I complain about on here..  her actions represent all of ours.  We are one unit.  One of us screws up and its "those appraisers again". In this case..  screw up aside or not, it is why would you go out of your way to not make contract price?  Even after all the questionable adjustments just leaning on the most recent sale could have justifiably supported it. 

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Meatloaf

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Reply with quote  #19 
Quote:
Originally Posted by RubberStamp


Too late.  I knocked my losses down to about $1000 and called it a day.  I am thinking about questioning her after it is all closed based on the principle of it all.  In line with what I complain about on here..  her actions represent all of ours.  We are one unit.  One of us screws up and its "those appraisers again". In this case..  screw up aside or not, it is why would you go out of your way to not make contract price?  Even after all the questionable adjustments just leaning on the most recent sale could have justifiably supported it. 


But... Now I get it...

There was probably a decent appraiser that had the oppertunity to accept the assignment and he looked at it and did a quick pencil search and said... Nawwww.  I can't make contract so I am not going to accept it.... Then it was re-assigned to someone else....who didn't make contract because they followed their mentor's adjustment sheet like it was 1999.

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RubberStamp

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Reply with quote  #20 
Quote:
Originally Posted by Meatloaf


But... Now I get it...

There was probably a decent appraiser that had the oppertunity to accept the assignment and he looked at it and did a quick pencil search and said... Nawwww.  I can't make contract so I am not going to accept it.... Then it was re-assigned to someone else....who didn't make contract because they followed their mentor's adjustment sheet like it was 1999.


I get it ..  haha.   One of the reasons I'm taking the lumps this is a crazy business we are in.  Maybe karma is biting me in the rear.

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Nomad

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Reply with quote  #21 
Quote:
Originally Posted by RubberStamp


Too late.  I knocked my losses down to about $1000 and called it a day.  I am thinking about questioning her after it is all closed based on the principle of it all.  In line with what I complain about on here..  her actions represent all of ours.  We are one unit.  One of us screws up and its "those appraisers again". In this case..  screw up aside or not, it is why would you go out of your way to not make contract price?  Even after all the questionable adjustments just leaning on the most recent sale could have justifiably supported it. 


If it is close all of us should be hitting the contract #. Especially those inexperienced appraisers who are appraising with fear. Otherwise they will find an avm that does hit the #. Refi’s it is what it is.
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RubberStamp

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Reply with quote  #22 
Quote:
Originally Posted by Nomad
If it is close all of us should be hitting the contract #. Especially those inexperienced appraisers who are appraising with fear. Otherwise they will find an avm that does hit the #. Refi’s it is what it is.


 I know Nomad.  I found that really strange since it STILL could have been supported through reconciliation even with odd adjustments.  It is so fitting that an appraiser gets shafted by another appraiser.  This is the type of inconsistency that makes FNMA go to a computer rather than one of us I guess.  I have no idea how to fix it..

My agent has not laughed to my face but I'm sure he's giggling behind my back.

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Meatloaf

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Reply with quote  #23 
You should go to your agent and ask him to reduce his commission.  Thats expected.

You need to at a minimum call the appraiser... If you have already decided to bend over and take it up the ass give the appraiser about 6 dozen comps from all over hell and back and ask him to consider.  Just fugg with him... 

Post that crap on here, give us a name/number, Using a chimney to validate a fireplace???? WTF???

I guess, no chimney means no santa.  SOOOO... he might be right about the value of a chimney.

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BillDing

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Reply with quote  #24 
Quote:
Originally Posted by RubberStamp


There are so many things to factor.  Being winter my carrying costs can be $400/mth just for heat and water..  so by prolonging all of it I could lose possibly the best buyer at the moment and have to carry that through winter.  
After a quick calculation .. it was best to concede and move on.

There's a good example of how the pending price sometimes is a better indicator of Market Value then the sale price.  That's another reason it's important to call the agents of your comps and verify why the sale sold as it did. That appraiser put you in a situation where you had undue stimulus to sell. Agents have sent me the appraisal to show that they weren't making it up. I've never had a problem opining to a higher value by reconciling that situation.  Unfortunately, most appraisers just take the sale price at face value and assume nothing affected it. Assuming can make a real ass out of an appraiser.

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Anna

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I recently was completing my CE in class.  

I made the comment that I typically call agents.  Many in the class where taken back by this but it's always worked for me.

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Meatloaf

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Reply with quote  #26 
Quote:
Originally Posted by BillDing

There's a good example of how the pending price sometimes is a better indicator of Market Value then the sale price.  That's another reason it's important to call the agents of your comps and verify why the sale sold as it did. That appraiser put you in a situation where you had undue stimulus to sell. Agents have sent me the appraisal to show that they weren't making it up. I've never had a problem opining to a higher value by reconciling that situation.  Unfortunately, most appraisers just take the sale price at face value and assume nothing affected it. Assuming can make a real ass out of an appraiser.


If they don't provide the documentation to prove it, then you might be asking for a lie.

I hear agents tell me all the time... it appraised for way more than the asking price....

Same situation.  Lets say you have an appraisal come in above the contract price... but the contract price was based on real market exposure and proper pricing... how do you reconcile that?

I still think its best to weight the actual closed price but consider more than the required 3 sales.  Thats how I reconcile.

Agents will lie and agents will forget... many times the agent doesn't ever meet the buyer or seller... Sometimes the agent has never seen the house.


I texted an agent last night to verify if a comp had a pool.  I identified myself as an appraiser needing to verify some comp data.  The listing didn't show a pool but the tax card and aerial did.  The agent said it did have a pool but was confused as to why I was asking.  I don't think the agent would have admitted the house had a pool if I hadn't specifically asked ONLY about the pool.

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BillDing

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Reply with quote  #27 
The selling agent has no reason to lie about that and I would confirm that with the listing agent. They don't get together and formulate a lie in the rare case an appraiser actually calls because he needs the sale for a comp. In regards to a high appraisal, the buyer and seller's meeting of the minds is what sets the price. If the listing agent said the appraisal was higher, then my next question is why did the seller sell so low then?  or are you that bad of a realtor that you can't even sell a house at market value?  [wink]
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RubberStamp

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Reply with quote  #28 
Actually..  I've learned that the appraiser too can set the price.  And this does not get recorded in any way.
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BillDing

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Reply with quote  #29 
Quote:
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Actually..  I've learned that the appraiser too can set the price.  And this does not get recorded in any way.


That's why appraisers are required to verify with the party of the transaction.

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RubberStamp

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Reply with quote  #30 
Quote:
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That's why appraisers are required to verify with the party of the transaction.


Well.. yes and no.  The appraisal is a part of the mortgage process so a part of market value for a mortgaged transaction.  So you could not make a positive adjustment based off of a price lowered due to appraisal.  But you could not use it and keep it in your notes in case you get called out on it.

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Meatloaf

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Reply with quote  #31 
I thought of something I have never really thought of before.

House is under contract for $100000.  Appraisal comes in at $97000.  Sale price reduced to $97000.

Was the actual sale price reduced to $97000?  or was it really $100000 with a $3000 concession for financing?

BTW... There is nothing in USPAP that says we can't use the contract price as opposed to the sale price to develop an opinion of market value.



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Bobby

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Quote:
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I thought of something I have never really thought of before.

House is under contract for $100000.  Appraisal comes in at $97000.  Sale price reduced to $97000.

Was the actual sale price reduced to $97000?  or was it really $100000 with a $3000 concession for financing?

BTW... There is nothing in USPAP that says we can't use the contract price as opposed to the sale price to develop an opinion of market value.




Wouldn't that get tangled in with "predetermined value"?

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RubberStamp

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Reply with quote  #33 
Quote:
Originally Posted by Meatloaf
I thought of something I have never really thought of before.

House is under contract for $100000.  Appraisal comes in at $97000.  Sale price reduced to $97000.

Was the actual sale price reduced to $97000?  or was it really $100000 with a $3000 concession for financing?

BTW... There is nothing in USPAP that says we can't use the contract price as opposed to the sale price to develop an opinion of market value.


$97,000 and still $3000 in concessions. Because most likely the owner still had to pay the concessions because nobody has money to close these days.

However "typical" concessions are considered a part of market value.  But "typical" is never defined and it varies.  Where we appraisers are wrong, and its only because of underwriter push back, that we don't make a positive adjustment for either cash or no concessions.  If the appraiser was allowed to do that I'd, again, have my full ask offer approved.  She used all cash sales.  No concessions.  The market value she derived was a cash purchase value. 

Is that market value?  Again I guess it depends.

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Meatloaf

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Reply with quote  #34 
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Originally Posted by Bobby


Wouldn't that get tangled in with "predetermined value"?


I don't think so.

The contract is an agreement to sale.  Like BillDing (I think) said once it appraises under contract the seller is now under duress.  The contract price represents the actual sale price and the seller offers an additional concession to close the deal.  

Like in RS's example.  He agreed to a price and then weighed the pros and cons of the price reduction and came to terms with giving the buyer a $2000 concession to close the deal versus waiting and spending more on payments, insurance, utilities etc.

The contract price represents the meeting of the minds and the re-negotiated contract reflects the seller's duress.

To me it is now clear as day... I don't think anything in USPAP would frown on that thinking but something tells me the state and FNMA wouldn't be so open-minded.

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Reply with quote  #35 
Quote:
Originally Posted by Meatloaf


I don't think so.

The contract is an agreement to sale.  Like BillDing (I think) said once it appraises under contract the seller is now under duress.  The contract price represents the actual sale price and the seller offers an additional concession to close the deal.  

Like in RS's example.  He agreed to a price and then weighed the pros and cons of the price reduction and came to terms with giving the buyer a $2000 concession to close the deal versus waiting and spending more on payments, insurance, utilities etc.

The contract price represents the meeting of the minds and the re-negotiated contract reflects the seller's duress.

To me it is now clear as day... I don't think anything in USPAP would frown on that thinking but something tells me the state and FNMA wouldn't be so open-minded.


Yeah it makes sense but you would get flamed in a review.
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RubberStamp

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Reply with quote  #36 
Quote:
Originally Posted by Meatloaf


The contract price represents the meeting of the minds and the re-negotiated contract reflects the seller's duress.



Although the seller wouldn't be in duress if it wasn't for the appraisal.   I wish the appraiser followed this forum because if she did she would have been more aware of the fact that the contract was a meeting of the minds - and to not assert her will unless there was truly due cause.   She is a seller's worst nightmare.  It could have been worse with that type of practice.   

I learned my lesson.  I will be at every appraisal for my properties from here on out.

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Meatloaf

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Reply with quote  #37 
forward this thread to her.  Maybe she could learn something.

Sounds like she is accustomed to fear based appraising.

Kill the deal = less liability.  Not the way it should be, but still a lot of appraisers live by this.

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BillDing

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Reply with quote  #38 
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Originally Posted by RubberStamp

However "typical" concessions are considered a part of market value.  But "typical" is never defined and it varies. 


Sorry RS, that is completely false. Being typical has absolutely nothing to do with it and it is clearly defined by FNMA.

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BillDing

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Reply with quote  #39 
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Originally Posted by Nomad
Yeah it makes sense but you would get flamed in a review.
Yes, it surely does make sense. I've done it that way and did not get flamed.

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RubberStamp

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Originally Posted by BillDing


Sorry RS, that is completely false. Being typical has absolutely nothing to do with it and it is clearly defined by FNMA.


Not clearly defined in what is allowed as a concession BillDing.  That they define for the underwriters. Rather clearly defined in how an appraiser should calculate the concession adjustment on the grid.  I still see appraisers making dollar for dollar adjustments even when $10,000 concessions are the norm in the market.  FNMA specifically detailed that this is most often incorrect.  

If it were clearly defined appraisers should be able to come to very similar to identical conclusions.   As it is now probably 5 out of 10 appraisers would disagree with each other and all of them would still be accepted by the underwriter.  But it could affect the derived value by thousands of dollars.  

It needs better definition in application for appraisers.   

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Meatloaf

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Reply with quote  #41 
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Originally Posted by RubberStamp


Not clearly defined in what is allowed as a concession BillDing.  That they define for the underwriters. Rather clearly defined in how an appraiser should calculate the concession adjustment on the grid.  I still see appraisers making dollar for dollar adjustments even when $10,000 concessions are the norm in the market.  FNMA specifically detailed that this is most often incorrect.  

If it were clearly defined appraisers should be able to come to very similar to identical conclusions.   As it is now probably 5 out of 10 appraisers would disagree with each other and all of them would still be accepted by the underwriter.  But it could affect the derived value by thousands of dollars.  

It needs better definition in application for appraisers.   


I agree.  The definition or expectations are confusing.

I generally look at my sales and if I have one or two with no concessions and I can discern that the sales with the concessions sold for more then there is my adjustment (which is nearly always dollar for dollar).  That being said, there are many builders who will offer an "incentive" that can be used towards closing or upgrades.  In this case, how do you account for the concession?  The upgrades are a concession but then again so is the closing costs.  The builder expects you to value the house higher because it has upgrades, but in the case where the buyers chose the closing costs, the sale price of the home is the same pointing to a zero dollar contribution for the upgrades.

WTF do I DOOOOOO???

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BillDing

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Reply with quote  #42 
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Originally Posted by RubberStamp


Not clearly defined in what is allowed as a concession BillDing.  That they define for the underwriters. Rather clearly defined in how an appraiser should calculate the concession adjustment on the grid.  I still see appraisers making dollar for dollar adjustments even when $10,000 concessions are the norm in the market.  FNMA specifically detailed that this is most often incorrect. 

That is completely incorrect. And they should be adjusting $10k for concessions.

FNMA states that 

"The need to make negative dollar adjustments for sales and financing concessions and the amount of the adjustments to the comparable sales are not based on how typical the concessions might be for a segment of the market area"  

The only time you could make a typical adjustment is a scenario where there was a law stating that all transactions, including cash, requires the seller to pay out a mandatory concession.

We are to adjust them to a hypothetical scenario where what would they agree upon if they didn't need the seller to pay the $10k in concessions...99.99% of the time, when you verify, the seller would drop the price $10k and the buyer would except, since it is the same in & out of pocket.

 


 


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Meatloaf

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Reply with quote  #43 
That is the confusion.

The "hypothetical" scenario where the buyer doesn't need the seller to pay concessions rarely exists.  In my area, homes are priced with the expectation that a concession is going to be paid.  IN rare instances, the amount of the concession exceeds what was "priced in" and you will see something sell for above list.  In this scenario, I think an adjustment is warranted.

There are some builders who refuse to pay any concessions because they want to attract buyers who actually have money.  The guy that NEEDS a concession doesn't NEED a $120/sf house.  That being said, there are other builders building very similar quality homes and selling them for the same price with a concession.  Soooo does the concession affect the sale price?  

But back to reality.... most sales have a concession because most buyers need to put what money they have as a down payment.  To find buyers that don't need a concession would in a lot of instances require pricing to attract investors.

I think it also matters as to what price range you are in.

No one with $50000 in the bank is going to buy a $50000 house to live in.  But there are people with $500000 in the bank that will happily live in a $500000 house.  Soooo cash buyers at lower price ranges are too rare to be considered the norm.  Cash buyers at higher price ranges are less rare but still far from the norm.

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BillDing

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Reply with quote  #44 
Quote:
Originally Posted by Meatloaf
That is the confusion.

The "hypothetical" scenario where the buyer doesn't need the seller to pay concessions rarely exists.  In my area, homes are priced with the expectation that a concession is going to be paid.  IN rare instances, the amount of the concession exceeds what was "priced in" and you will see something sell for above list.  In this scenario, I think an adjustment is warranted. 

That doesn't matter and is not to be considered a factor.   

Quote:
Originally Posted by Meatloaf
 That being said, there are other builders building very similar quality homes and selling them for the same price with a concession.  Soooo does the concession affect the sale price?  

Only way to find out is to call them up and ask them if they would lower the price if they didn't have to pay the concession.

I've had a scenario where the builder wouldn't lower the price! The concessions were given because they were financing the deal and getting their concessions back that way.  In that case, no adjustments were given.

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Meatloaf

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Reply with quote  #45 
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Originally Posted by BillDing

That doesn't matter and is not to be considered a factor.   


Only way to find out is to call them up and ask them if they would lower the price if they didn't have to pay the concession.

I've had a scenario where the builder wouldn't lower the price! The concessions were given because they were financing the deal and getting their concessions back that way.  In that case, no adjustments were given.


The seller would always lower the price.  Why not?

The buyer is the one that you need to ask if they would have bought the house with no concession if the seller lowered the price.  But you already know the answer to this question.  The buyer needed the concession or they wouldn't have asked for it.

Only in situations of new construction where the builder/seller is trying to keep the $/sf up would a seller refuse to lower the price by the concession amount.

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BillDing

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Reply with quote  #46 
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Originally Posted by Meatloaf


The seller would always lower the price.  Why not?

Exactly. Therefore it did affect the price.

Quote:
Originally Posted by Meatloaf
The buyer is the one that you need to ask if they would have bought the house with no concession if the seller lowered the price.  But you already know the answer to this question.  The buyer needed the concession or they wouldn't have asked for it.

No you are adding another variable into the equation. MV does not do that. Hypothetically, what would the sale price be if they told the seller that their mom died and left them some money, so they don't need him to pay the closing costs. They'd rather lower the price (which will help it appraise)

Quote:
Originally Posted by Meatloaf

Only in situations of new construction where the builder/seller is trying to keep the $/sf up would a seller refuse to lower the price by the concession amount.
Not just new construction. Sellers will finance their own home.

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RubberStamp

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Reply with quote  #47 
Quote:
Originally Posted by BillDing


FNMA states that 

"The need to make negative dollar adjustments for sales and financing concessions and the amount of the adjustments to the comparable sales are not based on how typical the concessions might be for a segment of the market area"  

No more confusing a statement could I create if I tried.  You are interpreting it one way.  However, what they are saying there is "The need to make a negative dollar adjustments"..are not predicated on anything tangable - such as "typical".  They are making the case for no adjustment at all.  Otherwise it would be clear and I would not be arguing the point.  They would just say "Dollar for dollar adjustments are the rule unless the appraiser observes something and wants present and define some more appropriate adjustment". 

There are also other FNMA statements that I simply do not have time to dig up that state that dollar for dollar adjustments are rarely appropriate.  AMCs were sending it around to try to get appraisers values up.  During that time AMCs were kicking reports back if you had $ for $ adjustments and did not provide an analysis in the addendum stating why. 

Strangely, the appraiser's analysis basically states what is "typical" in the market and contrary to the statement you quoted from FNMA above. 

As mentioned:  It is poorly defined.  I can't see how you see that as "clear".  They are basically dancing around all possibilities and for that reason appraisers are all over the place. 

My conclusion?  In typical FNMA fashion they die if they don't make loans.  When you adjust for concessions there is less value and therefore more probability of the loan not going through.  So they remain abstract and vague and hope that you get the hint - but never do they want verbiage or a paper trail you can point to defend yourself. 

More conspiracy.. ooooooooooo...   Except its not.  That is the world we live in today.  Being liable for anything has major financial consequences so if they can hint and generalize and leave it up to you..  they most certainly are. You've got to believe they are between a rock and a hard place with concessions.  I think all agents and all builders have pressured them enough to look the other way and that is why it is poorly defined and left up to us.  It would be very easy for them to mitigate the risk of concessions as your way would do.   They just need to come out and say it if that is truly what they want.

Adjusting dollar for dollar like you suggest makes the most sense.  But don't forget, concessions are recorded as a part of total price.  We use that price to determine market value.  It is a part of market value.  And you can bet your bottom that the new AVMs are using the recorded sale price regardless of concessions as they do not have access to MLS data to even begin adjusting.  Even excessive concessions are considered a part of the market value it generates.

 


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Meatloaf

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Reply with quote  #48 
Quote:
Originally Posted by RubberStamp

No more confusing a statement could I create if I tried.  You are interpreting it one way.  However, what they are saying there is "The need to make a negative dollar adjustments"..are not predicated on anything tangable - such as "typical".  They are making the case for no adjustment at all.  Otherwise it would be clear and I would not be arguing the point.  They would just say "Dollar for dollar adjustments are the rule unless the appraiser observes something and wants present and define some more appropriate adjustment". 

There are also other FNMA statements that I simply do not have time to dig up that state that dollar for dollar adjustments are rarely appropriate.  AMCs were sending it around to try to get appraisers values up.  During that time AMCs were kicking reports back if you had $ for $ adjustments and did not provide an analysis in the addendum stating why. 

Strangely, the appraiser's analysis basically states what is "typical" in the market and contrary to the statement you quoted from FNMA above. 

As mentioned:  It is poorly defined.  I can't see how you see that as "clear".  They are basically dancing around all possibilities and for that reason appraisers are all over the place. 

My conclusion?  In typical FNMA fashion they die if they don't make loans.  When you adjust for concessions there is less value and therefore more probability of the loan not going through.  So they remain abstract and vague and hope that you get the hint - but never do they want verbiage or a paper trail you can point to defend yourself. 

More conspiracy.. ooooooooooo...   Except its not.  That is the world we live in today.  Being liable for anything has major financial consequences so if they can hint and generalize and leave it up to you..  they most certainly are. You've got to believe they are between a rock and a hard place with concessions.  I think all agents and all builders have pressured them enough to look the other way and that is why it is poorly defined and left up to us.  It would be very easy for them to mitigate the risk of concessions as your way would do.   They just need to come out and say it if that is truly what they want.

Adjusting dollar for dollar like you suggest makes the most sense.  But don't forget, concessions are recorded as a part of total price.  We use that price to determine market value.  It is a part of market value.  And you can bet your bottom that the new AVMs are using the recorded sale price regardless of concessions as they do not have access to MLS data to even begin adjusting.  Even excessive concessions are considered a part of the market value it generates.

 



Good point.  But FNMA has a record of the concessions from our appraisal.  That is why they are always pressuring for it to be listed on page 1 even when the contract is re-negotiated after the appraisal.  I never oblige, but plenty of appraisers do.

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BillDing

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Reply with quote  #49 
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Originally Posted by RubberStamp
However, what they are saying there is "The need to make a negative dollar adjustments"..are not predicated on anything tangable - such as "typical".  They are making the case for no adjustment at all. 

No, just the opposite. 

The definition of Market Value states:
"(6) 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." 

Further clarity is given to sales concessions; Nowhere does it mention or even suggest that no adjustments are necessary for seller concessions if they are "typical" in the market, but rather only when they:"are normally paid by sellers as a result of tradition or law in a market area" How does one identify this? Market Value goes on with additional clarity; "these are identifiable since the seller pays these costs in virtually all sales transactions." There is no such tradition or law in the market area and these costs are not present in virtually all sales, therefore it is clear that typical concessions still need to be adjusted if they result in a different price had the seller not paid them.

The following excerpt from the Selling Guide, B4-1.3-09: Adjustments to Comparable Sales (01/31/2017) (C) provides further guidance for these circumstances:
“The need to make negative dollar adjustments for sales and financing concessions and the amount of the adjustments to the comparable sales are not based on how typical the concessions might be for a segment of the market area—large sales concessions can be relatively typical in a particular segment of the market and still result in sale prices that reflect more than the value of the real estate.... The adjustments must reflect the difference between what the comparables actually sold for with the sales concessions and what they would have sold for without the concessions so that the dollar amount of the adjustments will approximate the reaction of the market to the concessions.”

This adjustment is not a mechanical dollar for dollar adjustment, nor should it be. Market value states: "Any adjustment should not be calculated on a mechanical dollar for dollar cost..." The key word is "mechanical"; Dollar for dollar is often the market reaction, but this cannot be assumed. In order to get the most accurate insight, the agents of the comparable sales are called to verify the contributory value of the concessions
 
 
Quote:
Originally Posted by RubberStamp

There are also other FNMA statements that I simply do not have time to dig up that state that dollar for dollar adjustments are rarely appropriate.


No, there are no such statements...and I have researched this extensively.
In fact, they just clarified that in the last guide and they clearly state that if $4$ is the case...it is perfectly acceptable to adjust $4$. 

BTW, A stronger argument than not adjusting $4$ is adjusting greater than $4$. Cash buyers tend to buy at even lower prices...however, you do that, shiit will hit the fan.

Quote:
Originally Posted by RubberStamp
Adjusting dollar for dollar like you suggest makes the most sense.  But don't forget, concessions are recorded as a part of total price.  We use that price to determine market value.

No, we use the adjusted price to determine market value.


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BillDing

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Reply with quote  #50 
Keep in mind, FNMA is not out to protect the appraiser. They can easily take the closing costs and wrap it up in the mortgage.  Voila. But, now they're on the hook. So their thinking is "Have Mikey the appraiser include them and not adjust and pump out a higher appraisal to get the deal done with less money on the hook.  That way, if something goes wrong, the appraiser now takes the fall!
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