Appraisals Obsolete?

[Janet_IHB]

<p>IR makes a compelling case for valuing residential real estate at rent *160.</p>

<p>Since we know that Appraisers have three methodolgies: cost appoach, sales comparison approach and income approach, does this mean that the first two approaches are not valid?</p>

<p>All Appraisers - even the most stringent and diligent - have been going with the flow, so-to-speak, and issuing values higher than indicated by the cost approach.</p>

<p>In fact, we know that at the most-basic level, an appraisal today merely confirms where a property is valued relative to other recently-sold, similar properties in its market area.</p>

<p>Does anyone think that appraisal methodologies will change, or even become obsolete?</p>

 

[oc-conservative_IHB]

<p>I never understood the role of an appraiser in a free market. </p>

<p>I could understand the need for them in certain situations, but once a home inspector tells you that your home is in great condition with no problems, and everyone can see that the same type of home sold for X dollars in the last 2 months, it would seem that an appraiser shouldn't be able to value your home more or less than that.</p>

 

[IrvineRenter_IHB]

Appraisers are pretty good at telling you the current resale prices based on comps. The problem is that price often has little or no relationship to underlying value due to crazy financing terms, etc.





In a normal real estate market (not that California has seen one of those in a while) all three appraisal methods you mention will return roughly the same value. As an obvious sign of the bubble, the first two valuation methods started returning values more than double of the income approach. The income approach is where we are headed, the cost and sales approaches are where we have been.

 

[dammshar_IHB]

<p>I was turned onto this site about a month ago - and it seems to me that the Southern Utah area (where I live) is following the rest of the country into the handbasket. The median income for a two-income family of four (although many women are stay-at-home moms) is $40,000. No, that's not a typo. Law enforcement officers start out at around $13.00 per hour. The market sky-rocketed (my home value changed from $140k to $300k from 2005 - present), pricing your average joe out of the home ownership market. Existing Home Prices are on the downslide, yet we continue to build and build and build. Every time a new golf course community with oppulent homes pops up, even if existing homes aren't selling well (or at all) the home values skyrocket due anyway. The appraisers are using the new (southwest cookie cutter style) homes as comps - and for those people who refi'd or took out 2nds to make use of their equity and are now facing foreclosure or sale, the actual selling prices are well below the appraised amounts. It's confusing.</p>

 

[Janet_IHB]

<p>Wow - police officers risk their lives for $13.00/hr?</p>

<p>OK, maybe it's safer there, but that's outrageous.</p>

<p>Let me guess - teachers make even less?</p>

<p> </p>

 

[dammshar_IHB]

<p>New teachers start at around $28k, I think. And it may be safer here than LA or LV, but they still risk their lives for peanuts. The area is beautiful, but not the wages. But lots of LV and Calif residents who sold at the peak came here and built a home for next to nothing - which increased the building business, homes increased in value (or cost), and priced pretty much everyone out of the market here. </p>

<p>Some people even drive to Vegas to work (over 2 hours) because they can't make it otherwise. </p>

 

[lendingmaestro_IHB]

We don't care about our teachers here!!! Give us our OK magazine or the most recent copy of US Weekly...I need to see what Brangelina is doing today!

 

[gepetoh_IHB]

Conceptually, the system was supposed to use a balance of the three methods to properly appraise homes. Obviously, as the market demanded higher pricing, one method began to be favored over the others, and appraisers simply ignored whatever was unfavorable to the demands. The current rules give the appraisers the freedom to use any of the methodologies. I think a methodology that combines the three appraisal methods would represent a reasonable estimate.