http://www.denhamspringsappraisers.com/ – DECLINING MARKET CONDITIONS ADJUSTMENTS APPLIED TO THE CONTRACT DATE, NOT THE SOLD DATE EXPLAINED.
DECLINING MARKET CONDITIONS ADJUSTMENTS APPLIED TO THE CONTRACT DATE, NOT THE SOLD DATE. When we easily see clear declining market proof, the exact same proof a Listing Agent can see in their own MLS, let’s say of -12% in the past year, we adjust the sold comps at -1% per month and apply that adjustment to the “CONTRACT DATE”, NOT THE SOLD DATE, per lending guidelines. If the appraisal is being performed on 4/1/2009 and our 3 sold comps were under contract 4, 5 and 6 months from that 4/1/2009 date, then they are adjusted downward by -4%, -5% and -6% of the sales price. Again, these are the instructions for both Conventional and FHA appraisals. Believe me, if an appraiser fails to make these declining markets adjustments to their Sales Comparison Grid, then we will receive a call from the AMC and/or underwriter and/or Chief Appraiser with a reprimand. Major Banks are very, very, very serious about this issue. The first time I forgot to make this adjustment in a report, I found myself on a conference call with 1 chief appraiser and 2 managers of 1 major AMC asking me to explain why I overlooked this. That’s how serious an issue this really is.
WHY DO APPRAISERS MAKE DECLINING MARKET CONDITIONS ADJUSTMENT? Because, as a real estate professional, it’s unethical not to do so, And, It’s in our appraisal instructions to do so, to adjust for declining markets. Appraiser’s Instructions for both Conventional and FHA now are that we use 3-4 solds, which are “lagging indicators” and 2-3 listings adjusted to Listing-To-Sales Price Ratio of whatever that is, say 94%. Guess what? In today’s market more emphasis is place on the current listings adjusted to List-to-sales price ratio that on the older sold comps, depending on which underwriter you’re dealing with. Today’s underwriters make value decisions based on the most current data, not on homes that sold 3-6 months ago. YES, LISTINGS DO TRUMP OLDER SOLDS IN THIS MARKET.