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58 During the real estate crash beginning in 2007, there were accusations of collusion between appraisers, mortgage brokers, and real estate brokers, resulting in some properties being sold at a low price and then within a few hours or days being resold at a much higher price. ese actions resulted in many people questioning the veracity of appraisals offered by some appraisal firms. With today's new rules for the mortgage industry, appraisers are additionally challenged to provide valuations that accurately reflect the true value of a property based on the purpose for which the valuation is to be used. ey must determine if the appraisal will help to determine foreclosure value, fair market value, distressed sale value, or investment value. Another consideration is realizing that value is not always the same as price. By utilizing advanced technologies and incorporating strategies that will propel the industry forward, valuations professionals are finding their footing in this new housing environment. VALUE DEPENDS ON PURPOSE Determining accurate property values depends on the client and the intended use of the valuation, explained Jeff Del Rey, director of strategic partnerships at PCV Murcor in Pomona, California. For example, the information an investor requires may be quite different from that required by a bank trying to sell a foreclosed property. For investors looking for a quick estimate of value that's inexpensive, an automated valuation model (AVM) or the seller's broker price opinion (BPO) might serve their purpose, Del Rey said. On the other hand, someone who is trying to manage a property for loss mitigation, a short sale, or as an REO, will want to know what a property is worth today or in 90 to 120 days. To explain the differences in various methods of determining value, Del Rey said, "A BPO is actually asking a different question than an appraisal, and some people don't understand that. ey expect that the values derived from each of these methods will be the same, but these methods are not the same because the question each asks is very different." In a BPO, he explained, a broker is asked for an estimated sales price of a property. "On the other hand, an appraisal asks for a market value at a given point in time. ese are two different questions and may produce different results, with neither method being necessarily better than the other. It all depends on the purpose for which they are going to use the valuation," he said. In some instances, some people will order both types of valuations. "ey will get two values—a BPO from a broker and an appraisal," he explained. "en they can reconcile the differences. When we deal in reconciliations, we analyze the strengths and weaknesses of both and can then give our opinion of which one is the most accurate, or, in some instances, that neither of them is correct." Del Rey, who has been an appraiser for more than 20 years, said differences in value can often be attributed to how the appraiser and broker approach the condition of the property. "A broker may put more value on repairs than an appraiser or vice versa. When we reconcile to determine which is right, the one that has a better assessment of the condition and the cost of bringing it into a marketable and saleable condition is often the one that is more credible," he explained. According to Del Rey, the major disadvantage to AVMs is they do not take into consideration the condition of the property. In contrast, some people will order a property condition report prepared by a broker and combine it with the AVM, which gives them a low-cost alternative to a BPO or appraisal. "is is a product we offer because of market demand and the fact that people recognize the inherent weaknesses of the AVM," he added. "Just as valuation models vary, so do appraisers and brokers," Del Rey stated. "ere are varying degrees of expertise from appraisers and brokers in every market, but it's difficult to say that one is C O V E R S T O R Y / S A N D R A L A N E "That's the best way to determine value, not just using an AVM or an appraiser's opinion without having data to support those findings. A combination of both would be best." –Jordan Petkovski, chief appraiser for TSI Appraisal and Chairman of the National Appraisal Congress

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