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They are what they are. If you find a low priced property in this tough Michigan Real Estate market it’s for a reason. In most cases the property has been offered at higher prices only to be lowered time and time again due to lack of buyers. When you enter one of these transactions you first need to know the definition of market value that appraisers use and second apply some common sense.

First: An appraiser’s definition of market value is “the most probable price a property should bring in a competitive and open market under all conditions for a requisite sale, the buyer and seller, each acting prudently, knowledgeably, and assuming the price is not affected by undue stimulus.”

Second: The common sense is that if the seller is willing to offer at a low asking price and/or accept a low offer it is because it’s the best offer/price they could get. Thus, it would automatically represent the most probable price a property should (in this case, could) bring in a competitive and open market.

Buyers that think they are getting a great deal and deserve an appraisal for a lot higher then there purchase price are not accepting the conditions of this current real estate market. If you have paid what you consider a low price for a property, you have found the declining market. You have not bought at a great price, you have bought at market value for this time. The great deal comes in when the market comes back these properties purchased at low prices should see the fastest appreciations. But, for right now you have purchased at a fair market value for this tough Michigan Real Estate market.

No we do not comp check. Comp searches (seeing if an estimated value is possible) do not make any sense to us in this tough real estate market for several reasons.

First Reason: Comp searches are a way of setting a predetermined value. It is unethical for appraisers to accept an appraisal order based on a predetermined value.

Second Reason: It is against Michigan State Law for an appraiser to give a verbal appraisal. All appraisals must be in writing and there for must include all certifications required by USPAP (Uniform Standards of Professional Appraisal Practice).

Third Reason: It is unethical for an appraiser to give an opinion of value without having gone through the entire appraisal process. Much like a good doctor would not diagnose a patient without seeing them; a good appraiser would not value a property without seeing it. The value of a property can vary significantly depending of the condition.

Fourth Reason: It is unethical to accept an appraisal order based on payment being contingent upon the attainment of a stipulated result. Once an estimated value is confirmed in a comp search appraisers are expected to stop work and not get paid if there is any reason the value is not possible after seeing the property.

Fifth Reason: Comp searches create an environment which allows loan officers to value shop. Value shopping is the process of calling multiple appraisers to see who will give the highest appraisal on a property. This practice is unethical behavior by loan officers and it completely eliminates the unbiased third party opinion of value. With is situation going on a desperate appraiser is going to inflate a property value to get the business.

Sixth Reason: Most loan officers say that a guaranteed value is not being asked for. Well, if a guarantee is not what you want then why even ask for a comp search in the first place. A mean appraiser could just tell you that a value is possible, take your borrower’s money, and completed the appraisal at what ever value they want to. At the end of the day if the loan officer gets mad at the appraiser and puts pressure on them it’s the loan officer that could get in trouble for lender pressure.

Conclusion: We do understand there are some loan officers out there trying to get comp searches ethically and just want to know if they should waste their time or not. All I can say to that is order an appraisal first thing and don’t do anything else with the loan until it comes back. Our company can complete and deliver an appraisal within 2 to 3 days. There are those out there that say they don’t want to waste the borrower’s money if the value is not going to come in at something that will make the loan work. I do not see an appraisal being a waste of money even if it does not allow a loan to go through. A home owner has gained valuable information about their property and their financial situation. From experience, if a loan officer says this it means that the borrower knows the value needed would be a stretch and the loan officer is now value shopping to find that desperate appraiser to guarantee an inflated property value.