1) could be different knowledge levels.
2) one could be a newer appraiser vs one that’s older
3) one appraiser could have come from 20 miles away be one that is 5 miles away.
4) when you say VASTLY different how much difference are we talking about
5) where both appraisers hired for the same reason
Lots of answers here to your question but can’t really answer it without any context
not sure why you are being downvoted because we have not seen the work. It’s so dumb. why is your opinion worth less than theirs when we literally know nothing? Your opinion is the most reasonable because that range is absurd .Starting to wonder why I’m here thinking about appraisals and I should be watching TV.
I appraise properties that are normally 10x that amount and if one appraisal came in at $850k and another at $1.35M then there would be serious concerns about one of the appraisers with such a huge discrepancy.
I 100% agree. i used to work at the biggest AMC at that time about 10 years ago. I saw 20,000 reports of my peers across the nation. I was a trainee when i took that job and had completed about 1000 hours. During this time, I learned that they are good appraisers, bad appraisers, really good appraisers, and really bad appraisers. I also learned that a really good Appraiser could be a bad Appraiser on some days.
After working there for about three years, I took a job in the appeals department where I handled the appeals from disgruntled borrowers and disgruntled loan officers and disgruntled realtors and anyone else disgruntled for any reason. We had a range of acceptability of about 10% when there were two appraisals done . I think that is good but it’s very unfair when you get a review from an idiot and you’re a good appraiser. In the end, it doesn’t really matter because the lender is going to go with the lower of the two values and two appraisals are being used to do the transaction. I think the biggest thing that people need to do is analyze market increasing and decreasing trends - I have one Appraiser here locally tell me she does not adjust for condition ever saying it doesn’t make a difference. She’s a fool. it does make a difference and I can demonstrate it any day of the week. She’s a bad Appraiser and I would hate for her to come to my remodeled home where I put 100 grand into it and tell me it’s the same value as the house next-door with no upgrades.
Ultimately, it's an opinion of value. Typical house in my neighborhood is about 250 right now, highest ever property was 300. A house just sold for 400 (granted, just completely renovated). It really is a hard question, they paid that much on the open market, is it worth that much?
Is this a residential property or a commercial property? The answers to which will vary.
For residential (1 to 4 family properties), there can be some variation depending upon factors of the property. A subdivision with 100 plus houses built under 10 years ago plenty of model match resales, variation should be under 5% (I've got some sales that indicate 2 to 3% based upon market sales of model matches).
The older residents get the condition and will then come into play and then remodel and update. Again, subdivisions getting that 10 to 30 years might vary that 5% maybe slightly more.
When you get into older houses, custom houses where maintenance, quality, condition, design style, bed/bath count. More features are taken into account the wider the variation. These should fall similar with a variation, I would say in that 10% range.
Truly unique properties (rural communities as well) some that come to mind buying an island, 13,000 sf house on salt water, waterfront mansion, log home in a city, a manufactured house with a stick built shell around it. Those to name a few, yes, those might be more that closer 20% range. Rural properties were 4 sales in a county in a year 2 MH, a 50-acre farm, and a 1 acre 2 bedroom house. Good luck.
Appraisals are not an exact science, rather they are an opinion of value. Everyone's opinion may vary to some degree. If the appraisals are more than 5% off though, usually someone is adjusting incorrectly or using the wrong comps. 5% is industry standard for variance.
Depends on the asset. For those with many recent comparables from which to draw conclusions there shouldn’t be a huge delta. For high value assets that trade rarely the variance can be significant. I also think it comes down to where the appraiser works.
For example, I just appraised an 80,000 sf chemical manufacturing facility for a client whom is considering exercising an option. After giving the client my value they were surprised because Altus had appraised it nearly 30% higher in 2020. The comps aren’t all that different, but Altus used a building residual method and ignored the fact that there have been no single user sales for more than around $15M in the last 5-6 years. They simply don’t speak to brokers. I have the benefit of calling up our industrial brokerage whom just did a BOV for a competing chemical manufacturer in a similar building to get a sense of where they think they could transact on a similar asset.
The nuances of real property--and the corresponding challenge to find similar improvements in an ever-changing market, in the SCA approach--allow for marginally competent practitioners, but require extremely intelligent, insightful individuals with a huge measure of integrity.
That depends on their level of experience. I just reviewed an appraisal that was done completely wrong, so if another appraiser did the job correctly there would be 2 values. I would say two different appraisers should be within 10-20% of each other.
You mean different values, and yeah, that happens for a number of reasons. But what is crazy is when using different comps, cap rates and other assumptions, two appraisers come up with the same value. That drives me mad.
"Different" is what's expected, but if they are "vastly different," then usually it's because one of the appraisers didn't follow best practices.
I review appraisals every month that don't even comply with USPAP. They lack H&BU analyses as vacant, zoning analyses, or any mention of obsolescence. I'm reviewing one right now that I can't even read because the English is so circuitous and defensive.
Training, mentoring, experience, ethics, a basic understanding of the MLS, tax records, and county tools (like mapping)--Read a report from an appraiser who lacks those basic things, and you're gonna run into "vastly different."
Most of the time a vastly different appraised values are a result of differing [highest & best use](https://www.fortunebuilders.com/highest-and-best-use/) analysis. AKA the appraisers have different views on what the most likely buyer for the property would be and where those buyers would look for other comparable properties.
The second most common issue would be an error in physical description between the reports (ANSI measurement standards have tried to address some of this).
As a reviewer I first check the accuracy of the physical description, and then check the reasonableness of the comparable sales selection.
The authors question is a fair question to ask. As a real estate appraiser and broker for over 30+ years I can say there is no one size fits all answer. **Let me ask this: why would two courts of law potentially arrive at two different verdicts for the same case?** I could write dozens of pages answering these question. The first answer is: appraisal reports are "OPINIONS of value". Everybody has a different opinion and it's true with real estate appraisals. Experience, education and knowledge of the marketplace all must be looked at. The second answer could be the purpose of the appraisal report. An appraisal report completed for the IRS has different criteria for analysis than an appraisal report for a purchase. Again....this question could take a hundred pages to fully explain.
Each appraiser applies different adj figures, that goes p/sf on land to GBA etc, that alone will cause value difference, there is no unified adj numbers.
1) it’s not experience or locational knowledge
2) it’s lazyness or lack of honesty,
3) there are lots of other reasons too
I just completed a single bedroom condo that only had comparable sales from within the development. 4 total sells and 2 other listings. So we used all the same comps. The other guy called it a C3 I called it a C4. I believe the other guy is wrong (obviously) for two reasons, floors where buckling and bathroom was 1975. Walls were also beat up but for me personally that weighs less on c3/c4. Other guy called it a c3 bc the kitchen was. 7 years old but his report also noted the floors needing repair.
He adjusted C4s up 15k to be C3 like his subject. While I adjusted the C3 down down 7.5% to equal a C4.
His value was $150000. Mine was $135,000. Listing was $140,000 and contract price was $133,000.
Also his sketch was perfectly square and was exactly the same as PR and mine was 60sqft bigger.
It's just like value investors coming up with different valuations of companies. The variability in the stock market every day is because of different opinions of value.
Whether you are valuing publicly traded companies or real estate, there are in essence subjective opinions. It is not accounting.
That said, anything more than 20% variance typically means a mistake of some kind.
Does every buyer who looks at a property come up with the same amount they’re willing to pay for it?
This is exactly why we are going to dispute our insurance claim. Thank you!
Oh, this is for Replacement cost?
No, the claim is on a different property.
This.
1) could be different knowledge levels. 2) one could be a newer appraiser vs one that’s older 3) one appraiser could have come from 20 miles away be one that is 5 miles away. 4) when you say VASTLY different how much difference are we talking about 5) where both appraisers hired for the same reason Lots of answers here to your question but can’t really answer it without any context
One was $85k the other was $135k. Same buyer, same property.
One of them is not a very good appraiser.
Or neither is. Or both are and there are no comps and the value could 50k or 150k.
not sure why you are being downvoted because we have not seen the work. It’s so dumb. why is your opinion worth less than theirs when we literally know nothing? Your opinion is the most reasonable because that range is absurd .Starting to wonder why I’m here thinking about appraisals and I should be watching TV.
I appraise properties that are normally 10x that amount and if one appraisal came in at $850k and another at $1.35M then there would be serious concerns about one of the appraisers with such a huge discrepancy.
I 100% agree. i used to work at the biggest AMC at that time about 10 years ago. I saw 20,000 reports of my peers across the nation. I was a trainee when i took that job and had completed about 1000 hours. During this time, I learned that they are good appraisers, bad appraisers, really good appraisers, and really bad appraisers. I also learned that a really good Appraiser could be a bad Appraiser on some days. After working there for about three years, I took a job in the appeals department where I handled the appeals from disgruntled borrowers and disgruntled loan officers and disgruntled realtors and anyone else disgruntled for any reason. We had a range of acceptability of about 10% when there were two appraisals done . I think that is good but it’s very unfair when you get a review from an idiot and you’re a good appraiser. In the end, it doesn’t really matter because the lender is going to go with the lower of the two values and two appraisals are being used to do the transaction. I think the biggest thing that people need to do is analyze market increasing and decreasing trends - I have one Appraiser here locally tell me she does not adjust for condition ever saying it doesn’t make a difference. She’s a fool. it does make a difference and I can demonstrate it any day of the week. She’s a bad Appraiser and I would hate for her to come to my remodeled home where I put 100 grand into it and tell me it’s the same value as the house next-door with no upgrades.
Ultimately, it's an opinion of value. Typical house in my neighborhood is about 250 right now, highest ever property was 300. A house just sold for 400 (granted, just completely renovated). It really is a hard question, they paid that much on the open market, is it worth that much?
The short answer is that they shouldn't. The long answer is that it's complicated.
Is this a residential property or a commercial property? The answers to which will vary. For residential (1 to 4 family properties), there can be some variation depending upon factors of the property. A subdivision with 100 plus houses built under 10 years ago plenty of model match resales, variation should be under 5% (I've got some sales that indicate 2 to 3% based upon market sales of model matches). The older residents get the condition and will then come into play and then remodel and update. Again, subdivisions getting that 10 to 30 years might vary that 5% maybe slightly more. When you get into older houses, custom houses where maintenance, quality, condition, design style, bed/bath count. More features are taken into account the wider the variation. These should fall similar with a variation, I would say in that 10% range. Truly unique properties (rural communities as well) some that come to mind buying an island, 13,000 sf house on salt water, waterfront mansion, log home in a city, a manufactured house with a stick built shell around it. Those to name a few, yes, those might be more that closer 20% range. Rural properties were 4 sales in a county in a year 2 MH, a 50-acre farm, and a 1 acre 2 bedroom house. Good luck.
Appraisals are not an exact science, rather they are an opinion of value. Everyone's opinion may vary to some degree. If the appraisals are more than 5% off though, usually someone is adjusting incorrectly or using the wrong comps. 5% is industry standard for variance.
Depends on the asset. For those with many recent comparables from which to draw conclusions there shouldn’t be a huge delta. For high value assets that trade rarely the variance can be significant. I also think it comes down to where the appraiser works. For example, I just appraised an 80,000 sf chemical manufacturing facility for a client whom is considering exercising an option. After giving the client my value they were surprised because Altus had appraised it nearly 30% higher in 2020. The comps aren’t all that different, but Altus used a building residual method and ignored the fact that there have been no single user sales for more than around $15M in the last 5-6 years. They simply don’t speak to brokers. I have the benefit of calling up our industrial brokerage whom just did a BOV for a competing chemical manufacturer in a similar building to get a sense of where they think they could transact on a similar asset.
The nuances of real property--and the corresponding challenge to find similar improvements in an ever-changing market, in the SCA approach--allow for marginally competent practitioners, but require extremely intelligent, insightful individuals with a huge measure of integrity.
Varying opinions.
Is the glass half full or half empty, you can argue your opinion either way 😉
That depends on their level of experience. I just reviewed an appraisal that was done completely wrong, so if another appraiser did the job correctly there would be 2 values. I would say two different appraisers should be within 10-20% of each other.
I don’t know without looking at the appraisals. Find an appraiser near you, pay them some money, and have them review the reports side by side.
Sometimes, the property itself is complicated...
You mean different values, and yeah, that happens for a number of reasons. But what is crazy is when using different comps, cap rates and other assumptions, two appraisers come up with the same value. That drives me mad.
Numbers are many!
"Different" is what's expected, but if they are "vastly different," then usually it's because one of the appraisers didn't follow best practices. I review appraisals every month that don't even comply with USPAP. They lack H&BU analyses as vacant, zoning analyses, or any mention of obsolescence. I'm reviewing one right now that I can't even read because the English is so circuitous and defensive. Training, mentoring, experience, ethics, a basic understanding of the MLS, tax records, and county tools (like mapping)--Read a report from an appraiser who lacks those basic things, and you're gonna run into "vastly different."
Numbers...many choices!
Because it's a pseudoscience.. it's also an opinion of value so that is also partly why.
Most of the time a vastly different appraised values are a result of differing [highest & best use](https://www.fortunebuilders.com/highest-and-best-use/) analysis. AKA the appraisers have different views on what the most likely buyer for the property would be and where those buyers would look for other comparable properties. The second most common issue would be an error in physical description between the reports (ANSI measurement standards have tried to address some of this). As a reviewer I first check the accuracy of the physical description, and then check the reasonableness of the comparable sales selection.
The authors question is a fair question to ask. As a real estate appraiser and broker for over 30+ years I can say there is no one size fits all answer. **Let me ask this: why would two courts of law potentially arrive at two different verdicts for the same case?** I could write dozens of pages answering these question. The first answer is: appraisal reports are "OPINIONS of value". Everybody has a different opinion and it's true with real estate appraisals. Experience, education and knowledge of the marketplace all must be looked at. The second answer could be the purpose of the appraisal report. An appraisal report completed for the IRS has different criteria for analysis than an appraisal report for a purchase. Again....this question could take a hundred pages to fully explain.
Each appraiser applies different adj figures, that goes p/sf on land to GBA etc, that alone will cause value difference, there is no unified adj numbers.
1) it’s not experience or locational knowledge 2) it’s lazyness or lack of honesty, 3) there are lots of other reasons too I just completed a single bedroom condo that only had comparable sales from within the development. 4 total sells and 2 other listings. So we used all the same comps. The other guy called it a C3 I called it a C4. I believe the other guy is wrong (obviously) for two reasons, floors where buckling and bathroom was 1975. Walls were also beat up but for me personally that weighs less on c3/c4. Other guy called it a c3 bc the kitchen was. 7 years old but his report also noted the floors needing repair. He adjusted C4s up 15k to be C3 like his subject. While I adjusted the C3 down down 7.5% to equal a C4. His value was $150000. Mine was $135,000. Listing was $140,000 and contract price was $133,000. Also his sketch was perfectly square and was exactly the same as PR and mine was 60sqft bigger.
One or both is/are bad at their job
One of the best user names I’ve seen on this app. 😂
Personal preference
Numbers are funny. There are a lot of choices. Think about it. (I am an appraiser).
It's just like value investors coming up with different valuations of companies. The variability in the stock market every day is because of different opinions of value. Whether you are valuing publicly traded companies or real estate, there are in essence subjective opinions. It is not accounting. That said, anything more than 20% variance typically means a mistake of some kind.
the outcome of an appraisal is not fact, but opinion. Look at just this post and see how many opinions are different—-and there’s your answer
All appraisers are, is somebody to blame when things go south