Buyer in Watercolor

[JUL]

In the novel Real Estate for Dummies, it talks about an error in CMA's is often too much emphasis on Sq. footage price.

I think that is because some realtors don't know any better...it is hard to compare a property on paper unless you have visulalized the property to know the true amenities and updgrades. I know some realtors just use the printouts from the mls solds and that can be such a disservice to the home seller.

 

[SHELLY]

The "Market Value" of a piece of property is met when a buyer is willing to pay a price for a property which equals what a seller is willing to sell it for... WITH NO UNDUE DURESS.

A lot of sales today are DISTRESS SALES (where the seller is under duress). Appraisal guidelines, when using the Market (Sales Comparison) Approach to value properties, specifically address that distress sales are not valid comparables. Period.

This does not mean that every sale today, where a seller is losing money, is categorized as a distress sale.

And what do appraisers catagorize the value when they are "bullied" into "hitting the numbers" or risk being blackballed? Will that be catagorized as being appraised while "under duress?"



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[elgordoboy]

In the novel Real Estate for Dummies, it talks about an error in CMA's is often too much emphasis on Sq. footage price.

Hah! I got a good laugh out of this for a little bit. I thought you had made a good joke calling it a novel. Like it wasn't anything like the real world. Anyhow will this "distress sale" list as a qualified sale at the pa site? If so then I as a buyer would want my agent to find another such distress sale for me to buy. I should think two years ago noone was "distress selling" at discounts.

 

[Mango]

And what do appraisers catagorize the value when they are "bullied" into "hitting the numbers" or risk being blackballed? Will that be catagorized as being appraised while "under duress?"
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Shel, do you personally know any appraisers that experienced this or are you citing what you read from the Senate testimony and maybe other on-line sources?

Having seen, reviewed, and ordered hundreds of appraisals, excessive duress has not been my experience. Bank approved appraisers stay on approved lists because they are conservative and find the best comparables so as not to have excessive adjustments for their final reconcilation. All of the review appraisers within the firms have advanced degrees and extensive continuing education in the appraisal sciences.
For some time during the refinance frenzy it could take a firm 3-4 weeks to get an appraisal back since they had more business than they could handle. If you had more business than you could handle, you had the luxury of being selective of your clientele. Some banks did not have an approved appraiser list but had a "blackball" list, but not the way you describe it. Blacklisted because they submitted appraisals that were basically crap, and would be tossed back if it was pulled for review prior to a bulk sale. More than often, I had appraisals that came in under value on purchases, and I've dealt with dozens of them, so they had no problem with NOT "bringing the value". There were times where with a unique property calls were placed if a property was undervalued. Case in point I had a buyer contract a condo that was converted from a movie theatre. The first appraiser came in significantly lower than the second one who had prior experience with appraising another purchase in the same condo.
The appraisers I talk to regularly tell me they are slightly embarrassed by some of the industry whining and lack of professionalism surrounding the "we were the industry biatches fairytale". I'm not saying they didn't get the occasional calls from peeved realtors, brokers or homeowners who saw their castle reduced to a realistic house.

Sometimes I just can't figure you out. On one hand you're criticizing appraisers (or the whole entire real estate industry) and at other times like this, defending a segment of the industry.

I still like you though.

 

[Bobby J]

Hah! I got a good laugh out of this for a little bit. I thought you had made a good joke calling it a novel. Like it wasn't anything like the real world. Anyhow will this "distress sale" list as a qualified sale at the pa site? If so then I as a buyer would want my agent to find another such distress sale for me to buy. I should think two years ago noone was "distress selling" at discounts.

Just having a little funn! If I was buying right now, I would be looking at distress sales. Most buyers are asking to find the best deals right now. Not all distress sales are the best deals. It helps to know and understand values in the areas you are looking at.

 

[Smiling JOe]

I agree SJ. The price/sq. ft. is an entire other issue that has nothing to do with whether the seller was distressed or not. When I stated that it was obvious that it was a distress sale, I referred to what I consider to be obvious... it was a builder selling below cost.

As I mentioned, I know the seller. What if I told you that one of the sellers was an attorney, rather than a builder? Would that be new information which might change your thoughts on the sale being distressed? I'm not saying that he wasn't distressed, but I'm saying that the comments need to stick to factual info regarding the sale.

 

[SHELLY]

Shel, do you personally know any appraisers that experienced this or are you citing what you read from the Senate testimony and maybe other on-line sources?

A bud of mine was a long-time Florida appraiser. During the early years of the bubble, he related some stories to me about how he was feeling pressured and started getting fewer jobs because he was asking too many questions. Then in 2004 he lost his home during Hurricane Ivan, and told me it probably was for the best. He said he wasn't comfortable with what was going on in Florida RE, and that he was close enough to retirement to move out of Florida and start fishing full-time up in South Carolina. We still keep in touch, and he still keeps in touch with some of his friends in the business in Florida. When I ask him if it is as bad as I hear about (inflated appraisals)....he just says, "It's worse."

Here's an article from Friday's WSJ Page One. I know this nationwide RE mess isn't just a figment of my imagination--:shock:--or maybe it is all in my mind and you all live inside my head, like an episode of "The Outer Limits":

http://online.wsj.com/article/SB119820566870044163.html?mod=googlenews_wsj


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[Mango]

Here's an article from Friday's WSJ Page One. I know this nationwide RE mess isn't just a figment of my imagination--:shock:--or maybe it is all in my mind and you all live inside my head, like an episode of "The Outer Limits":

http://online.wsj.com/article/SB119820566870044163.html?mod=googlenews_wsj .

This nationwide mess is a result of fraud in the stated income, stated assets area and mainly in the subprime, Alt A markets. Totally different animal altogether sometimes in the species of appraisers, attorneys and Banks utilized. The company cited in the article Bear Stearns at the height of the real estate industry had no business making these types of loans. The article even states that they were newbies and didn't have experience. They didn't have the proper fraud detection procedures in place. Quite a few Banks had access to MLS and market data, and if Bear Stearns had this in place, they wouldn't had made a loan on house worth excessively over market for the neighborhood. All they had to do was look up the comps to see that. They didn't even review the invoices submitted and verify them to see if the contractors were licensed, were they on letterhead etc. Even the banks that did have fraud detention procedures in place at times put pressure on staff to move loans along too to make the securitization in time and some things got by that shouldn't have.

The comment made in the article that appraisers were starving and willing to do anything to make a buck at the height of business in 2005 is not realistic. They were still busy. Now they are hungry, no doubt, but what do you think is happening to appraisals now when they come in to the underwriter. If they weren't ripped apart before (and quite a few were especially by out of state banks) they are even more so now, and the appraisers who are still in the game, most likely because they played by the rules and kept their backbone, are being even more cautious and conservative as all heck to maintain their good standing in this credit environment.

No, it's not a figment of your imagination, you're just seeing lots more of it because it was too darn easy to get credit with these prove nothing mortgages, but mortgage fraud is not a new concept. It's been going on for as long as I can remember in one shape or another. Oh gosh, I hope I don't need to live in your head. I more of a Trekkie than an Outer Limits type.

I'm sure your appraiser friend questioned much more in the Florida market being more speculative as opposed to mine, which is more of an end users market.

 

[SHELLY]

This nationwide mess is a result of fraud in the stated income, stated assets area and mainly in the subprime, Alt A markets. Totally different animal altogether sometimes in the species of appraisers, attorneys and Banks utilized. The company cited in the article Bear Stearns at the height of the real estate industry had no business making these types of loans. The article even states that they were newbies and didn't have experience. They didn't have the proper fraud detection procedures in place.

It wasn't just Bear Stearns that made questionable loans--everyone was in on the game. Fitch just downgraded $5.3 BILLION of Residential Backed Mortgage Securities on Friday night. If you look at the list you'll see ALL the players (Citi, WaMu, JP Morgan, Wells Fargo, Fremont, Option One, etc. etc.)
http://www.housingwire.com/2007/12/21/friday-night-lights-out/

Take a look at what is inside one of these beauties: WaMu's Apr 07
http://www.sec.gov/Archives/edgar/data/1397612/000088237707001364/p07-0615_424b5.htm

Even "high quality" mortgages accepted by Fannie are going down the toilet: http://www.housingwire.com/2007/12/...o-shrink-delinquencies-continue-upward-trend/



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[scooterbug44]

I still don't understand why you don't include these sales because they're made "under duress".

It isn't as if Tony Soprano is holding a gun on someone, it's a sale price that reflects the current state of the real estate market and the economic situation in this country.

I certainly understand that you don't want to use an anomaly as the standard when appraising, but given how many homes are being sold at auction or "under duress" it needs to be taken into consideration.

Find it even more fishy that it shouldn't be used as a comp because it's a "builder reducing inventory", yet SJ says he knows the owner is lawyer! :angry: