Friday, November 29, 2019

Critical Risks Many Appraisers Are Not Telling You

Home or condo appraisals are not divulging critical risks concerning their otherwise well-supported value opinions 

From the early 1900s until about 1975, real estate values for residential properties remained the same during any market cycle. There were very few markets with wild swings in value during any market cycle during this period.

During this period, appraisers with local knowledge were sought out that had access to local sales data and had the technical skills of adopting generally accepted appraisal principles and processes. Back then, the primary purpose of obtaining a professional appraisal was to reduce the risk of a value opinion that didn't reflect the "most probable" single-point-in-time market value.

Consequently, 100% of the risk of an appraisal was in NOT receiving an accurate "most probable" single-point-in-time value opinion based on the definition of market value.

Back then as it is today, any property's current market value for a single-family or condos represents the present value of the future benefits. These future benefits are the collective markets forecasts for a specific property they expect to occur in the future. Included in these market forecasts is the expected future ending sale price for the appraised property during the current market cycle. Consequently, the present value of all the markets forecasts equals the property's current "most probable" single-point-in-time market value. 

If pre-1975's single-family or condo sale prices are reversed engineered into the collective markets forecasts using modern technology, the result would indicate the future markets forecasted ending sale prices didn't vary much from what was initially being paid for the properties. This reverse engineering indicated the future ending sale price market forecasts are supported by the value trends up to 1975.  

From 1975 and beyond, appreciation of residential and condo property values experienced unprecedented value increases. During this period, there have been two devastating real estate valuation collapses occurring within two of the market cycles, i.e. the 1989 Saving & Loan collapse and the most recent 2007 "Great Recession". 

If you reverse engineer these post-1975's sale prices, one can see the collective market's ending sale price forecasts also reflected these unprecedented appreciation trends. 

Exorbitant speculation of the future ending sale price market forecasts was highly exaggerated for sale prices taking place right before the 1989 Saving & Loan real estate valuation collapse and the most recent 2007 "Great Recession" real estate valuation collapse.   

Leading up to both of these two major real estate recessions and value declines, appraisers continued to traditionally value properties based on the "most probable" single-point-in-time market value using comparable sales.  This is understandable because licensed appraisers are required by law to only indicate the "most probable" single-point-in-time market value. 

If these sale prices are also reverse-engineered right before these collapses, it reveals the collective market was also forecasting irrational ending sale prices far above the initial selling price. This hidden irrational ending sale price market speculation is also built into the comparable sales used by appraisers in comparing to an appraised property. 

As a result, since the 1975's the dynamics of risk of an appraisal have changed. An accurate "most probable" single-point-in-time value opinion now only represents approximately 40% of the risks. The remaining 60% of the risk is whether or not an otherwise well-supported market value opinion is sustainable during the market cycle. Without this value sustainability 60% risk analysis, the appraiser's value opinion could be grossly misleading. This, however, is not the fault of the appraiser.  

This is why the users of valuation products are now asking the question, "What good is an appraisal if it doesn't protect us from market cycles?" This paradox is one of the reasons recent legislation is now allowing non-licensed individuals to perform single-point-in-time values called evaluations (watered down appraisals) and appraisal exclusions of even having to conduct an appraisal for lending purposes.  

As a result, progressive appraisal firms are adding this critical 60% value sustainability risk analysis after they have concluded with their traditional well supported "most probable" single-point-in-time value opinion that now only represents 40% of the risk. 

If the appraiser doesn't include the additional 60% risk value sustainability analysis to the appraisal, many review appraisers, lenders and Appraisal Management Companies have been separately conducting this 60% risk analysis and report using the appraiser's "most probable" single-point-in-time value conclusion. 

The reason lenders especially want a value sustainability analysis as part of a traditional appraisal is to protect themselves from making a bad loan which can potentially leave the borrower "underwater" in the near future. Being "underwater", or having a mortgage balance greater then the value of the property, increases the chance of default. It also requires the lender to set aside more than expected loan loss reserves that result in a yield killer bad loan for the lender. 

What can you do to protect yourself if your appraiser or lender won't provide you with a value sustainability analysis and report? The financial modeling needed for reverse engineering your residential property's selling price or appraised value is a complicated process. This is equally true in applying these results to a value sustainability financial model. And lastly, how do you interpret the results of this analysis in the form of an easy to understand report?

This barrier to entry in having the ability and access to perform a value sustainability analysis is a major problem for not only appraisers and lenders but also for the general public.  

If this problem could be solved, the automated value sustainability report would look something like this: SEE REPORT

Thankfully, this barrier to entry problem has been anticipated and solved with modern cloud-based technology. These complex financial models have been transparently standardized and automated that meet generally accepted appraisal standards. 

All the user has to do to receive the automated value sustainability analysis and report is answer 17 general questions that the user most likely already knows about the property. 

Then the system will ask you to insert your property's known appraised value or asking price. Or if you're just shopping around for a house or condo, just insert the asking price. You can put in any value that you think is the current market value for the property. 

That's it. Just press the "Give me my Value Sustainability Report" button to view and print. This report will explain everything you need to know if or if not your property's current value is in a bubble and is sustainable during the current market cycle.   

The report will also tell you if the property's current value is a great buying opportunity. This value sustainability scenario showing an opportunity indicates if the market's ending sale price forecast will be exceeded which affords the buyer an even greater then expected price appreciation of the property.   

This patent-pending transparent process was years in development by Appraisal Institute designated appraisers with the highest credentials and decades of appraisal experience. 

Hopefully, your appraiser works for a progress appraisal company and lender that uses this value sustainability analysis in better protecting their clients. If not, we want the general public to personally have access to this advancement to the traditional appraisal process. 

You can now personally test your property's known market value or asking price for value sustainability without any valuation education or technical training. At less then what we charge the professionals, you can have this report on your property for $8.99 with a 100% money-back guarantee. This one-time payment gives you three different properties to analyze and three value sustainability reports. You can purchase more property analyses or reports if needed. 

To start, press HERE to answer the 17 mandatory questions about your property. Next, pay the 100% money-back guarantee price of just $8.99 (professional appraisers will charge you a lot more for the same report with no money-back guarantee!). Next, insert your property's current market value or asking price. That's it. It takes 5 minutes. You're now ready to view and print your customized value sustainability report. 

Use this report to make better buying and selling decisions. It is also great for negotiation purposes in getting a better price for the property. 

Let's all wise up to this new globalized real estate market. Dangerous hidden real estate bubbles are disguised in an otherwise well-supported market value appraisal for any specific property. This hidden risk is occurring unknowingly throughout thousands of neighborhoods within our country and abroad. 

Don't get fooled again like many were in 2006 before the "Great Recession".  Try this 100% money-back guaranteed system created by some of the best valuation experts in the country. 

Many currently believe we are rapidly approaching the end of the current market cycle. This cycle has lasted a record 10 years before a recession. If you presently own a house or condo, you might want to use this product in assessing if you should hold on to the property or immediately sell the property before the coming recession. Depending on how severe a disguised bubble might be effecting your property's current market value will depend on how much financial damage you'll incur during the next recession. 

This product is also an excellent tool in presenting arguments regarding property tax appeals. Arguing with the property assessors about who has the best comps and what are the right adjustments can be futile. If the assessors won't come off their assessed value on your property, you can fall back with the argument that quantifies if their assessed value is fragile and in a severe bubble. 

Be assured, due to its transparency, this system can't be "gamed" with the users answered questions. Any irrational or fraudulent answered questions will stick out "like a sore thumb" to whoever reads the report.  

Getting a reduction of your property's tax assessment can save you $1,000's of dollars off your property tax bill. And you can do this yourself without the added cost of a professional. 

Press HERE to start answering the 17 mandatory questions about your property. Protect yourself in this new and volatile real estate market.  

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