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What Housing & Carnivals Have in Common

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Summertime is filled with many fun activities. In my area, most cities have carnivals called “Home Days”. Since our boys were toddlers, we have always taken them to a couple each year. Now they are 11 and 17 years old. They still love to go.

As a parent, my favorite part of the experience is watching the joyful expressions on their face as they ride the rides and play the games. The businesses that run these events, totally know how to get me to shell out the moola. It’s all about emotion.


Last week, I took my 11- year-old to one of these Home Days. He eyed a Pokémon stuffed animal that he wanted to win. The sign said, “winner every time”. That assurance sucked me right in.

For five bucks, you get to shoot down one cup. Under the cup is a size. Small, medium or large, which corresponds to the size of the prize. My son won a small animal. I mean small! With each play, came a slightly larger prize that the player could trade up for. It took five tries to win the one he wanted. I didn’t really care about the money because I enjoyed watching him have fun. It was exciting to witness the anticipation and joy on his face as he anticipated winning the one that he wanted. That was priceless to me! In full discloser, in the past, I have spent a lot more and received less at some of these carnivals.


$5 Toy Cost $25 To Win

At this point you’re probably wondering what in the world this has to do with the housing market? As humans, we typically act on emotion. That’s part of what makes life fun and exciting, at least when it’s not destructive.

Even with large purchases like homes, people often act on emotion. Sometimes, buyers know they are over-paying for a home. They don’t care because there is something about that home that they love and want. Sometimes, a person is willing to pay more than others, for the same property.

For example, a buyer may be trying to purchase a home that is next door to a relative or friend, or for some other reason. They may be willing to pay more than others are willing to pay, because for them, the convenience of owning that home may be worth more to them than to others. Kind of like that five-dollar toy. It’s about an emotional connection (stimulus).


At the carnival, my willingness to pay twenty-five dollars for that stuffed animal may not be reflective of most of the parents, whose children were playing the same game. I observed some parents telling their children that they were done after the first game.

It’s kind of like that when it comes to the market value of a home. How so? There is a common misconception that if two people are willing to agree upon a price, this constitutes market value. Here is the Definition of market value that you will find in the Fannie Mae residential forms:

“The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typical motivated; (2) both parties are well informed or well advised, and each acting in what he or she considers his or her own best interests; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in U.S. dollars or in terms of unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.”

In the carnival game scenario, I was clearly not acting prudently. I was willing to pay  more for the toy than it was really worth. You might say that I was affected by an undue stimulus. Namely, my own emotion. That happens in the housing market also.

If an appraiser is aware of a situation in which a comparable was sold under some type of undue stimulus, that sale is probably not reflective of the general market and would therefore not be used as a comparable sale. That is, if the appraiser were appraising the property to determine market value.

Sales of this type are usually what we call an “outlier”, because they typically sell for a lot more, or sometimes less, than other sales that might be considered by the market to be alternative sales to the property being appraised.

Sometimes, a homeowner will use an outlier like this when disputing a value in an appraisal. They may feel that this one sale supports a higher or lower market value than the appraiser’s opinion of value. If a homeowner is looking for a higher value, they often point out the one sale that sold for considerably more than all of the other comparable sales. Conversely, there are times when a homeowner wants a lower value, like when attempting to contest their assessed value with the county, or sometimes in a divorce. Then they point to distressed sales to try and argue for a lower value. However, distressed sales are generally not reflective of market value. The appraiser is going to use sales that are typical for the market in that neighborhood. What are the majority of the comparable sales selling for? The appraiser is trying to determine what is the most probable sales price.

While a buyer may be willing to pay more, lenders are not willing to lend more than a home is likely to sell for on the open market. Things happen in life. If someone over-pays for a home, the sting usually comes down the road, when and if financial problems arise. The financial problems may not be caused by over-paying for the home itself. It may be some other issue. But in retrospect, over-paying for a home certainly adds to the problems.

Buyer’s Remorse Can Happen Years Later

Therefore, having an appraisal is important. As appraisers, we have to act as a disinterested third party.  We have no emotion, or skin, in the transaction. I think that because of this, some feel that we are sabotaging deals because we just don’t care. The truth is that, we cannot care if the transaction goes through or not. While that is the case, I don’t know of a single appraiser, in my twenty-one years of appraising, that is purposefully appraising homes to kill deals. We have to reflect the market, good or bad.


Appraisers use comparable homes that have sold in the neighborhood of the property we are appraising, whenever possible. Those homes are exposed to the same potential buyers as those of the property we are appraising.

Therefore, if homes are selling at lower prices in one area over another, appraisers have nothing to do with it. We are simply reporting what is happening and forming our opinion’s based upon the market activity in that neighborhood and market area. We NEVER base our opinions on race, religion, gender or any other factors related to people. Appraisal reports reflect what people do in terms of real estate, not who they are or what they believe.

Back to the carnival analogy. Perhaps like me, when you go to a carnival, you love the lights, the people, the rides, the junk food, and most of all, the fun with our family. It’s all about positive vibes!

In many ways housing is the same. Home buying is an exciting time. Buyers imagine the morning sunshine coming through the windows in the kitchen of their new home. Or, they imagine big family dinners for special occasions. If a buyer has children or plans on having children in the future, they anticipate the joys of giving them a good home to grow up in. (Which is more than just the house)

If you’re looking for a home, I wish you the very best! It’s an exciting time. And if the value of the home you are looking to buy is in question, don’t hesitiate to call an appraiser in your area. We are here to help you to make an informed decision.

I hope that you enjoy the summer months! Go to a couple of carnivals. Eat some funnel cakes. Throw some darts and pop some balloons. Ride some rides, if you dare! (Bring hand sanitizer) Have some fun with your friends and family.

Thanks, as always, for reading my blog!  I appreciate your being here!

If you would like to just listen to this article, click here for an audio version on my podcast.

Here are some links to other articles and videos I enjoyed recently! I hope you will also…

The Emperor’s New Clothes In Housing Tech – Housing Notes by Jonathan Miller

Cost vs value, Johnny Cash, & an explosion of murals – Sacramento Appraisal Blog

The Risk of Waiving Your Home Appraisal – Birmingham Appraisal Blog

What Are The Purposes of Graphs? – George Dell’s Analogue Blog

How Does Grammar Impact Your Credibility – The Appraiser Coach

Zillow  Past and Future; Coester – Lots More Info; North Dakota Waivers – APPRAISAL TODAY

Why does North Dakota want to waive appraisals for 5 years? – Yolo Solano Appraisal Blog

Phony Compliant Against Appraiser – Mike Ford in AppraisersBlogs




5 thoughts on “What Housing & Carnivals Have in Common”

  1. Great post Jamie. I sometimes forget how important the emotional connection is when I’m grinding through a report. This a good reminder for me and good explanation for everyone on the other side.

  2. Nice job as always. A good word picture is priceless. I think you’re so right about emotion. The problem sometimes is buyers get caught up in emotion, overpay, and then have remorse afterward. This is where appraisers have to be sure to do their job to paint a picture of a true and reasonable value rather than “hit the number.”

    1. Thanks Ryan! So true! Interestingly, when problems arise and loans default, the home owner and lender are upset at the appraiser that hit a number when it is not supported by the market. And rightly so. Then the appraiser is in trouble. Better to do go and supportable work than to hit a number. I just appraised a property this week that sold last year for about $20k more than any comparable sale I can find that has sold in the neighborhood within the past two years. So my opinion of value was $20k less than the home sold for last year. And my appraisal was for a purchase. I can’t figure out how in the world it could have appraised that high last year. Perhaps it was an appraisal waiver. It reminds me of what was happening in 2006. Yikes!

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