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I get all of what you are saying. I thought maybe he gave little weight to the high and low values. But the adjusted value of the other two were both $158K. If the appraised value was $158k, I would have understood. Coming back $2k below the two most comparable sales is what I do not understand. The $145k was actually a foreclosure that was bought up by an investor and turned around and sold quickly (two weeks).
The buyer has actually agreed to pay $158K ($2K more than the appraised value). So, I am only down $2k from our original contract.
I am just trying to figure out how the appraiser came up with $156K.
Obviously, most weight was given to the two that adjusted to $158K offset by some weight given to the low range because foreclosures are having an impact on the market. Perfectly reasonable to me.
The appraiser is required, per USPAP, to explain the reconciliation in the report. After the adjusted sales prices are derived then the appraiser shouldn't just be picking a number out of the air without explaining the reason behind the reconciliation.
You mentioned having another appraisal where the appraised value came in much lower than the adjusted sales prices. If I understand what you are saying, then that appraisal is useless. Any factors that affect value should already have been adjusted on the comparables, so the adjusted sales prices should be good indicators of value. It's nonesensical to do all of the adjustments then choose a value that is outside of the range of adjusted sales prices.
This is exactly what I am thinking and hence, my question. The only explanation he gives is that comps 1,3,4 are in my neighborhood and he gave weighed consideration to the adjusted values of the comps to come up with a final value using the sales comparison approach. This to me is not an explanation it just a statement of process.
I am an analytical person. All I am trying to find out or figure out myself is how he got from A to B. With A be the adjusted value of the comps and B being the appraised value.
NOTE: In earlier post, I use my faulty memory for the comp values. This post has the correct comp values.
Obviously, most weight was given to the two that adjusted to $158K offset by some weight given to the low range because foreclosures are having an impact on the market. Perfectly reasonable to me.
But, that is just a guess on your part (that's not meant to be argumentative). If he had actually said that in his report, I could accept that. He did not say that. I realize I am not his client, but as a person that is directly impacted by his decision, I should not have to scratch my head or rack my brain trying to figure out how he arrived at his value.
I am just trying to make sense of the process. In the end, in this market everyone is telling me I should just happy that I am only down $2k in the negotiation process. And that my mortgage and closing costs will be covered by the payoff. Although, the pigheaded side of me want to tell the agents, that I am going to walk away if I don't get an explanation.
The only explanation he gives is that comps 1,3,4 are in my neighborhood and he gave weighed consideration to the adjusted values of the comps to come up with a final value using the sales comparison approach. This to me is not an explanation it just a statement of process.
That is a very astute observation. This appraiser did not comply with USPAP if he or she did not explain the reconciliation. You've noticed the subtle difference between stating the process with a generic statement and explaining the reasoning behind what was done, and why. Those are the sorts of details that are emphasized in USPAP education.
Typically, the reconciliation is not a pure mathematical process. It's frowned upon to do it that way, and actually a violation of Fannie Mae guidelines if those are applicable for your appraisal. So you're not likely to figure out what the appraiser did by doing a mathematical analysis.
That is a very astute observation. This appraiser did not comply with USPAP if he or she did not explain the reconciliation. You've noticed the subtle difference between stating the process with a generic statement and explaining the reasoning behind what was done, and why. Those are the sorts of details that are emphasized in USPAP education.
Typically, the reconciliation is not a pure mathematical process. It's frowned upon to do it that way, and actually a violation of Fannie Mae guidelines if those are applicable for your appraisal. So you're not likely to figure out what the appraiser did by doing a mathematical analysis.
Thanks, that clears up a big part of my question. It's a conventional loan not FHA. But from what you are saying, I need to forget about making a mathematical determination and just accept a somewhat subjective approach.
But, that is just a guess on your part (that's not meant to be argumentative). If he had actually said that in his report, I could accept that. He did not say that. I realize I am not his client, but as a person that is directly impacted by his decision, I should not have to scratch my head or rack my brain trying to figure out how he arrived at his value.
I am just trying to make sense of the process. In the end, in this market everyone is telling me I should just happy that I am only down $2k in the negotiation process. And that my mortgage and closing costs will be covered by the payoff. Although, the pigheaded side of me want to tell the agents, that I am going to walk away if I don't get an explanation.
There is no exact mathematical formula that will give you the value as indicated on the appraisal. You're trying to make sense of the process? Then you have to understand it is a process. You are attempting to make years of education and experience equate to a simple math problem. Included in that value are laws, regulations, guidelines, underwriter comments, and a variety of other unseen factors affecting the value. You won't get an A+B=C answer, that's not how it works.
Then, how does it work. He said he provided that analysis. He did not. He just stated the obvious process. I just want him to tell me how he arrived at his value.
Then, how does it work. He said he provided that analysis. He did not. He just stated the obvious process. I just want him to tell me how he arrived at his value.
What exactly are you looking for? He stated the process, which is how he arrived at the value. Do you want a mathmatical formula? Because, that's not possible. Part of the process is the appraiser's knowledge and experience, federal. state. and local guidelines, lender requirements and a variety of other factors. What is it that you want?
What exactly are you looking for? He stated the process, which is how he arrived at the value. Do you want a mathmatical formula? Because, that's not possible. Part of the process is the appraiser's knowledge and experience, federal. state. and local guidelines, lender requirements and a variety of other factors. What is it that you want?
I tend to get careless with my words on forums like this and realize after the fact I need to be more specific.
In my original post, my question was (and still is): how does an appraiser use the adjusted sales price of a comp to come up an appraised value?
I have learned from this thread that it is not a simple mathematical equation.
I have also learned that an appraiser is suppose to give an analysis explaining how he determined the value.
This appraiser simply stated the process (market comparison and a weighting of adjusted values) that he used to arrive at his conclusion. He did not give an analysis or expalin his conclusion. For all I know, he just copy and pasted the same verbiage that he uses on every appraisal.
I feel like I should be able to look at his work and say it make sense and despite whether I like it or whether I agree with it. I am grown up enough to do that.
The explanation would usually include the appraiser talking about why he or she gave particular emphasis to one, two, or all three of the comparables.
There are lots of reasons why the reconciliation may favor one or more comps over the others. Recency of the sale is one good reason in a fast changing market.
The similarity of your house to the comps is another. Some appraisers look at the net and gross adjustment percentages and use those as a basis for figuring out which comps may receive the most weight.
If you have any unique aspects to your property, like being on a busy road for example, then the appraisal might emphasize any of the sales that also have that attribute.
The conditions of sale such as any of the comps being distressed sales might also have influence. If your market includes a lot of distressed sale, and active listing activity then the appraiser might give more weight to comps with those similarities. In this tough economy, active listings should be considered by the appraiser even if he or she does not include those in the appraisal due to the client's requirements. So if the appraiser looks at active listings that might be much lower than the comps, then the appraiser might emphasize the lower end of the value range of adjusted sales prices.
On the other hand, if you have a recently updated property that is in excellent condition then the uppper end might be emphasized.
There are dozens of reasons why one of more of the comparables might be given more weight, but these should give you some ideas.
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