Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Ya, I don't know where all the negative feedback on the housing market is coming from. Perhaps these "experts" are non-directingly talking about cities like LA? SF? NYC? My neighbors bought their house for 110k a year ago, fixed it up a bit, and it is listed for 155k right now. And they didn't put 45k worth of improvements into it, so that's showing a serious market jump, at least in Surprise. Although the house will prob sell in the high 140s. And the shocking part that's making me doubt zillow, is that zillow only estimates their house at 116k. Imagine how much many of our homes are ACTUALLY worth.
Ya, I don't know where all the negative feedback on the housing market is coming from. Perhaps these "experts" are non-directingly talking about cities like LA? SF? NYC? My neighbors bought their house for 110k a year ago, fixed it up a bit, and it is listed for 155k right now. And they didn't put 45k worth of improvements into it, so that's showing a serious market jump, at least in Surprise. Although the house will prob sell in the high 140s. And the shocking part that's making me doubt zillow, is that zillow only estimates their house at 116k. Imagine how much many of our homes are ACTUALLY worth.
I don't think any amount of computer programming skill can overcome how phoenix is laid out - zillow knows that nearby "comps" are really important, but it can't tell the difference between a trailer and a mansion, so in many areas of town where both exist, the mansion gets a half-price zesstimate and the trailer looks like an outstanding value at $400k...
I don't think any amount of computer programming skill can overcome how phoenix is laid out - zillow knows that nearby "comps" are really important, but it can't tell the difference between a trailer and a mansion, so in many areas of town where both exist, the mansion gets a half-price zesstimate and the trailer looks like an outstanding value at $400k...
But, it's fun to make fun of!
Haha, that's a good point. I would have assumed zillow could figure that out when you enter building structure, sq ft, zip code... at least... Most trailers are in trailer parks anyway.
Pending sale price per square foot increasing or decreasing is a good indication of whether the Sold prices will increase or decrease during the next couple of months. Since August the Pending prices have been increasing, and began to increase at a fast rate.
However, during the last 3 weeks the Pending prices have leveled off. That's an indication that the Sold prices may level off during the next month.
As we're aware the Sold price per square foot has increased by 15.5 during the last 3 months, which is a very high rate, and it's unusual for them to keep up that rate for a long period of time.
However, the supply has not changed. The supply is still short and that should keep upward pressure on prices.
Mike Orr has still not changed his prediction of a 25% price increase by the 4th quarter.
Last edited by Captain Bill; 05-22-2012 at 07:56 AM..
Mike Orr mentioned that the world, and especially appraisers, need to catch up with the increasing prices.
Appraisers can use Pending price comps, and they do. However, when using Pendings, they need to use the right ones that are indicative of the market movement.
An appraisal on one of my listings came in low. In studying the appraisal report I found some glaring errors and ended up writing a 4 page challenge to the appraisal.
Appraisers are chosen randomly from a pool of appraisers by an appraisal management company. This appraiser came from Phoenix to appraise a Val Vista Lakes home. Appraisers need to know the local sub market, and this method of assigning appraisers will place appraisers in markets where they are not familiar.
One of my challenges was that this appraiser was from central Phoenix and not familiar with the lake community, Val Vista Lakes Gilbert sub market.
S/he chose two Pending comps in a community outside of Val Vista Lakes, and did not make any price adjustment for the premium that is paid for Val Vista Lakes homes due to the clubhouse and the lakes.
One of those homes was an REO (all the others were traditional) yet she did not make a price adjustment for the REO being sold As Is and with a Special instead of General Warranty Deed. No one will pay the same price for an REO as they will for the same type of home in a traditional sale.
The subject home is a C2 home (highly updated condition). One comp outside the community was listed on the report as a C2, but was actually C3 (never had updates -- obvious from the photos). That can be a $30k adjustment.
Our subject house was a 4 bedroom plus den/5th bedroom. S/he showed it as a 3 bedroom. Consequently, adjustments were made that should not have been made, causing our value to be lowered.
S/he was making adjustments of $4,000 for a garage bay, but only a $3,500 adjustment for a bedroom. Bedrooms cost more to build.
On one home, s/he made an adjustment of $7,000 for 2 bedrooms plus a 1/2 bath. (The $7,000 was for 2 bedrooms, so there was no adjustment for the 1/2 bath.)
S/he did not use one comp that was only 30sf outside the range of 25% diff in square footage from the subject. It was a perfect comp and would have increased the appraised value of the subject.
S/he did not use a comp around the corner that was Pending at full price, and the same model as our subject except our subject had 4 bedrooms and den, whereas this comp had 3 bedrooms and den. That Pending was also a C3 needing extensive updates and had no pool.
S/he stated that in this market there was an over abundance of homes for sale and that sellers were having to give seller concessions to attract buyers.
That was completely wrong. The absorption rate in this community is 9 homes per month Sold (not including Pendings). There are 16 Active, so at the absorption rate of 9/month there is only a 1.8 month supply. (That's hardly an over abundance)
Out of 43 homes Sold in 2012, only 3 homes had seller concessions. 15 of them were sold for cash.
Appraisers are human. They can and do make mistakes. With this new appraisal system, they also make less money. The management companies take a large share of their fee. That may tend to make them rush, and use some boiler plate language that does not reflect the current market.
It can also cause them to take short cuts, such as finding a few comps and determining an average, and then pick adjustment numbers to make the numbers come out to that average.
This is not to criticize appraisers, whom I respect as hard working underpaid individuals. But I will challenge any appraisal where I find errors that cause the current market value of my clients property to be understated.
Not only does an erroneous appraisal damage my client, but it can damage other homeowners in the community whose home values will be negatively affected by the incorrect appraisal.
My suggestion for anyone who gets an appraisal is to go through that appraisal with a fine tooth comb with your Realtor to make sure it is done correctly.
Most of the time, if the appraisal is right on the purchase price, no one will challenge it, but it should be challenged any time errors are detected.
Mike Orr mentioned that the world, and especially appraisers, need to catch up with the increasing prices.
Appraisers can use Pending price comps, and they do. However, when using Pendings, they need to use the right ones that are indicative of the market movement.
An appraisal on one of my listings came in low. In studying the appraisal report I found some glaring errors and ended up writing a 4 page challenge to the appraisal.
Appraisers are chosen randomly from a pool of appraisers by an appraisal management company. This appraiser came from Phoenix to appraise a Val Vista Lakes home. Appraisers need to know the local sub market, and this method of assigning appraisers will place appraisers in markets where they are not familiar.
One of my challenges was that this appraiser was from central Phoenix and not familiar with the lake community, Val Vista Lakes Gilbert sub market.
S/he chose two Pending comps in a community outside of Val Vista Lakes, and did not make any price adjustment for the premium that is paid for Val Vista Lakes homes due to the clubhouse and the lakes.
One of those homes was an REO (all the others were traditional) yet she did not make a price adjustment for the REO being sold As Is and with a Special instead of General Warranty Deed. No one will pay the same price for an REO as they will for the same type of home in a traditional sale.
The subject home is a C2 home (highly updated condition). One comp outside the community was listed on the report as a C2, but was actually C3 (never had updates -- obvious from the photos). That can be a $30k adjustment.
Our subject house was a 4 bedroom plus den/5th bedroom. S/he showed it as a 3 bedroom. Consequently, adjustments were made that should not have been made, causing our value to be lowered.
S/he was making adjustments of $4,000 for a garage bay, but only a $3,500 adjustment for a bedroom. Bedrooms cost more to build.
On one home, s/he made an adjustment of $7,000 for 2 bedrooms plus a 1/2 bath. (The $7,000 was for 2 bedrooms, so there was no adjustment for the 1/2 bath.)
S/he did not use one comp that was only 30sf outside the range of 25% diff in square footage from the subject. It was a perfect comp and would have increased the appraised value of the subject.
S/he did not use a comp around the corner that was Pending at full price, and the same model as our subject except our subject had 4 bedrooms and den, whereas this comp had 3 bedrooms and den. That Pending was also a C3 needing extensive updates and had no pool.
S/he stated that in this market there was an over abundance of homes for sale and that sellers were having to give seller concessions to attract buyers.
That was completely wrong. The absorption rate in this community is 9 homes per month Sold (not including Pendings). There are 16 Active, so at the absorption rate of 9/month there is only a 1.8 month supply. (That's hardly an over abundance)
Out of 43 homes Sold in 2012, only 3 homes had seller concessions. 15 of them were sold for cash.
Appraisers are human. They can and do make mistakes. With this new appraisal system, they also make less money. The management companies take a large share of their fee. That may tend to make them rush, and use some boiler plate language that does not reflect the current market.
It can also cause them to take short cuts, such as finding a few comps and determining an average, and then pick adjustment numbers to make the numbers come out to that average.
This is not to criticize appraisers, whom I respect as hard working underpaid individuals. But I will challenge any appraisal where I find errors that cause the current market value of my clients property to be understated.
Not only does an erroneous appraisal damage my client, but it can damage other homeowners in the community whose home values will be negatively affected by the incorrect appraisal.
My suggestion for anyone who gets an appraisal is to go through that appraisal with a fine tooth comb with your Realtor to make sure it is done correctly.
Most of the time, if the appraisal is right on the purchase price, no one will challenge it, but it should be challenged any time errors are detected.
Thanks for the advice and examples. I don't think most people know they can challenge the appraiser if they believe it's wrong, I do have to say that the part about sellers giving concessions is pretty whacky and the first thing I'd think is "drive by" appraisal.
The appraisal business is as bad as ever. My Realtor twisted the arm of an appraisser on my last mortgage. Made him change the word "fair" to "good", when "train wreck" was more accurate. That was 2001, and I may never get another mortgage. The appraisers in Arizona tried to shut down Zillow back in 2006...that just shows how insecure they are. If someone wants to buy from me and only has 3.5% down or whatever miniscule amount; there will be non-refundable earnest money, and that will be if they are the only offer. I don't see any reason to feed the pigs for less than 100K. Look at the high percentage of cash buyers in that price range.
Thanks for the advice and examples. I don't think most people know they can challenge the appraiser if they believe it's wrong, I do have to say that the part about sellers giving concessions is pretty whacky and the first thing I'd think is "drive by" appraisal.
They must provide details and supporting data. They cannot say what the appraised value should be.
In the past, I understand that the challenge went directly to the appraiser, who could choose to change or not change the values.
Today the challenge goes to the appraisal management company who hires the appraiser (and takes most of the fee).
I don't know how they proceed. They may review it themselves and then recommend the appraiser make appropriate changes, or they may just forward it directly to the appraiser.
Appraisers are human. They can and do make mistakes. With this new appraisal system, they also make less money. The management companies take a large share of their fee. That may tend to make them rush, and use some boiler plate language that does not reflect the current market.
I think it's important to realize that appraisers are providing an OPINION of value. There can be mistakes, like if they miscount garage bays or put in a SF value wrong. But if you don't like the amount they adjust an item for, that's not really a mistake, you just have a different opinion.
There is a new way of working the appraisers at one of the valley's biggest banks. If they don't hit a certain # of appraisals in a period, they only get paid like $10/hour. So they have a big incentive to hit a big number of appraisals every week. Only then do they get their 'normal' pay, which is a fraction of the appraisal fee.
I think the appraisal mgmt. company reviews any challenges to an appraisal and if they find there might be something to look into, they will forward it to the appraiser and require them to respond. The appraiser will usually describe their thinking, in defense of their appraisal, and that's that. If someone downstream suggested another comp, they might agree that it's a suitable one and include it, and that may or may not change their opinion of value. In the couple years I appraised, I got maybe 2-3 back with realtor comments. Only once did I agree to include a new comp and change the value opinion. The other times I stood by my original appraisal.
The appraisal mgmt. companies I worked with use rating systems for their appraisers and assign things out based on that. If you get caught with errors, your rating goes down and you get used less. I worked mostly with Wells Fargo, BofA and (then) Countrywide. They had ratings per product, too. I had a good rating on my drive-bys so I got a lot of those. Some of them do try to pick an appraiser within an area but the ones I worked for the appraiser specified which zip codes they would serve. Most of the valley is pretty standard, despite what many realtors would say. Val Vista Lakes is lovely but not so unique it needs a specialized appraiser, IMO. A house in VVL not on a lake I would probably consider comparable to a house in a nearby subdivision without lakes. But you do these things based on price comparisons in the market, so you can kind of tell if the market considers them comparable. The cost of building a bedroom doesn't matter in a sales comparison analysis. What the market will pay for that incremental bedroom is all that matters. And above 3 bedrooms, I think usually it's just the square footage adjustment that matters. Just one opinion, though! Everyone always thinks their own neighborhood is clearly better and their own house is. The bank just wants a neutral opinion. It does suck when it kills a sale. Most appraisers will strive to hit a sales price, while not endangering themselves.
Last edited by ReadyFreddy; 05-22-2012 at 11:20 AM..
I don't think anyone can claim that neither the appraiser nor his/her management company does not know what the target number is. They may not come right out and ask (anymore), but somewhere in the process they are told details of the loan.
I doubt there are any guidelines for realtor conduct involving appraisals, it does seem like it is a form of collusion, price fixing, and insider trading all wrapped into one.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
