Real Estate Appraising is Tricky Business
Real estate appraising is tricky business. It is an arbitrary business based on opinions. And you know what is said about opinions.
Determining property values in our business is critical. Use the wrong value going into a deal, could mean a disaster on the other end.
My experience with appraisers over the years has been one of a love/hate experience.
An appraisal report, no matter how official it looks is nothing more than someone's opinion. A calculated guess even.
Years ago a very experienced appraiser told me his business was an art, not a science. The personality of the appraiser enters into the formula as well. Conservative personalities usually spits out a conservative report.
Anyone who spends a little time in the real estate business will soon discover appraisers can be deal killers or deal makers.
Lenders base their loan to value ratio on the appraiser's report. A few years ago during the boom years, real estate refinance loans were hot. Banks were flush with cash!
In that case appraisers were pressured to come in with the highest value possible to make the loan possible. In the market of today the opposite is the case.
With cooling market sales, banks, even hard money lenders, have tightened their lending standards. Caution is the current feeling.
One thing is for sure, there is no more accurate appraisal than that from a human being.
So what is up with the electronic appraisals? Technology is being used more and more to attempt to value property. Banks have been using their own software programs for years to determine value for properties.
There are many free websites today, which will (supposedly) give an accurate value for properties. Some are more accurate than others. However!
No matter how sophisticated the software program, there is no replacement for the man on the ground.
The computer can not get down on its hands and knees to poke, prod, smell, inspect or physically touch a subject property.
Property values can be misleading. A computer can never account for current condition and location like the flesh and blood, clip board carrying appraiser.
The savvy appraiser on the ground will take into account the property's condition, and actual location on the street. I call this the pebble in the water approach in my wholesale manual.
Neighborhoods have pockets of both good and bad trends which a computer is unable to catch. But, the man on the ground certainly will.
The national appraiser's union has opened a law suit against a large mortgage lender for taking their reports and loading them into a database to use for future appraisals.
The alleged violation is that the man on the ground sends back his report to the lender, only to never get follow up business. The lender loads that report into their database for future use or even to sell that same data to others.
If this is the case, it is not a smart move on the part of the lender. Appraising is a case by case business. Technology can never replace that man on the ground who can see, touch, and smell the property.
As far as the electronic appraisals go, you can use them as a guideline. But more intricate info is needed to grab the finer details of the value of a property.
Remember, ours is a business of numbers, not emotions. You must get the best numbers to get the best deals.
Take Action!
Ken Williams
www.thewholesalewizard.com
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