The Great Appraiser Bake Off…Same Ingredients, Different Results & Summit County Stats

Cleveland Appraisal Blog

2 years ago

My wife and I enjoy watching cooking shows, including The Great British Bake Off. In these cooking challenges, different cooks create similar baked items. However, not all results are the same. Before we move on, take a few minutes to enjoy some funny outtakes from this show.

In a way, appraising real estate is like this show. Two appraisers may be working to develop an opinion of the market value of the same property.

Let’s call the appraiser’s opinion of the property’s market value the cake. The data available to be analyzed are the ingredients used to make the cake. Our standards, the Uniform Standard of Professional Practice (USPAP), are like the recipe with guidelines on how to do it.

Despite having the same pool of sales to choose from and the same standards to follow, the results of two appraisers’ work are often a little different, like the baker’s dishes. There’s nothing wrong with this. Two appraisers may choose different comparable sales to use. Or they may utilize different methods of extracting the adjustments from the market. If a market changes rapidly, and the appraisals are not based on the same effective date, this can make a difference in value opinions also. However, if two appraisers use the same market data to develop their opinion of the market value of a property, the results should be reasonably similar. Market value is best described in a range. Usually, the two opinions of value should be somewhere within that range. Of course, sometimes, the results are very different!

A REAL-WORLD EXAMPLE

Recently, a person called me with a problem they were having. They explained to me that they were getting divorced. The person and their spouse had agreed to a price they felt their home was worth. At that time, they also had applied for a loan from a bank. The bank appraiser appraised their property much higher than the amount they had agreed upon.

When that happened, the spouse, who was moving out and to be paid half the property’s market value, hired an independent appraiser to appraise it. Then, the other spouse had another appraisal completed by another appraiser. One would think that two appraisers appraising the same property around the same time, having the same general pool of data to analyze, would be reasonably close.

In this case, however, one appraiser came in around $350k, and the other came in over $150K higher. This situation doesn’t invoke trust in appraisers, does it?

While it is true that two appraisers will usually appraise the same property for different values, assuming the two appraisals are made in the same general time period and all other things being equal, the two appraised values should be within a reasonable range—certainly not over $150K apart at this price point. I don’t think you need to be an appraiser to figure that out.

I read both reports and did some research on my own. The data I examined pointed to a market value somewhere between the two other appraisers ‘ value opinions. Interestingly, the lower appraisal favored the spouse hoping for a lower value, and the higher appraisal favored the spouse desiring a higher value.

Were the two appraisers advocating for their clients? It’s difficult to say because I can’t read their minds, but you can see why someone might draw that conclusion. Can an appraiser perform an appraisal and advocate for their client while developing it?

WHAT APPRAISAL STANDARDS SAY

What do appraisal standards say? The Uniform Standards of Professional Appraisal Standards (USPAP) in the Ethics Rule states that “The appraiser must not perform the appraisal assignment with bias.” It also states that the appraiser “must not advocate the cause or interest of any party or issue.”

If both appraisers were asked if they were acting as advocates for their clients, the answer would likely be no. By the way, if the appraised value favors their client, there’s nothing wrong with that if the opinion of value is well supported by the market. Honestly, if both appraisals were well supported by the market and USPAP Standards, both appraisals would be credible and worthy of belief despite being different.

Sadly, one appraisal may have been half-baked in this case, while the other overcooked.

It’s been my experience that when an appraiser appears to be advocating for their client’s desire for a high or low appraisal, it is usually completed with numerous errors, including unsupported adjustments and/or not using truly comparable sales, which leads the appraiser’s opinion of value in a direction that is not supported by the market.

What does USPAP say about errors in an appraisal? It acknowledges that no appraisal is perfect. We all make some mistakes in our work. However, USPAP states that the appraiser “must not render appraisal services in a careless or negligent manner, such as by making a series of errors that, although individually might not significantly affect the results of an appraisal, in the aggregate affects the credibility of those results.”

The point I am trying to make here is that it is common for two appraisers to appraise the same property at different prices, and both are credible. However, if you find an appraiser who asks if you’d like a high or low appraisal, I recommend finding another appraiser. A morally flexible appraiser will often cost you more in the long run!

As an aside, I have friends who had their homes appraised, and the appraiser asked them what they thought their home was worth. They told me it seemed shady for an appraiser to ask the homeowner this question. After all, isn’t that what the appraiser’s being hired to determine? I agree. I don’t ask my client and/or the homeowner what they think their home is worth. To me, asking that is a little janky, don’t ya think? To be clear, there’s nothing wrong with an appraiser asking the homeowner what they think their property is worth. But I don’t think it’s a good idea. Hey, maybe that’s just me.

On that note, let’s get to the housing data, shall we? Bon appetit!

GETTING TRENDY (Summit County Stats)

Here are some fresh stats for Summit County. I’ve been appraising in Summit County since 2000, but I’ve never shared these stats with the public. So, I hope that you find them helpful! My next post in June will have more stats for Cuyahoga County.

Median Sales Prices Up approx. 10% year over year.
April had 1.19 months of inventory, slightly under a year ago.
Median List Prices Up Over 7% year over year.
On average, selling a home in April takes 6 more days than a year ago.
On average, homes sell at 100% of their listing price, which was the case a year ago.

TRENDS ON SOME MORE LOCALIZED AREAS IN SUMMIT COUNTY

Single-family home prices per square foot were increasing at an annual rate of 8% as of last month in Fairlawn.

As of last month in Twinsburg, single-family home prices per square foot were increasing at approximately an annual rate of 8%.

Single-family home prices in Sagamore Hills have been generally flat over the past year.

In other news, these bicyclists/musicians nicely demonstrate what happened to home sales volume when the mortgage rates increased dramatically…

Let’s hope the housing market gets rolling more smoothly, especially for buyers, sooner than later…

HOME HACKS

While searching social media, I often encounter people sharing home hacks that make things a little easier. I figured I would share some of my favorites in my blogs. Here’s one for you.

To end this week, I leave you with a few fun outtakes from the Great Britsh Baking Show. Enjoy!

Have a great weekend ahead!

For my readers in the CLE area… here are some articles related to news in our local area that you may enjoy…

Cosmic dining: Welcome aboard The Astro Restaurant at Tower City – FreshWater Cleveland

What Is the Future of Cleveland? Take a Trip to Northeast Ohio in 2050 – Cleveland Magazine

If you enjoyed this blog, please check out some awesome blogs by my fellow appraisers…

The Spring Market Hasn’t Really Sprung With Or Without Cheeseballs Or A 40,000 DJIA – Housing Notes by Jonathan Miller

An insurance crisis wasn’t on my bingo card – Sacramento Appraisal Blog

What Tools Do You Use to Support Your Appraisal Adjustments? Appraisal Today

The Appraiser’s Guide to Evaluating Home Value Before You Buy – Birmingham Appraisal Blog

For my appraiser colleagues, I enjoyed this interview my friend Tim Andersen made with attorney Danny Villazon about how to stay out of trouble with your state board. Here is the video. Some sage advice here!