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Having actual existence or reality.3. a. Uninfluenced by emotions or personal prejudices: an objective critic. See Synonyms at fair1. b. Based on observable phenomena; presented factually: an objective appraisal.
For an appraisal to be completely objective, it would need to be based 100% on measurable factors, which are agreed upon by all parties and weighted the same way by everyone. The result would be the same every time, given the same property and market, no matter the appraiser.
The question becomes one of "which" measurable factor and the reading of the market to determine just how much value those factors contribute to the overall value. The appraisers knowledge and experience should not be subjective or based on anything but observable market response. The interpretation of observable market response to those factors is what is sought. To state that Appraisals are not that objective is both not true, and is misleading. Differences in value opinions are based on the value given those factors that the appraiser believes is representative of a typical buyer for that particular property.
The opposite of "objective" is not "biased." It is "subjective." Objective means there is no judgement involved. For an appraisal to be completely objective, it would need to be based 100% on measurable factors, which are agreed upon by all parties and weighted the same way by everyone. The result would be the same every time, given the same property and market, no matter the appraiser. That is demonstrably not the case. It is not an insult to appraisers to say it's somewhat subjective. In fact, I'd say it's more of an insult to say it's totally objective, because the hard-earned judgement they bring to the table is what makes a skilled appraiser valuable, isn't it? If all they're doing is plugging numbers into a known formula, to get a totally objective result, anyone who can type can do it.
I think one of the real issues is that appraisers have to judge the "quality" of the sold comps based on pictures and MLS descriptions, which of course show the house in the best light possible and hide the issues.
I have a listing that is very high $/sq ft for the neighborhood because it has a very large, somewhat flat lot (very rare here) and the interior is updated (but not opulent). With 3 full-priced offers, I am still concerned how the appraisal will go so I looked at close comps to see the difference. One house was almost exactly the same on paper (based on MLS) sold for $30K less. I called the buyers agent and he said it had tons of wood rot, the interior was completly original, 20 years old, except for the granite counters in the kitchen, the driveway was crumbling, etc., etc., etc. None of these items were described as such in the listing. If an appraiser doesn't make that call, how can they possibly make valid adjustments no matter how skilled or objective they are? I've received a few calls from appraisers recently, but nowhere near as many as homes I've sold.
Nina, that kind of adjustment is an easy calculation just based on the selling price of the comparable. A lot of appraisers don't make it, but it isn't difficult to arrive at a value regardless of the reason a house sold high or low.
Two elements apply: Depreciation is loss in value for any reason. Sale price of a house (arms length) IS its depreciated value.
Sale Price of GLA/RCN of GLA gives you depreciation %. Comparable Depreciation % - Subject Depreciation % = condition adjustment.
The opposite of "objective" is not "biased." It is "subjective." Objective means there is no judgement involved. For an appraisal to be completely objective, it would need to be based 100% on measurable factors, which are agreed upon by all parties and weighted the same way by everyone. The result would be the same every time, given the same property and market, no matter the appraiser. That is demonstrably not the case. It is not an insult to appraisers to say it's somewhat subjective. In fact, I'd say it's more of an insult to say it's totally objective, because the hard-earned judgement they bring to the table is what makes a skilled appraiser valuable, isn't it? If all they're doing is plugging numbers into a known formula, to get a totally objective result, anyone who can type can do it.
Location. View. Quality of finishes. Condition. You can say they're measurable if the measurements are very coarse (does it have a view or not), but when it comes down to fine distinctions, it breaks down.
Location. View. Quality of finishes. Condition. You can say they're measurable if the measurements are very coarse (does it have a view or not), but when it comes down to fine distinctions, it breaks down.
All the items you list are adjusted for. Have you read the new breakdowns for quality and condition (i.e C1-C6 and Q1-Q6)? They are pretty detailed.
View is pretty obvious. Location is the one that is somewhat lacking imo. In my small town of about 22,000 the west side is clearly more desirable and more valueable than the east or south sides, but there is never an adjustment for it.
Location. View. Quality of finishes. Condition. You can say they're measurable if the measurements are very coarse (does it have a view or not), but when it comes down to fine distinctions, it breaks down.
Location and view can be determined, frequently, by the lot value. Condition can be determined by depreciation which can be determined by the cost approach.
I honestly don't know why I'm even debating about this, because it truly isn't something I care a lot about, and I'm not one of the people who dislikes appraisers (as some of the others on these threads seem to be). And I have a feeling no one on either side of the discussion is going to change his or her mind. But the argument that it's all perfectly measurable, and that no judgement goes into it at all, just doesn't sit right with me.
I didn't say these factors can't be adjusted for, I said they can't be "measured." Meaning, I don't personally believe that someone (anyone) can walk into a house, say "this view is a 7.34, and the one down the street is an 8.283," and plug those into a formula to get a deterministic value for the house. Yes, lot value is a good signal, but it can change over time. What if a big building was built blocking half of the view? What if there was a wildfire that burned down a bunch of the trees that were previously beautiful? Further, who is to say that the original lot value is right? At some point, someone had to decide that the view or location on home A is better than the view on home B, to give it a higher value. How do they determine that? On a golf course home, what is the difference in value of a house on the fairway vs the green? What is the difference in value of a house on a 25MPH street vs. one on a 30MPH street?
Similarly, how much do you deduct for a 6 inch diameter coffee stain on the carpet in the living room, and how does that differ from a 12 inch diameter stain, or a stain in an out of the way bedroom? What's the difference in value between a 16 year old well maintained furnace, and a 4 year old poorly maintained one?
Let me approach from the other side: if it IS all measurable and objective, how is it that two appraisers can come up with different values for the same property in the same time frame? Are you guys saying that when that happens, one of the appraisers is wrong and one is right? If not, and if it's all measurable, and if no judgement comes into play, what accounts for the difference?
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