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.