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Comment by ensignavenger | Hacker News Reader

Yeah, but how accurate are appraisals? Several years ago I was reading about an analysis that found that Zestimates were about as accurate as appraisals are 80%+ of the time.

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If appraisals are not accurate, then what is the definition of 'accurate'? Appraisals are what the lender relies upon to verify the mortgage amount. I also highly doubt that number.

The article uses the actual sales price as the "accurate" number.

As with anything, the 'value' is what a willing and able seller and a willing a able buyer agrees to. An appraiser attempts to determine the most likely price for something (in this case a home) within reasonable amount of marketing time. The appraisal report will usually specify the expected marketing time. I think in most areas this will be 3-6 months, some areas longer and others shorter, depending on the market.

Of course, appraisals effect prices, because most buyers need to finance, and most financiers won't do it without an appraisal that is at least as much as the purchase amount. (That is the "able" part of the willing and able requirement).

Two appraisals performed on the same property at the same time can come back with very different numbers. I have bought two houses in the last 4 years- both had 2 appraisals done, and one the values were almost almost 17% different- a difference greater than most of the "errors" that the articles notes for Zestimate vs sale price. On the other house, the appraisals were came back with nearly identical values, but the first appraisal was done wrong. Still this value (the appraised value from both appraisals) was 16.2% higher than what I paid for the property.

My experiences are just as anecdotal as the articles, though. But I have spoken with real estate professionals all over the country that have the same experiences repeatedly with appraisals.

Sales price is really the only 'accurate' statement of value.

In a way, that's true and false. A house may be worth $500k, and you might get a dozen people to offer $500k, but if someone comes along and wants to buy back her childhood home for $1 million for the sentimental value, isn't the house still only worth $500k? The next buyer will still think the house is only worth $500k.

I suppose that's kind of my point (not the parent.) 'value' is an amorphous term. Ultimately, you have comps, a detailed appraisal, and emotion to guide the purchase. There is no hard number, but the first two get you very close.

The job of the appraiser is to write down a number as large as or larger than the amount to be financed. They know this and they know the number in advance. What they do is not rigorous.

They won't write down a completely insane number. They're a first level filter not a fine detailed filter. "I'm willing to go on record that I found three recent sales in the neighborhood for about $whatever" where whatever is reasonably near what you're financing. One need only go a few miles to find houses a tenth the cost or ten times the cost. If your neighbors house sells for $X and you want a loan for $X they're not going to sweat it, if you are trying for a loan of $X times ten its going to be difficult.

I paid a couple hundred bucks for an ex-general contractor with a thick binder to inspect my house for hours, looking inside the furnace heat exchanger and testing every wall outlet and inspecting the plumbing and roof inside and out and insulation and foundation and everything. That is a detailed analysis of what you're likely to spend on maintenance and upgrades over the next ten years. Its probably more useful than an appraisal but it takes a lot more time and money.

Definitely not true... there are many checks in place to ensure this doesn't happen

http://www.freddiemac.com/loanadvisorsuite/loancollateraladv... http://www.freddiemac.com/loanadvisorsuite/faq/loancollatera...

This doesn't even take into account the process for appraisal management companies (third parties).

You seem to think these industry controls are effective. Maybe they prevent an appraisal from being, say, 10x higher than the recent sale prices on either side, but they don't prevent the equally bad event of a series of 10 sales on the same block each being 10% higher than the previous. Every one of those houses in Las Vegas that turned out to be worthless in 2007 was appraised for at least the sale price the year before. The appraisers in those cases didn't do a damn thing, for example they didn't come out to the house and write down "this neighborhood is in a desert with no access to water where the unemployment rate is 20% and the employed people make minimum wage therefore this cannot be a neighborhood of $850000 houses." They just said "the last house sold for $800000 and this market seems pretty hot so $850000 okey dokey."

Certainly you can influence the appraiser, but the way you state it is nonsense. Their job is also to provide feedback to the buyer, they won't just pull any number you like out of a hat.

Appraisers absolutely do pull numbers out of hats, because appraisers who regularly fail to write down a large enough number will stop getting calls.

That has not been my experience at all, and I'm pretty sure lenders would have a big issue with that if it were as rampant as you say.

What incentive does the lender have? The involved parties are the seller, the buyer, their agents, and the originator of the loan. All of these people are working to close the deal at the negotiated price. The originator of the loan will hold the loan for somewhere between 72 hours and 30 days, so they don't care.

Of course they care; any money they give you over the value of the home is unsecured! They're not going to lend you e.g. 20k @ 3.5% with no collateral. C'mon.

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