I've had a fun morning!
I did an appraisal on a fairly complex waterfront property here in Austin last week, which in and of itself was no big deal. I am familiar with the area and have a good understanding of the complexity. However, the property was owned by a realtor who was
refinancing it but also was trying to sell it. She thought the property was worth $1.5M. I appraised it (generously) at $1.3M. She then sent me several HUD-1's for underwater property that she said had sold for $50,000 per acre. She owns an additional
6 underwater acres, and requested that I essentially do the math: $1.3M +(6 acres x $50,000) = $1.6M.
I attempted to calmly explain to her that:
(a) the appraisal was done at the request of the lender (not her) for the specific mortgage refinance transaction, and was not something I could simply modify to her requested number,
(b) that it was not that simple, and that what she was requesting was actually a new appraisal and that I would have to find similar properties with similar acreage underwater (nearly impossible I am guessing, but that would be the assignment),
(c) she could not use my appraisal and give it to her buyer to use for his mortgage because the lender would not accept it and would want their own, and
(d) I was fairly confident that it would come out nowhere near her estimate because in my opinion the value of the underwater land is minimal as long as the property offers deep water access, and that her property was worth what it was specifically because
it has deep water access.
Well, of course "you are wrong" and "I paid you for the appraisal, so it is mine and they can use it, you don't know what you are talking about", and
my personal favorite:
"The definition of value is what the buyer and seller agree to, so if I am willing to sell it for that much and they are willing to pay that much, you need to appraise it for that!"
I was so stunned I couldn't even talk for a moment. Did she really just say that? This is a fairly well known realtor in the area, and this is really how she thought the process worked? While it would sure make my job easier ("So you are buying it for
$x, and you are selling it for $x, so let me just fill in some miscellaneous text on this URAR form and then write in $x as the value. That will be $350 please!"), I didn't think the ASB would find that to be sufficient.
I tried to explain that her definition of value was slightly off (forgetting that it should contain something about both buyer and seller being
knowledgeable and acting prudently, etc), and that "value" and "appraised value" are different as well. Appraised value is what I can mathematically prove, and is to protect the bank from financing a property that is not worth what it might
otherwise sell for (among other things).
Anyway, in order to keep my client out of the fire, I didn't waste time arguing any more and just offered to refund her money, which she accepted.
I understand that in all professions there are a few bad apples, idiots, and otherwise mediocre players that just don't care about ethics and professionalism (including my own profession), but how do you get to be a realtor without understanding the concept
of an appraisal and its use? She didn't understand that:
(1) the appraisal was done for the lender for a specific mortgage transaction, not her personal use and advertising,
(2) an appraisal is not transferrable to whomever she felt like giving it to,
(3) that an appraisal for a 1 acre parcel of land was completely different than an appraisal for a 1-acre parcel of land plus another 6 acres, and
(4) that the appraised value is not necessarily the exact amount that she was selling it for.
I can understand maybe the first one or two as it is fair to say that isn't necessarily common knowledge, but all four? And to automatically assume that I should appraise it for exactly what she is selling it for? All of this from a seasoned realtor no
less, and not a newbie. I don't know if "Intro to Appraisal" is a required course for realtors, but it should be.
BIT O' WISDOM: Every poker table has a sucker at it. So when you sit down and look around but can't figure out who is the sucker, you're it.