13 November 2003
Songs of appraise
No later than day two of Econ 101, they tell you: "The value of something is equal to what someone is willing to pay for it." The arcane art of real-estate appraisal is devoted to disproving this statement.
I have been reading over the appraisal for the new digs, and it's a complicated piece of work: there's a whole lot of WTF-level math and enough disclaimers to keep a passel of lawyers in Evian for a month. Still, I remind myself, this isn't for me; this is for the lender who is actually advancing the bucks for the purchase in exchange for three decades of servitude, and said lender isn't at all keen on forking over, say, two hundred grand for some place they can't sell for half that if I go off the deep end.
Interesting bits of verbiage:
Race and the racial composition of the neighborhood are not appraisal factors. (Freddie Mac Form 70)
Not legally, anyway. I suspect it plays a small role in some other characteristics, but is probably impossible to isolate.
Definition of market value: 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. (Freddie Mac Form 439)
A further paragraph adds more adverbs to the mix.
Even though the printed output is obviously from a PC software package, the guy who had to put all this together certainly earned his fee; there seems to be a tremendous amount of work involved just to make sure all the disclaimers are properly stated, and there's a fair amount of statistical analysis lurking behind the numbers. And, what the hell, he priced the place at 2.7 percent over what I'm paying for it, which is close enough for non-governmental work.
Posted at 8:31 PM to Surlywood
Trust me on this: Every single piece of paper you get that is not the Note or the Mortgage is the result of lawsuit or threatend lawsuit or perceived consumer need.
Lets Count the Ones I Can Name Off the Top of My Head:
Good Faith Estimate
Truth in Lending Disclosure
Flood Insurance Disclosure
Probably an Amended GFE at closing
Loan Servicing Disclosure
Enough used-to-be wood to add on another room.
Are you perhaps slandering the real estate profession, saying it is a SCAM and a CROCK with a lot of BULL and HYPE and FLIM FLAM? Are you maligning hard-working agents who earn a measly $20,000 dollars for having to put up a For Sale sign on your front lawn and showing your house to 5 couples? Or title insurers who charge the same $900 for researching the same property every few years, always going back to Joan of Arc or King Alfonse of Spain? Tsk tsk.
Being appraiser-trained, I can tell you that a skillful appraiser can set up those disclaimers in such a way (with the right software) that they appear in a drop-down menu as he's completing the form on his computer.
Furthermore, to add to Chris's point, the purpose of an appraisal these days is, in fact, to give legal cover to the lender for approving the loan -- and only secondarily to determine how much the property is "worth." The appraiser who conducted the course I took last year included an extensive discussion of the history of the modern appraisal industry. Short version: The S&L crisis.
Well, actually, I don't know how many people, if any, saw this house before I did. It was listed late on a Tuesday and an open house was advertised for the following Sunday; The Expert emailed me about it Tuesday night, we saw it Saturday morning, and the contract was written up Saturday afternoon. (And The Expert, just for having to put up with me, certainly earned her fee.)
Given the fact that most houses in this area take rather longer than a week to sell, I suspect that it probably takes more than five showings on average.
On the other hand, I have always suspected that the term REALTOR® is a combination of two Spanish words: real, royal, and toro, bull.