Sounding Bored is my semi-regular column on the state of the appraisal profession. This week I get annoyed with appraisers who decide to become diligent only when they are told.
In Kenneth R. Harney’s column Nation’s Housing his article addresses appraisers and the comparable sales they use in Valuation Gets Tough When Sales Slide [WaPo].
Traditionally, real estate appraisers focused heavily on sales of similar properties — “comparables” that closed in recent months — in making their valuations. But that doesn’t work well in markets that were super hot but are now stalled or falling.
One of the problems with appraisals during the housing boom has been the idea that very little research was done and this is evident in the quote above. The premise has been that you simply throw 3 “comps” on the grid and plus up for time and everyone was happy.
I am not sure what “tradition” this follows, but good appraisers never did this. They always look at contracts, listings and interaction with brokers, buyers and sellers in addition to using closed sales. This is what a residential appraiser should be doing. Its not something that should be undertaken simply because the market turned. Otherwise, how else would an appraiser see a changing market?
A sharp appraiser, like the one in this article is aware of tricks used that will cloud the data such as ghost listings and concessions.
My hope as an industry is that we someday appraise the same way during all markets, and not simply do as we are told.