Multiple offers and home appraisals

Multiple offers and home appraisals. Just because you have multiple offers doesn’t mean that the home is going to appraise. No, but it doesn’t mean that it’s not going to. If it goes way above. Right. So it was weird this morning. We were talking about how some homes didn’t appraise that we’ve seen recently and others that were 300 and some thousand above. And I asked, how is that going to appraise?

And you’re like, Oh yeah, totally. And it’s really weird that how we’re starting to look at things, right? So let’s kind of break this down and I’ll give you my own opinion first. And then I think that’s a.

Kind of two parts to this topic.

So let’s look at first. If there’s ten offers, 20 offers, 30 offers on a property and people are willing to put that much money in and they were willing to go above. And the price that one or the highest one or the one that was selected was not materially much higher than the others. In that scenario, I don’t see a reason why the home is not 100% worth whatever number is paid for it because everybody was willing to pay it.

Correct? Right. Like the market just showed. Not one person but two, but three. But for about five we’re willing to pay for it within hours.  

Yeah, but I don’t think so. Therefore it’s worth it to appraisal standards. That’s one of the items that.

Well, they need to change. They need to change their standard. They need to change your standards.

But that should also I mean, what one 100% pay is definitely what the home is worth. Right. But the appraiser is working on behalf of their client, who is a lender in most cases.

All right. So let’s let’s think about this. Right. So because the appraisal, there are three different standards that they can appraise it by, right? And I think they need to add a fourth one and just put some more details in. So the first is they can choose the cost approach, right?

Like it’s a replacement cost approach and I don’t know why. Just decide to name these off the top of my head, but I did the market value approach.

Sales approach and the income approach. Right. And I just nail those. I think I kind of did just remember them from a long.

Time ago, an investment property then so then they pick which one is the most appropriate right. But I think that they totally need to have a section I haven’t seen if it’s been put in there, but I think the standard appraisal needs to be modified to include how many other offers were on this property and what type of time frame, what type of volume just to show the overall demand that was going in.

Yes. Well, here’s the thing, guys. How would it. Not? The appraiser does not have access to that information. They don’t know they’re not provided that information.

I don’t know. I think most experienced agents would provide that information so they can understand the demand of the property. But, you know, they only have certain amount of information. They access it from MLS and they don’t have that information. You know, they don’t know also if a home next door was sold in a distress situation.

So, you know, that’s why it’s extremely important to do your appraisal packets. But I see what you’re saying. Their standard should include what is the market. But they do have a section in their report that says what is the activity like? And they’re, you know, they’re supposed to to put that in there. But if they don’t ask and they don’t know, then they don’t have it right.

Well, Miss Shana Acquisto. Yeah, I do suggest that there are some additional information that should be added to Miss then. So when was the last time that we made a major change to it? So let’s think about this.

If we show how much income or commission that’s offered.

Now, if there’s if there’s been strong demand for property. Sure. Why is that not documented within Mlss for records? It might not be shared publicly.

Because I think it shows in the cost above list. That’s really the indicator of if it goes 112% above the list price and you’re seeing that consistently amongst five comps, then that tells you most likely if it went above that, they had multiple offers.

Yeah, I personally don’t feel that’s enough information because what it’s not doing is it’s not saying was one person willing to pay that or five or ten or 20. So for example, I would really like to see within Mlss whether it’s shared publicly or not or only available for appraisers, but more detail necessary for each contract that goes through to say how many showings, how many offers, how many above, like what were the general prices? Because that would help validate some of the. Things that are going on in the market.

I don’t really agree. I don’t think that’s going to happen. You have people that could just make a, you know, a number of I mean, you don’t have you know, not everybody is is showing time. I just I disagree. I think that it’s in the numbers. I mean, I, I believe it’s in the numbers. And, you know, we have to provide the correct and accurate information to our Mlss.

And it’s it’s shown in the percent over that’s the that’s the indicator to me that what market are we in that you have these people willing to pay this so that sets the market price.

Yeah. And then if we have one distressed property, all of a sudden that tanks the market.  

It’s really it takes an average. I mean, it could. It could, but you’re most likely going to have you know, you could argue that back and that would be a valid argument if a property came in. Why did you use this comp? This has this is not a apples to apples comparison, but if there are no other comps, they make adjustments to that.

So even though it was a distress, they’ll make adjustments to bring it up to to whatever the subject property is. But I don’t know.

But we’re going to have to agree to disagree. I think that disclosing that information and sharing it is extremely valid and would show exactly where we are. I think it would actually help the banks to understand the right as well.

Also, where are you moving to and you know, all these other things, I don’t know. I think that, yeah, we can just disagree. But the point of this is we think that because our market’s been, you know, hot, hot, hot for the last how many years that maybe the appraisals have caught up to it wrong. We have I believe we personally had one that came in lo recently and it’s like what?

Yes. Sometimes appraisers are bad, just flat out.

Bad. Yeah, but you have to know how to read an appraisal. Your lender don’t just rely on the lender to do that. You need to also read it and look at it and understand what comps are they using? Are they were they the closest to the property? Were they, you know, apples to apples in comparison? Was there something that may have closed after that appraisal was conducted that you could now use? They will make that change or Pending.

Given that’s what I’m saying. If something was pending and it’s about to close or it did close from the time, then you can actually ask them to update it with that new information because it’s valid information, it.

Is difficult to have a property go up in value for an appraisal. With the upward pressure, it tends to move slow, but it dramatically comes down on the other end. Yeah, it’s like a weighted system. I don’t really like how that’s all conducted because it feels like, you know, just one or two bad properties can sink it and it takes so much pressure on the up side to pull it uphill. Momentum is not in that favor.

So there’s another topic to this, that now that we’re discussing our kind of issues with appraisals, that’s new. So as of this year, Fannie Mae accepts desktop appraisals. We’ve seen them in the years past, but I think we’re going to see them more and more now because we tend to have a shortage of appraisals. The demand is so high we can’t get them done in time, etc.

So here’s an article and I want us to chat in the link and I really want you to look at this article and read it because it’s an appraisal blog and someone’s kind of talking through all these different points. So we don’t have time to get to all the points today. But basically here it is in a nutshell. Anyone, anyone. So appraisers have to be licensed by the state of Texas, take a desktop appraisal.

However, if the lender chooses to use utilize the desktop appraisal, they can send pretty much anyone out to do the measurements, do the floor plan and gather the information. How is that? So you’re going to send some random person. I mean, it could be a realtor, which to me that’s I don’t know. How do you prove the validity if they don’t have to be licensed? Right.

So this scares me a little bit. I, I don’t like it. So you uber over to a house and hold on, I’ve got to go in and you know, your that was a bad example in this article it said your Uber driver could be the person that’s coming up to the house and do the measurements. So yeah, I don’t know. I just I think that that’s wrong for safety issues, you’re just going to let anyone in your home.

I think that’s demeaning to Uber drivers be. Because all every Uber driver I ever had was like formerly a tech millionaire. And they’re just like between gigs waiting for the next thing to to spike.

But if it, if it then has to be like signed off by an appraiser, what appraiser is going to just take I don’t know. There used to be a thing and it’s still around, but they were called BPOs and there were broker price opinions where you’d get paid like $75, right. To go out and drive by, take a picture and put together a little, you know, like a mini appraiser appraisal, I guess, if you will, for a lender when we had foreclosures because they never visited the property, but they wanted to see the condition it was in and and all of that. So that was the thing people did for $75.

Yeah. And so they’re illegal here to cost a real estate. We’re totally out on that whole thing. If you have a problem with it, please come talk to me directly.

But I mean, if you know nothing’s new and you need something real, no. One to do things for. We will not be doing agents. That is a huge liability. I don’t even know how that would be covered if you had an.

We’re out in that.   New. So so anyway take a minute save that article and take a look at it. It’s it’s an interesting perspective.

I think it’s a horrible idea. Scary. And stay tuned. I have something else that’s just as horrible of an idea that I personally had that I want to cover with you.

Episode Links

Texas , MLS, home appraisals, Fannie Mae, Uber driver, Mike Acquisto , Shana Acquisto , TNT 

Episode Recorded Live on YouTube 02.21.22

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