Chicago Appraisal Blog

Believe it or not, I have turned down work recently. 

Appraisals are getting harder.  Even in my backyard deciphering the recent sales, determining if REO's are a factor, short sales, etc., is a lot of work.  Asking me to provide a value estimate for a property 50 miles away when I haven't worked there in a year, could be a little tricky.  Sometimes there are enough sales occurring of a given type of property to have a clear understanding of what value trends really are.  Sometimes there aren't enough sales.  When there aren't enough sales, if I can not write a competent addendum that I could stand behind and be confident is accurate collateral protection for my client, I turn it down.  I'm just not the person for the job.  No shame in admitting that you don't know.  It does go the other way too.....Sometimes a property may be grossly undervalued because the appraiser does not have a good understanding of the neighborhood.  In this case, better to err on the side of caution, right?  WRONG!  Do not accept these assignments.  Taking the work for the sole purpose of cashing the check while grossly undervaluing property for the purpose of a CYA mentality leads to lack of sales!! We need the sales!!  The world is not ending, people would still like to buy homes.

I recently read a review where an appraiser working in Chicago told me that the MLS defines neighborhoods.  They believed that the Chicago MLS code was the end-all, be-all determination of median sales prices.  (Appraisers, you know what I mean.)  A neighborhood doesn't consist of "80XX", but rather is composed of where the value boundaries lie.  Further, within these neighborhoods you may have a mix of decreasing 1-bedroom condominiums, with stable single family prices.  Please, fill out the 1004MC accurately! Use your real, neighborhood boundaries!  Consider viable buyer alternatives!  Just because Belmont Ave may be 1.0 mile from Armitage Ave doesn't mean that a buyer will buy there as an alternative!  Don't review based on 1-mile radius median sales prices!  Don't review based on MLS codes.  Review work is tough.  You'll probably learn something everytime you accept an assignment.  I know I do.  Just make sure you know the area you are appraising.  It's just USPAP. 

Back in the day we use to be able to research any given neighborhood in a short amount of time because the data pool was so large.  Not anymore.  All I ask is that we all follow the Competence Rule.  It is becoming a defining problem for purchase transactions. 

A RULE I LIVE BY:

KNOW THAT YOU DON'T KNOW