All Forum Posts by: H. Jack Miller

Isn't this particularly true in Philadelphia, and why? I've seen this systematically now particular in Philadelphia where appraisals or official Arv's are above realistic market value. 

Lower rents here (WA south sound)

Lower or flat-ish rents for sure.

Evictions, fortunately, I own in very good areas. Cross my fingers, have had none and hope to not have any. 

For commercial properties, we require appraisals performed by appraisers holding MAI designation.  For the rare residential deal we entertain, we require either MAI or SRA designation.  This tends to eliminate appraiser incompetence and requires adherence to guidelines set by the Appraisal Institute.  Yes, we still sometimes end up with appraisals that are significantly “off”, but, those tend to be “off” by lesser amounts and most are at least somewhat reliable.  The appraisals that are submitted to us by borrowers “hoping” we will accept them are often performed by “state licensed” appraiser who do not hold the MAI designation.  The borrowers pay significantly less for those appraisals; they usually lack vital information, tend to be performed to much more “lax” standards, and often lack good decision making as to comps, capitalization rates, and adjustments of value between the subject property and the comps.  

The “worst” appraisals I’ve seen (on a consistent basis) as to over valuation are on non operational health care facilities.  Even the valuation of these by MAI appraisers value them at something like double their average sale value.  Everybody and his brother (or her sister) obtains a purchase contract for a shuttered nursing home that once had an appraised value of $10 million; has a current appraised value of $5 million, and the investor has it under contract for $2 million.  But the facility is obsolete so that no self pay patient or insured patient would live there.  Therefore, the only patients a nursing home like this could get is state Medicare, which does not pay enough to cover anything other than MARGINAL costs.  The investors all are going to turn it into something else - low income housing , student dorms, self storage, transient housing, drug treatment, etc.  somehow this almost never works out; eventually the property sells for something close to land value.  

I’ve also seen some pretty severe UNDER valuation in appraisals.  This tends to occur when the appraiser is unfamiliar with the area, and the area has had a recent rapid increase in property value.  

Appraised value is a completely different metric than market value.

 I have ran Into so many appraisals like this! 

I had a client go with lender A, appraisal came in at $415k. (Pretty fair if you ask me, but the client thought otherwise. We went with a completely different AMC a month later and the value came back at $577k. Comps used were in better areas of course. None of my business to say what the value of the property is, but it's extremely difficult when they make or break a deal. I have also had instances, where the appraiser cut value tremendously.

This is why as a mortgage broker, I do not provide any option of value at all. Your clients will hold your word to it. That is their job to do their homework before submitting anything over. 

I always smile when people look at an appraisal as if it is gospel. The report literally says it's an opinion of value and people pay OVER (and under) appraisal price all of the time. The ironic thing is, when someone pays over appraisal price, the subject property becomes a new comp and literally creates a brand new value for itself and the other properties nearby. 

I've also had appraisers tell me straight up that they are on a mission to keep values down and make housing more affordable. They're human beings with opinions and biases. 

In our small corner of the market, ~1,000 units in Northwest Ohio, our rent increases are softening, but we are actually at our lowest level of late payments and evictions in over 2 years.

@H. Jack Miller

yep, it's the part of the RE iceberg that's under the water.

 Never take the value of an appraisal for face value. Review the comps, the location and the interiors compared to your property. We had one in Mass. recently where they overvalued the property which was in awful condition and compared it to homes in a cul de sac that were updated. It was a joke of an appraisal.