Saturday, January 19, 2013

Bluegrass Valuation Services causing problems???

I'm trying to remember the last article I read in national headlines that sang the praises of appraisers, that's right, I haven't!  I just read another article from Fox Business that describes appraisers as backwards thinkers when it comes to home values.  This statement is partially true since the only place to find evidence of what the market is willing to pay for a piece of property is in the past.  However, this thought process is a two-edged sword.

Realtors are on the opposite end of the spectrum.  Most Realtors I've dealt with will list a home based off the active listings in the neighborhood, or worse, what the home owner owes on it.  This is especially dangerous when the home owner has lost his mind and borrowed all the equity out of his property just as the market starts to soften.

Appraisers select opinions of value in three ways: retrospective, As-Is, and forcasted into the future.  Of the three, retrospective and forcasted see the least action.  That's because lenders want to know what the property is worth the day of inspection, not in the future.  The best way to do this is to analyze properties that have sold according to the definition of market value ( I won't bore you with the details).

Why don't appraisers make adjustments on comparable sales for the time that has elapsed between the sale date and inspection date?  They typically don't due to lending requirements becoming increasingly tighter (most lenders want properties that have sold between 90 days and 1 year).  This short period of time isn't long enough for most markets to develop a noticeable trend which would dictate a time adjustment.  Only volatile markets that have clear trends typically will get adjusted.

So, what have we learned?  Well, if you want to know what a property is worth, you need to find properties that meet the definition of market value, which are in the past.  Lastly, appraisers do have the ability to look into the past as well as the future in terms of finding an opinion of value.  Feel free to visit our Facebook page , click the like button, and don't forget to leave a review!

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