Appraise the Lord!

In the beginning, God created heaven and earth. In other words, in addition to real estate, Yahweh manifested a whole bunch of blue sky out of the void, so that man had something to forever scratch his head about.

Sometime later, Adam and Eve were evicted for conduct unbecoming. The Garden of Eden went into foreclosure. As punishment for man’s pride, The Almighty instructed him to learn the ritual act known as appraisal. It was an imperfect process full of human flaws. Man’s thankless task was to assign value to all the terra firma God had created and all the infinitely “less firm” blue sky surrounding it. Real estate hasn’t been the same since.

Even though I should be immune, after long years of slogging through the real estate trenches, I’m still awestruck by how many people see a home appraisal as some kind of mystical, magical pronouncement handed down from On High. The inviolate Word of God chiseled onto a stone tablet.

Most appraisers are conservative, unassuming types, working quietly behind the scenes. They show up on our doorsteps. Take a few measurements. Snap some pictures. Drive around the neighborhood in search of “comps.” And then…apparently… when we can’t see them, they don priestly robes and ascend to the nearest mountaintop. They sacrifice a few lambs and fatted calves while grabbing some serious face-time with the infamous Burning Bush of Biblical Renown.

We all seem to be searching for the Holy Grail. Divine certainty where there’s none to be had. What is my house worth? Exactly. Right now. In this very moment. Forever. We desperately want there to be one official source of all-knowing, all-powerful real estate truth that takes the fear and the loathing out of the buying and selling process.

That’s the only time it really counts anyway. If we want to dream about what our properties are worth, we can always stretch back in the lay-z-boy, pull out a calculator, add and subtract numbers and play fantasy real estate with our “equity” – just like we might manage a fantasy baseball team in a friendly “rotisserie” league.

But equity really only means something when we buy or sell. When we venture into the great unwashed marketplace to make our assets liquid. Offering them up to a jury of our peers. Until then, value is like the proverbial tree falling in the forest. If there is no one there to hear it, does it make a sound? If a house isn’t on the market, does it even have a value? Except for the one we imagine it has?

Our desire to know the unknowable, blinds us to many of the nuances and subtleties and shades of grey that are part and parcel of the appraisal game. That unquenchable thirst makes us easy marks for easy answers that unfortunately, are not always accurate.

A question about appraisal that is rarely invoked is: What is the appraisal for? Re-fi? Probate? Asset valuation by his divorce attorney? Asset valuation by her divorce attorney? Or for an actual sale between an actual buyer and an actual seller? For those on the outside, it doesn’t always occur to them that appraisals for different purposes can yield very different results.

Why is it that almost all “purchase” appraisals come in at the exact same price that a buyer and seller have already agreed on? Pure coincidence? Dumb luck? Or because the appraiser already has a copy of the purchase contract in hand before they ever get to the property?

In essence, appraisers have the answer before they even ask the questions. Their real job is to justify the price two principals have agreed upon. They are there to protect a lender who is giving a loan to a stranger. A loan that is secured by a property the lender will never actually see.

If you called three appraisers, paid them each $400 a pop and asked them to value your home, without a purchase contract or any other advanced agenda in mind, the process would euphemistically be called three “blind” appraisals. Kind of like the story of the three blind men touching the elephant, describing what they feel. Most likely you would end up with three different valuations from three very good appraisers. Not the Word of God.

Next week, we’ll talk more about blind appraisals, comparative market analysis, blue sky and some of the God-on-a-Shtick algorithms out there on the web that are touted as the “next best thing” to the Word of God. This side of Eden, of course.

 

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