Jul 25, 2016 - 07:41 AM
We would like to change the basic way property appraisals are done as we don't believe they put an accurate value on property over time. We would like a system that put most of the weight of the value on construction price and then the local comps.
If I have a new truck and the neighbor sells his new truck for half what it is worth my truck is not worth that price nor should my house be.
Houses are worth what they cost to build plus the land plus the contractors margin minus depreciation. A relatively simple formula could be used to get in the ball park one would think then the comps should be added in. Comps over time are useless on any real level as no one knows what the comps will be as no one knows what the liquidity in the real estate market will be in five or ten years. Construction cost are much more consistent.
Right now entire communities of people are being forced to sell their own homes at a substantial discount to the real market due to the appraisal system that is in place at this time. I have seen countless sails lost because the house was appraised so far under construction cost that the buyers could not come up with the extra down payment to make the deal.
It is our belief that given a better set of criteria to work with the appraisal industry would be better off as a whole and could get out from under bank control. Another words some credibility would be restored. In large part the past boom and bust would not have happened had a more concrete set of criterial been used. The top would not have been so high and bottom so deep. It would have still happened as the extra liquid put into the market by the banks’ ability to sell XXX paper for AAA would have had the same basic end result. The bottom would not have been nearly as bad as people could have sold their homes for far more given realistic valuations.
The banks like the present system as it serves there purpose and that is all they want so changing this will not be easy and possibly impossible. That having been said the banks laid the blame on the appraisal industry which was not correct and the industry as a whole should be willing to make these changes just from a credibility stand point.
Please let me know who we will need to talk to and to submit the necessary information to possibly correct this problem. No system is flawless but this one is really poor.
Kerry L Reich
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Jul 25, 2016 - 07:41 AM