What’s My Home Worth? The answer doesn’t have to be a WAG.

No one ever said the appraisal process was scientific or perfect. Certainly somebody from MIT, or Stanford, or the UW Math Department could create a system to pinpoint real estate value. Oh, it’s been tried. See your property assessment, or Zillow’s Zestimate, or the RPR Value. There are a multitude of these calculators out there. They all use quite disclaimers of their lack of dependability, but they whisper the disclaimer and shout their confidence.

A useful tool on the internet is the mortgage amortization calculators. They different than (WMHW) tools in that  we expect accurate information.  Accuracy doesn’t appear to be the goal of the WMHW tools we see. You do know the tool isn’t generating a product, right? You’re the product.  All of these tools are shiny machines to attract your attention. Everyone know we will give away our valuable privacy for  a peek at a cute cat or a bird that talks. Lead capture is the purpose of WMHW and other calculator programs. (You’re not even a number, you’re now a lead and you’re getting sold to who knows.) Oh, the program will put out a number for you. Some will give you a $90,000 range (the right number has gotta be in there somewhere). It’s not a dependable number and it comes with no evidence of support.

The widespread use of WMHW is concerning. These numbers do get used as starting point for home sellers and buyers, data for financial statements, as an idea to decide to refinance, dispute resolution, etc. I’d like to see them go away until someone builds something that works. Until then, there is a better way.  Of course the appraiser is your only resource for a report to satisfy a lender.  That appraisal may cost $500 and it’s likely to be worth the cost. If you don’t need a certified number, the Realtor® price opinion is still better than WMHW WAG. If the licensee, regardless of experience, is using a value adjustment process to arrive at an opinion, you can trust the number to be within 5.0% of what a typical buyer would pay to own your property at the moment.  The key is the proper input of relevant data, and a calculator.

If you want to know a number worth knowing and you don’t want to pay, talk to a Realtor®. If you want to be sold to the real estate industry, play with the shiny machine.




Reasonable and Logical Value Opinions

The appraiser must provide appropriate comment(s) reflecting the logic and reasoning for the adjustments provided… Selling Guide FannieMae.com  Adjustments to Comparable Sales.

Prices offered for homes last year were at times neither reasonable or logical. Home sellers were ecstatic and would-be buyers were anything but. I don’t know what the market will be in 2017 and I’m not going to guess. If we assume the next six months will be more or less like the first two quarters of 2016, it will be wise to pay attention to this publication MGIC How to Review an Appraisal. Mortgage underwriters have a critical role in protecting the lender who does not have the enthusiasm for the risk of owning properties at undocumented prices…if worse comes to worse (again).   Inflated values documented in appraisals are well documented as a contributing factor to the collapse of the last housing bubble. The prepared underwriter looks at each appraisal with a critical eye. Adjustments for amenities, improvements, location, market conditions are open for discussion. While there are not limitations or guidelines associate with net or gross adjustments, it’s the underwriter who will decide on behalf of the lender if the adjustments used by the appraiser conform to the neighborhood.

The listing agent or buyer’s agent who has a reasonable and logical method for comparing relevant sales to a subject property, using value adjustments, may be highly valuable in the process if avoiding hurdles and surprises is important. Creating a spreadsheet that functions similar to a uniform residential appraisal  form is a start. The art  to produce more or less useful results from that spreadsheet is to use dollar amount adjustments that would be acceptable to underwriters. Considering there are no published standard adjustments, we’re on our own to use numbers that are reasonable and logical to the underwriter … a person we do not and will not know. It’s all reasonable and logical. Or magical.

I have a spreadsheet I started using in 2014. It’s not perfect because it’s not the unknown underwriter, but to document the evidence and add some logic to the illogical process of pricing property, it’s a reasonable tool.