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October 9, 2009

Appraised Values are Bullshit

Filed under: General Real Estate,Of Interest to Buyers,Real Estate: Condominiums — Center City Philadelphia Real Estate Agent @ 3:50 pm

…how do you not understand that?

I have long contended that appraisals are not worth the money. Sure, they are a necessary ingredient into any mortgage or refinance situation, but just how real is an appraisal for any given Rittenhouse Square condo for example?

It has been my general experience that an appraisal is any given mortgage or Re-Fi situation is a question of “Meets”….does the appraised value meet or exceed the sale price. If yes, then great…deal goes through. If not, big problem. But I have seen COUNTLESS appraisals magically come back at exactly sale price. Now how does that happen?
Here is what happens: Appraiser finds out sale price, then finds comparable sales to meet that sale price.  It is the tail wagging the dog.

But my bigger complaint is that appraisals do not take into account (or for the most part, discount) interior condition. IF Mr. or Mrs. Appraiser is looking for comparable sales to either meet or exceed the value of the subject property, but he or she has not been inside the comparables, how can they account for the huge fluctuations in the sale prices of supposedly similar units? Does the emotional impact of a unit not count for anything?  And are they getting their insight/knowledge about the interior condition, or the emotional impact of a condo from 5 or 6 crappy photos of a Center City Condo added to the MLS by some realtor with a $20 camera??
I would love to hear some feedback on my assertion that appraisals are Bullshit. What do you have to say?

Mark Wade
Prudential Fox and Roach REALTORS®
530 Walnut St., Suite 260 Philadelphia, PA 19106

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