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TheMadPoster wrote:

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STARCHY wrote:  

So if I understand you correctly, you are claiming that appraisers are more accurate judges of "fair market value" in the local real estate market than buyers?

 

 

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Of course, by definition buyers are the final arbitrators of "fair market value," but that's not what appraisers do. They try to figure out for a bank what the property is actually worth for the purposes of underwriting the loan. 

Appraisers offer a level of consumer protection and a level of protection for whoever is eventually buying the loan (which in this market would 99% of the time be FNM or FRE, aka the government). If you allow appraisers to inflate their estimates, then you allow much more risk into consumer's finances and into the banking system as a whole. 

Seems like this should still be pretty fresh in people's memories. 

 

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For a single family home, how is "worth" different than "fair market value"?

In single family home appraisals,  "income generated" and "replacement costs" are rarely used- most of the time "sales comps" is the dominate index, and sales comps are nothing BUT the amount that a ready willing and able buyer DID pay for a comparable property.

And how does any of this "allow appraisers to inflate their estimates"? 

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STARCHY wrote:

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TheMadPoster wrote:

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STARCHY wrote:  

So if I understand you correctly, you are claiming that appraisers are more accurate judges of "fair market value" in the local real estate market than buyers?

 

 

---

Of course, by definition buyers are the final arbitrators of "fair market value," but that's not what appraisers do. They try to figure out for a bank what the property is actually worth for the purposes of underwriting the loan. 

Appraisers offer a level of consumer protection and a level of protection for whoever is eventually buying the loan (which in this market would 99% of the time be FNM or FRE, aka the government). If you allow appraisers to inflate their estimates, then you allow much more risk into consumer's finances and into the banking system as a whole. 

Seems like this should still be pretty fresh in people's memories. 

 

---

For a single family home, how is "worth" different than "fair market value"?

In single family home appraisals,  "income generated" and "replacement costs" are rarely used- most of the time "sales comps" is the dominate index, and sales comps are nothing BUT the amount that a ready willing and able buyer DID pay for a comparable property.

And how does any of this "allow appraisers to inflate their estimates"? 

 

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When comps in a neighborhood are $300/sf and a buyer wants to pay more per sf, right now, they can't get a loan. Because the appraisal will come in low. This is stopping a lot of sales from closing. 

Now magically there is a movement to revise appraisal standards. Why do you think that is? Couldn't be as a way to inflate prices? No, that would be crazy. 

BTW-

Fair Market Value assumes a fair market. In a market where people are using huge amounts of leverage, and where the majority of mortgages are being bought from the issuers by FNM and FRE (with a backstop from the US government) the players aren't operating in a fair market. 

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TheMadPoster wrote:

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STARCHY wrote:

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TheMadPoster wrote:

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STARCHY wrote:  

So if I understand you correctly, you are claiming that appraisers are more accurate judges of "fair market value" in the local real estate market than buyers?

 

 

---

Of course, by definition buyers are the final arbitrators of "fair market value," but that's not what appraisers do. They try to figure out for a bank what the property is actually worth for the purposes of underwriting the loan. 

Appraisers offer a level of consumer protection and a level of protection for whoever is eventually buying the loan (which in this market would 99% of the time be FNM or FRE, aka the government). If you allow appraisers to inflate their estimates, then you allow much more risk into consumer's finances and into the banking system as a whole. 

Seems like this should still be pretty fresh in people's memories. 

 

---

For a single family home, how is "worth" different than "fair market value"?

In single family home appraisals,  "income generated" and "replacement costs" are rarely used- most of the time "sales comps" is the dominate index, and sales comps are nothing BUT the amount that a ready willing and able buyer DID pay for a comparable property.

And how does any of this "allow appraisers to inflate their estimates"? 

 

---

When comps in a neighborhood are $300/sf and a buyer wants to pay more per sf, right now, they can't get a loan. Because the appraisal will come in low. This is stopping a lot of sales from closing. 

Now magically there is a movement to revise appraisal standards. Why do you think that is? Couldn't be as a way to inflate prices? No, that would be crazy. 

BTW-

Fair Market Value assumes a fair market. In a market where people are using huge amounts of leverage, and where the majority of mortgages are being bought from the issuers by FNM and FRE (with a backstop from the US government) the players aren't operating in a fair market. 

 

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Exactly- low appraisals ARE stopping a lot of deals from going through- and THATS the problem! 

And the RECENT REVISAL of appraisal standards is what has caused this to happen- its stifling transactions.

Fair Market Value REQUIRES and open market (not a fair market).

We can argue the impact on the USG "backstop" till we are blue in the face, but the bottom line: sellers and buyers are out there every day- right NOW in fact- haggling over prices of individual houses- their negotiations determine the value of real estate. If you want to buy or sell TODAY (right now) you can not ignore their influence on the price you will pay or the price you will get. Everything else is just speculation. 

BTW, I don't think there's anything wrong with the appraisal system we have now. If there is a question about how the appraisal was done, it goes through a desk review anyway before the underwriter signs off on the loan. If the appraisal comes in lower than the offer, it's up to the buyer and seller to renegotiate, or the buyer can decide if they are willing to make up the difference in cash. What's wrong with that?

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amydevemma wrote:
This is just one more way to help the banks keep from realizing their losses when they sell a foreclosed home. Ugh.

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how does this help banks? 

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STARCHY wrote:

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amydevemma wrote:
This is just one more way to help the banks keep from realizing their losses when they sell a foreclosed home. Ugh.

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how does this help banks? 

 

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They have a better chance of selling their inventory for higher prices if they can get the appraisals to come in where they want them to. A lot of foreclosed homes fall out of escrow because the appraisal comes in lower than the offer.

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amydevemma wrote:

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STARCHY wrote:

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amydevemma wrote:
This is just one more way to help the banks keep from realizing their losses when they sell a foreclosed home. Ugh.

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how does this help banks? 

 

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They have a better chance of selling their inventory for higher prices if they can get the appraisals to come in where they want them to. A lot of foreclosed homes fall out of escrow because the appraisal comes in lower than the offer.

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But in these examples the banks have already agreed to sell the property- how do "new appraisal" rules that PREVENT banks from getting deals done "help" the banks that are trying to sell?  seems to me the exact opposite is happening.