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Appraiser Inconsistency

by Administrator on Feb 13, 2015 General Appraisal 1335 Views

I always tell my clients when I know that there is going to be another appraisal done on their property that the other appraiser will likely conclude a value opinion close to mine.  It makes them feel good to imagine that since we are both looking at the same market and the same comparable sales that they will come to a very similar conclusion. 

As appraisers know however there is no guarantee that the other appraiser will conclude a value within 5% of your value, in fact the other appraiser may conclude a value opinion that is 10% or more different and that is the kind of difference that can kill a real estate deal.  Most appraisers are using the same databases, they view the building in the same way and they take similar photographs of the improvements so how can such a big difference in value be concluded by two appraisers?

If you have ever reviewed the work of residential appraisers you understand how a difference of say 10% can easily develop.  Appraisers are not machines and any two appraisers can look at the same property and come away with entirely different opinions about things like overall improvement quality, building condition or the value added by different features like wood floors, pools with waterfalls, extra garages or tennis courts.

If you have a computer model that analyzes a residential property it will assign a certain weight to each feature and it doesn't matter who pushes the button you will get the same result over and over again, total consistency.  The computer's output, its value estimate if you like, doesn't come with shades of grey.  You can't question a comparable sale selection made by a computer program or its adjustments since they are built-in and part of its code.  You just have to accept that it is working for you or it is not. 

The question that residential appraisers have to ask themselves is does consistency make the computer program or computer model more or less palatable to users?  Would a user, say a bank for example, be more satisfied with a consistent computer model’s value estimate or two or more conflicting appraisal reports completed by appraiser that have to be reconciled?  It’s my opinion that expecting appraisers to be more consistent with regard to their comparable sales selections and quality, condition and feature conclusions is just a way to critique the entire appraisal process.  

When you consider commercial appraisals, in my opinion, inconsistency only increases.  It’s because appraisers usually can’t select comparable commercial property sales that are model matched like SFR homes.  Unlike residential properties commercial buildings are not located in the same subdivision, they rarely have the same builder, that have dissimilar lot sizes and many are constructed for more than one user.  They are often designed and built for multiple tenants.  Thus there are many more factors to consider when appraising a commercial property and its comparable sales and correspondingly more opportunity for appraiser disparity.

Can you use a computer model to consider the differences between sales and a subject property?  Of course you can but you are often dealing with buildings that have multi-million dollar values and for many it’s important to have an experience appraiser forming the value opinion.   

For more appraisal information contact Glenn Rigdon, MA, MRICS, ASA a Las Vegas / Henderson Nevada appraiser via email at grigdon@cox.net or via his business website Horizon Village Appraisal

Article source: http://www.appraisalarticles.com/General-Appraisal-Articles/4535-Appraiser-Inconsistency.html

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