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I believe Schouse makes a living as a real estate APPRAISER and I have no problem with that.
I further believe that a healthy real estate market with a large number of transactions is very beneficial to both real estate appraisers and agents/brokers.
If "higher values" do not come with a larger number of transactions I believe it is false and disingenuous to say the NAR has a financial interest in such things. It should be clear that the interests of ALL (buyers, sellers, lenders, agents/brokers, appraisers) are BEST served by an honest, accurate, unbiased view of current home values as reflected through an educated assessment of all the available data.
You missed the entire point of my post. If you have multiple, unrelated buyers willing to pay a given price for a given house...that IS the market. For the appraiser to step in and say..no, its not worth that much, is just ludicrous.
You both are missing the point. There are multiple markets here. People who are looking to live in the house establish a value for a house based on their needs. Investors looking to purchase a property for as an investment will establish a value based on the return that they are looking for. When the goal is to close deals and generate commissions, lenders have shopped for appraisers who value the property at levels that will close deals. Now lenders are establishing risk based value on worst case scenarios.
The original statement in the thead in absolutely correct:
For many years, we in the real estate profession have told people that the value of a house is the price that a willing buyer and a willing seller agree upon.
The disconnect comes when the 'willing buyer' doesn't have enough money to purchase the property themself. That willing buyer then needs a partner who will provide funding for the purchase. That partner acquires an interest in the property and has a right to put value on that house by which they will set their level of investment.
[quote=BootStrapTX;10021399]You both are missing the point. There are multiple markets here. People who are looking to live in the house establish a value for a house based on their needs. Investors looking to purchase a property for as an investment will establish a value based on the return that they are looking for. When the goal is to close deals and generate commissions, lenders have shopped for appraisers who value the property at levels that will close deals. Now lenders are establishing risk based value on worst case scenarios.
The original statement in the thead in absolutely correct:
For many years, we in the real estate profession have told people that the value of a house is the price that a willing buyer and a willing seller agree upon.
The disconnect comes when the 'willing buyer' doesn't have enough money to purchase the property themself. That willing buyer then needs a partner who will provide funding for the purchase. That partner acquires an interest in the property and has a right to put value on that house by which they will set their level of investment.[/QUOTE]
In my OP I should have stated that the value of a house is the price that a "ready, willing, and able" buyer and a willing seller agree upon. I think Bootstrap, in his last paragraph above, best responds to my questions in the OP. The key components of a successful transaction in today's market are obviously the terms "ready", "willing", and "able", not only as they apply to the buyer but also to the seller. IMO, the "able" component has taken on a somewhat different meaning in today's market as it relates to the buyer. Also, the "willing" and "able" components have taken on a somewhat different meaning as it relates to the seller. My point in bringing this up is to often I see or hear the statement from real estate agents about the value of a house being the price that a ready, willing, and able buyer and a willing seller agree upon.It is no longer thatsimple. We make this statement as if it is self explanatory to the general public when it is not. Actually it can be very confusing. We fail to explain that for buyers that must borrow to buy(to be "able") they must take on a partner(lender) who now also has some skin in the game(usually most of the skin). That lender has a right to determine value based on risk as Bootstrap stated.
I believe Schouse makes a living as a real estate APPRAISER and I have no problem with that.
I further believe that a healthy real estate market with a large number of transactions is very beneficial to both real estate appraisers and agents/brokers.
If "higher values" do not come with a larger number of transactions I believe it is false and disingenuous to say the NAR has a financial interest in such things. It should be clear that the interests of ALL (buyers, sellers, lenders, agents/brokers, appraisers) are BEST served by an honest, accurate, unbiased view of current home values as reflected through an educated assessment of all the available data.
I apologize to the professionals. I was being cranky and should not have generalized like that.
For many years, we in the real estate profession have told people that the value of a house is the price that a willing buyer and a willing seller agree upon..
That is not entirely true. Professionals in the real estate profession know better. Fannie Mae (which pretty much sets the standard) defines Market Value as
Quote:
DEFINITION OF MARKET VALUE: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised, and each acting in what he or she considers his or her own best interest; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in U. S. dollars or in terms of financial arrangements comparable thereto; and (5) 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.
A willing buyer and a willing seller is irrelevant. What we, as appraisers, look for in a buyer is a TYPICAL buyer. One with TYPICAL motivation, acting in his own self interest, who is well informed.
A buyer might be willing to over pay for whatever reason he/she can come up with. What the lender is interested in is what a typical buyer is going to pay. The buyer with a unique reason won't be buying it when they foreclose. They will have to put it on the market, discount it, leave it there for a while. They are looking at what the average buyer.......the most likely buyer for the property.......will pay for the property. And that buyer's motivation and willingness to pay is the value that we are appraising. The TYPICAL buyer, not just a WILLING buyer.............
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