For years we have railed against appraisers using reo, short sales, probate sales, and other non-arms length sales as comparable when valuing "market value" which is defined as:
Market Value is defined as: the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specific date and passing of title from seller to buyer under conditions whereby:
* Buyer and seller are typically motivated;
* Both parties are well informed or well advised, and each acting in what he considers his own best interest;
* A reasonable time is allowed for exposure in the open market;
* Payment is made in terms of cash, in United States dollars, or in terms of financial arrangements comparable thereto; and
* The price represents normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
Exposure time is one of a series of conditions in this market value definition. Exposure time is always presumed to precede the effective date of the appraisal. It is defined as the estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale, at market value, on the effective date of the appraisal. It is a retrospective estimate based upon an analysis of past events assuming a competitive and open market. In this respect it can be considered a Level “A” analysis which is general and descriptive, not subject-specific. General data and selected comparables are presumed to reflect the market. The conclusions based on this study might apply to most similar properties in the subject market area.
Now the appraisal institute and the appraisal foundation have decided to change horses in the middle of the stream. Their failure to adhere to this long time, hard and fast rule, has resulted in Debacle II (2007), and now Debacle III, the loss of trillions in homeowner and investment real estate equity, since the crash.
If the real estate market is ever going to recover this practice must be immediately stopped. Please sign our petition and forward to everyone you know friend or foe, property owner or not. The construction industry, and the General Economic Recovery needs you.