“house appraisal methods are stupid”
I’m serious - that phrase actually landed a hit on my blog.
Believe me, if anybody understands frustration, it’s me! But, but…
I have one main question here: “Why are appraisal methods stupid - can you please explain?” To form such an opinion, I have to expect that you have done some studying relating to appraising. After all, in order to call something stupid, you have to understand what makes it so, n’est-ce pas?
I doubt that the author of the above phrase is aware of the different approaches to value possible, or of the applicability/adequacy of such being closely dependent on the purpose of the appraisal assignment at hand. Yes, appraisals are done in contexts other than mortgage lending (maybe that’s news, too??).
OK, here we go - there are many ways to skin a cat, as the old saying goes. Give the same appraisal assignment to several different appraisers. No two of the resulting appraisal reports are going to be exactly alike. However, knowledgeable, experienced and honest appraisers are typically going to make valuations that are within approximately 5% of each other.
Really.
Any appraiser worth his/her salt will minimize both the number and size of individual adjustments made in the typical sales comparison grid as seen on the familiar FNMA appraisal report form. Every adjustment made reflects a feature that typically makes a buyer pay more or less money for a given home in a given area/market (more on that distinction at another time!). So, if “your house” has a good thing, more value is added to “your house” if the comparable sale doesn’t have it. Conversely, if the comparable sale has the good thing and “your house” doesn’t, value is subtracted from “your house”. Very simple. The “trick” is to know what contributes to and what detracts from value in the given market. A pool, for example, is not always a good thing - there are areas where pool homes are less desirable than those without a pool.
You gotta know the market, see?
The “house appraisal methods” are not really stupid. You may have been the “victim” of an inadequate appraisal, but that is a different matter. That pertains to the competence of the appraiser who performed the appraisal, not to the appraisal methods themselves.
