# Appraisal values of homesteads?



## Dave Edmunds (2 mo ago)

One of the problems with selling a homestead/micro-farm is the appraisal value.

Let's say you buy a beat-up house for $50K, fix it up and turn it into a working micro-farm, with a large garden, fruit orchard, chicken run and goat pen.

You now have young couples lined up to buy their dream farm, complete with all modern amenities (including high-speed internet access so they can work from home).

The problem is, even if people are willing to pay you $150K or more, a lender might only appraise the property for $90K, based on the local comps. The bank will basically look at number of beds/bath, square footage, zip code and some finishes. They might factor in some of your exterior improvements, but won't appraise the marketing appeal/demand of a micro-farm.

That means anyone willing to pay you $150K is going to have to come up with the extra $60K in cash.

Does anyone have any experience with trying to sell a WORKING/FINISHED homestead/micro-farm and what did you run into with the lender appraisal?


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## po boy (Jul 12, 2010)

Any real property loan will require comparable sales. Marketing appeal/demand on any type of property is included in the SOLD comparable comps.


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## DisasterCupcake (Jan 3, 2015)

We had zero problem getting our farm property appraised for the value of the house, barn, outbuildings and amenities like power and water at the barn, plus the arable land value and permanent fencing. Especially if it's insured for the real value


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## Evons hubby (Oct 3, 2005)

Oh my, yet another poor soul who has no concept of appraisers, what their purpose is or how they accomplish their assigned task.I was in the real estate business and trust me on this you’re not alone! Let’s cut to the chase… bob and Jane want to buy their lil dream property in the country… the seller wants $155k
. Bob and Jane head for the bank. The banker looks at their credit history, income, outstanding debt and all the other stuff to see if bob and Jane can afford the payments. If they can, good news, the banker contacts the appraiser and tells him to put on his white hat and appraise the property for enough to qualify the loan. If not the bank will contact the very same appraiser, tell him to put on his black hat and appraise the property low enough to kill the loan. The appraiser then fills up a file folder of comps of recent sales, make long winded (comparisons) of value and either kill the deal or make it happen. No black marks on the banker…. Government rules ya know. Bob and sally can’t complain, it wasnt their fault either!


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## po boy (Jul 12, 2010)

Evons hubby said:


> Oh my, yet another poor soul who has no concept of appraisers, what their purpose is or how they accomplish their assigned task.I was in the real estate business and trust me on this you’re not alone! Let’s cut to the chase… bob and Jane want to buy their lil dream property in the country… the seller wants $155k
> . Bob and Jane head for the bank. The banker looks at their credit history, income, outstanding debt and all the other stuff to see if bob and Jane can afford the payments. If they can, good news, the banker contacts the appraiser and tells him to put on his white hat and appraise the property for enough to qualify the loan. If not the bank will contact the very same appraiser, tell him to put on his black hat and appraise the property low enough to kill the loan. The appraiser then fills up a file folder of comps of recent sales, make long winded (comparisons) of value and either kill the deal or make it happen. No black marks on the banker…. Government rules ya know. Bob and sally can’t complain, it wasnt their fault either!


Any lender that orders an appraisal on a TD is a fool!


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## Dave Edmunds (2 mo ago)

Evons hubby said:


> Oh my, yet another poor soul who has no concept of appraisers, what their purpose is or how they accomplish their assigned task.I was in the real estate business and trust me on this you’re not alone! Let’s cut to the chase… bob and Jane want to buy their lil dream property in the country… the seller wants $155k
> . Bob and Jane head for the bank. The banker looks at their credit history, income, outstanding debt and all the other stuff to see if bob and Jane can afford the payments. If they can, good news, the banker contacts the appraiser and tells him to put on his white hat and appraise the property for enough to qualify the loan. If not the bank will contact the very same appraiser, tell him to put on his black hat and appraise the property low enough to kill the loan. The appraiser then fills up a file folder of comps of recent sales, make long winded (comparisons) of value and either kill the deal or make it happen. No black marks on the banker…. Government rules ya know. Bob and sally can’t complain, it wasnt their fault either!


Oh my, yet another realtor who can't read. I know EXACTLY how appraisers work. My question was asking anyone if they had sold a property that appraised much lower than what people were willing to pay.

Enjoy admiring yourself in the mirror some more.


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## Evons hubby (Oct 3, 2005)

Dave Edmunds said:


> Oh my, yet another realtor who can't read. I know EXACTLY how appraisers work. My question was asking anyone if they had sold a property that appraised much lower than what people were willing to pay.
> 
> Enjoy admiring yourself in the mirror some more.


Yes I did. Numerous times as a matter of fact.


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## Evons hubby (Oct 3, 2005)

po boy said:


> Any lender that orders an appraisal on a TD is a fool!


Perhaps, but they control the money.


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## haypoint (Oct 4, 2006)

I've never been happy with appraisals. Just too much personal opinions go into it. I had a home, barn on 160 acres. My neighbor had a vacant house, vacant barn on 80 acres and 80 acres of bare land. She valued the 80 acres of bare land as higher in value than the 80 acres with the house and barn. She believed an old farmhouse detracted from the property. 
I built a barn, 100' by 100'. The Appraiser set the value of the new barn at zero, since she felt farming in the area was not profitable. 
A garden, orchard, livestock fencing and livestock housing is of no value if the Appraiser has no such interests. 
But beyond the Appraiser, Banks can ruin dreams. A woman inherited her Uncle's farm. 40 acres of fields, 40 acres of hardwoods, two bedroom story and a half with full basement. Plus a barn and shop. The house was built in the 1930s and well maintained, but not updated. She lived in Georgia and wanted rid of it as quick as she could. The 80 acres joined my property. She wanted $30,000. I had $10,000 to put down and I asked the Bank for $20,000. The Bank refused. They said they'd loan me $100,000 on a newer place, but didn't want to loan money on an older place.


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## Dave Edmunds (2 mo ago)

In fairness to banks and other mortgage lenders, their goal is to make a profit. That's why they use math to value properties (comps). Appraisers have to give detailed reports to their clients (the lenders) explaining why they denied the lender an opportunity to make a loan and make interest (profit). Appraisals can be challenged, and if lenders keep overturning an appraiser's reports, that appraiser loses those clients.

The banks want to know two basic things: can this borrower make the payments, and if they can't can we sell this place quickly at this amount?

Because credit unions are non-profits, they are the smart place to start looking for a loan.

I have no problem with lenders not valuing my property as a mini-farm that is attractive to people looking for this lifestyle. I was just curious if anyone had experience with or knowledge of farm flips and the financing aspects.


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## Dutchie (Mar 14, 2003)

Evons hubby said:


> Oh my, yet another poor soul who has no concept of appraisers, what their purpose is or how they accomplish their assigned task.I was in the real estate business and trust me on this you’re not alone! Let’s cut to the chase… bob and Jane want to buy their lil dream property in the country… the seller wants $155k
> . Bob and Jane head for the bank. The banker looks at their credit history, income, outstanding debt and all the other stuff to see if bob and Jane can afford the payments. If they can, good news, the banker contacts the appraiser and tells him to put on his white hat and appraise the property for enough to qualify the loan. If not the bank will contact the very same appraiser, tell him to put on his black hat and appraise the property low enough to kill the loan. The appraiser then fills up a file folder of comps of recent sales, make long winded (comparisons) of value and either kill the deal or make it happen. No black marks on the banker…. Government rules ya know. Bob and sally can’t complain, it wasnt their fault either!


An appraiser does not value properties according to the banks wishes. An appraiser values a property according to the market.


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## Evons hubby (Oct 3, 2005)

Dutchie said:


> An appraiser does not value properties according to the banks wishes. An appraiser values a property according to the market.


and you base this on what?


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## po boy (Jul 12, 2010)

Evons hubby said:


> and you base this on what?


My company ordered a few hundred appraisals and none were based on whether or not the loan was approved or the value we needed to make a deal work. The appraiser and lender could lose their license.


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## Evons hubby (Oct 3, 2005)

Dave Edmunds said:


> In fairness to banks and other mortgage lenders, their goal is to make a profit. That's why they use math to value properties (comps). Appraisers have to give detailed reports to their clients (the lenders) explaining why they denied the lender an opportunity to make a loan and make interest (profit). Appraisals can be challenged, and if lenders keep overturning an appraiser's reports, that appraiser loses those clients.
> 
> The banks want to know two basic things: can this borrower make the payments, and if they can't can we sell this place quickly at this amount?
> 
> ...


At risk of sounding like a know it all I attempted to explain the basics (of appraising) based upon my years as a full time real estate agent and my experience with selling primarily hobby farms, homesteads, rural properties in general. We dealt primarily with local “hometown” banks who very often did not want to finance the property due to credit issues. Due to state and fed laws in place at that time the appraiser became their legitimate way out. But enough about appraisals.

We flipped hundreds of these properties despite the banks refusal to finance. At that time we had an outfit called PCA… production credit association that made loans to farmers for operating expenses. I managed to get a few small farms financed through them. More often we could get the owner to finance, other times we would purchase said property and owner finance to the buyers ourselves. 

every now and then when a real bargain came by we’d just buy it and resell to whomever wanted it. My point here is…… be creative!


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## Dave Edmunds (2 mo ago)

Evons hubby said:


> and you base this on what?


The law.


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## Alice In TX/MO (May 10, 2002)

Amusing. There are some ethical folks out there, but in ANY group of human beings, a percentage will not be compliant with the law. We have encountered them in the real estate and title company businesses.


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## Dave Edmunds (2 mo ago)

Alice In TX/MO said:


> Amusing. There are some ethical folks out there, but in ANY group of human beings, a percentage will not be compliant with the law. We have encountered them in the real estate and title company businesses.


Yes, we all know some people are dishonest. But advising people on how micro-farm appraisals work based on the poor ethics of some isn't really helpful.


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## Alice In TX/MO (May 10, 2002)

Stating life experience is what old and wise people do. Some cultures value advise from elders. The North American culture doesn’t emphasize respect.

Better to be advised of pitfalls than to trust blindly.


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## Dave Edmunds (2 mo ago)

Saying that "some people are bad" is not advice. It's obvious. Multiple posters here have said that based on their experiences, you should obviously expect most appraisers and banks to be corrupt. Because...I said so. That's not helpful. That's not wisdom. That's not a lack of respect - in fact, it's a show of disrespect from the posters who posted to air their personal anger, not to help others.


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## Wanda (Dec 19, 2002)

Evons hubby said:


> and you base this on what?


 She has been in the business for a number of years.


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## Alice In TX/MO (May 10, 2002)

Thank you for sharing your thoughts, Dave. 

What you find helpful may be different from what others find helpful.


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## JosephSeiss (May 3, 2017)

Dave Edmunds said:


> Saying that "some people are bad" is not advice. It's obvious. Multiple posters here have said that based on their experiences, you should obviously expect most appraisers and banks to be corrupt. Because...I said so. That's not helpful. That's not wisdom. That's not a lack of respect - in fact, it's a show of disrespect from the posters who posted to air their personal anger, not to help others.


It wasn’t just a few. You’re being naive. We lost everything in 2011 because of the tag-team of the government/bank industrial complex. Appraisers are as much to blame as anybody.









The appraisal bubble


Despite new rules, appraisers say pressure remains By Joe Eaton June 17, 2009 Rebuked appraisers reborn as real estate agents By Joe Eaton July 21, 2009 In 2004, years before plummeting real estate values turned Fort Myers, Florida, into a top five foreclosure capital, appraiser Mike Tipton...




publicintegrity.org













You're All Wrong. Blame The APPRAISERS For The Mortgage Crisis


They started a financial orgy.




www.businessinsider.com


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## robin416 (Dec 29, 2019)

OK, I"ve been following this conversation. I have yet to see any one address the issue of the owner wanting X when in reality the property is probably worth x. If it is over valued by the owner no amount of good or bad appraisers is going to value the property at the owner's fantasy value.


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## Dave Edmunds (2 mo ago)

robin416 said:


> OK, I"ve been following this conversation. I have yet to see any one address the issue of the owner wanting X when in reality the property is probably worth x. If it is over valued by the owner no amount of good or bad appraisers is going to value the property at the owner's fantasy value.


As far as a property being overvalued by the owner or what it's "worth", there's the bank/appraisal value and then the market value. Where the rub comes in is when lenders (properly and correctly) appraise a property at $100K because of the comps, but buyers are willing to pay $150K because they want a ready-to-go farm/homestead (they don't want to spend the time setting up their own). Even with non-farms, people have gotten into bidding wars and ended up paying more than the appraised value.

THAT'S what I was curious about. If people are lined up to pay you $150K for a farm/homestead that only appraises as a $100K comp (even if it doesn't make financial sense), that can cause hiccups.

I was just wondering if anyone had experience selling a micro-farm/homestead that appraised for a comp value that was less than the demand/market value.


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## robin416 (Dec 29, 2019)

At 50K over appraisal a potential purchaser would have to think long and hard about handing over that much cash. They have to consider whether or when the property would finally come up in value to the 50K overage.

A lesser spread like 10 or 15K would more than likely have them considering more seriously paying the overage out of pocket. Chances are the property will gain in value enough to warrant spending the extra.


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## Alice In TX/MO (May 10, 2002)

1. Realtor had seller change dates on a contract. 
2. Title company made up random numbers for property tax computation on the closing statement. 
3. Title company and realtor colluded to misrepresent the existence of an easement.
4. Title company denies responsibility for errors. 
5. Title company didn’t research the history of the property in a timely manner.
6. Title company can’t seem to send checks to the correct address in a timely manner. 
7. Title company wants me to solve problems they created.


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## Dave Edmunds (2 mo ago)

robin416 said:


> At 50K over appraisal a potential purchaser would have to think long and hard about handing over that much cash. They have to consider whether or when the property would finally come up in value to the 50K overage.
> 
> A lesser spread like 10 or 15K would more than likely have them considering more seriously paying the overage out of pocket. Chances are the property will gain in value enough to warrant spending the extra.





Alice In TX/MO said:


> 1. Realtor had seller change dates on a contract.
> 2. Title company made up random numbers for property tax computation on the closing statement.
> 3. Title company and realtor colluded to misrepresent the existence of an easement.
> 4. Title company denies responsibility for errors.
> ...


What does airing your personal situation have to do with this thread? How is it helpful to people wanting to learn about this situation in general (not your story)?

BTW, since so much illegal activity occurred (the realtor, seller and title company all colluded against you), can you share the court case with us?


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## Alice In TX/MO (May 10, 2002)

First you rag on folks not being specific, now you jump my case about being specific. 

Kiss my grits.


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## GTX63 (Dec 13, 2016)

Dave Edmunds said:


> THAT'S what I was curious about. If people are lined up to pay you $150K for a farm/homestead that only appraises as a $100K comp (even if it doesn't make financial sense), that can cause hiccups.
> 
> I was just wondering if anyone had experience selling a micro-farm/homestead that appraised for a comp value that was less than the demand/market value.


If people are lined up to pay above market prices, then the market adjusts and the undervaluation is temporary.
Creative financing, owner carry backs, CODs, secondary lenders, etc are methods for getting what you think your property is worth.


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## GTX63 (Dec 13, 2016)

robin416 said:


> At 50K over appraisal a potential purchaser would have to think long and hard about handing over that much cash. They have to consider whether or when the property would finally come up in value to the 50K overage.
> 
> A lesser spread like 10 or 15K would more than likely have them considering more seriously paying the overage out of pocket. Chances are the property will gain in value enough to warrant spending the extra.


People fleeing states like California and New York, for example, may have the cash to overpay for property in states with lower costs of living. 500k buys a tract house on a slab and a 1/4 acre in Oregon, but may get you 100 acres and a farm in Georgia. Retirees and those with capital gains money can bypass the banks and set their own values, regardless of the local market.


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## Danaus29 (Sep 12, 2005)

Dave Edmunds said:


> What does airing your personal situation have to do with this thread? How is it helpful to people wanting to learn about this situation in general (not your story)?


Thread drift happens.

Maybe you should ask your questions in a real estate forum where thread drift is discouraged.


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## Dave Edmunds (2 mo ago)

Alice In TX/MO said:


> First you rag on folks not being specific, now you jump my case about being specific.
> 
> Kiss my grits.


Not being specific to the question and trying to hijack the thread for personal reasons. Sorry you're so lonely and angry.


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## Alice In TX/MO (May 10, 2002)

ROFLMAO Not angry at anything. DEFINATELY not lonely. 

You








are amusing.


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## Danaus29 (Sep 12, 2005)

Look! A squirrel!


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## Dutchie (Mar 14, 2003)

There is so much mis-information about appraisals and appraisers in the this thread it blowd my mind. Just FYY, I was a Certified Appraiser for close to 15 years and currently licensed as a Realtor and MLO. So I have a clue about Federal regulations pertaining to these industries.

An appraiser is, by law, an independent, disinterested third party. Anybody trying to influence an appraiser as far as value is concerned is breaking Federal law and is sanctioned severely. Unless you have knowledge of the real estate industry you have no idea the Federal laws and guidelines all players have to abide by. That includes Title companies.


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## GTX63 (Dec 13, 2016)

I have knowledge of the real estate industry. I have friends and relatives who are appraisers and have long term working relationships with others. 1st hand accounts and experiences aren't misinformation.
No industry is immune from ineptness and corruption.


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## Alice In TX/MO (May 10, 2002)

Exactly. Just like the priesthood, law enforcement, and education, there are incompetent and law flouting folks in ANY organization.


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## Alice In TX/MO (May 10, 2002)

Three Title Agent Mistakes That Led To Underwriter Lawsuits


When writing title policies, a simple error in procedure or recorded information can lead to a lawsuit from your underwriter. Here are three cases that...




www.proplogix.com


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## Evons hubby (Oct 3, 2005)

Alice In TX/MO said:


> Exactly. Just like the priesthood, law enforcement, and education, there are incompetent and law flouting folks in ANY organization.


The trick is to remain honest while dealing with the less than honest.


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## boatswain2PA (Feb 13, 2020)

haypoint said:


> I've never been happy with appraisals. Just too much personal opinions go into it. I had a home, barn on 160 acres. My neighbor had a vacant house, vacant barn on 80 acres and 80 acres of bare land. She valued the 80 acres of bare land as higher in value than the 80 acres with the house and barn. She believed an old farmhouse detracted from the property.
> I built a barn, 100' by 100'. The Appraiser set the value of the new barn at zero, since she felt farming in the area was not profitable.
> A garden, orchard, livestock fencing and livestock housing is of no value if the Appraiser has no such interests.
> But beyond the Appraiser, Banks can ruin dreams. A woman inherited her Uncle's farm. 40 acres of fields, 40 acres of hardwoods, two bedroom story and a half with full basement. Plus a barn and shop. The house was built in the 1930s and well maintained, but not updated. She lived in Georgia and wanted rid of it as quick as she could. The 80 acres joined my property. She wanted $30,000. I had $10,000 to put down and I asked the Bank for $20,000. The Bank refused. They said they'd loan me $100,000 on a newer place, but didn't want to loan money on an older place.


Funny thing...every property (except for bare land) I've purchased has had the appraisal to be the EXACT price that I was buying the property for. When I found a great deal on a house and knew I was going to have instant 50% equity in the house....the appraisal was for the purchase price. When I needed a note to build our forever home on our dream property, the appraisal was for exactly the amount I needed to build the house (despite the value of the home, improvements, and land being three times that). And when I've bought houses at market value, the appraisals have been for, once again, EXACTLY the purchase price.

It's like they had a number they had to hit or something (again, except when I bought ag land).

I personally think the appraisal business is as much of a leech on the economy as the title insurance companies are. It's just another $500-$1K one has to spend to get a damn mortgage.



Dave Edmunds said:


> have no problem with lenders not valuing my property as a mini-farm that is attractive to people looking for this lifestyle. I was just curious if anyone had experience with or knowledge of farm flips and the financing aspects.


I have sold a farm/mini-farm at well above market value, and a house at well above market value. Both times I played banker though. To accept that risk (and the farm/mini-farm came back to me TWICE before I was able to sell it in traditional manner) I required large down payments and much higher than average interest rates.

I also bought ag land at well above appraised value because, to me, the land was worth much more than agricultural land. We built our forever house on it and will enjoy it for the rest of our lives. I was able to buy it for so much OVER the appraised value because we put 50% down, so the note for the land was about 70% of the appraised value of the land, thus the bank had little risk making the note.



Dutchie said:


> An appraiser does not value properties according to the banks wishes. An appraiser values a property according to the market.


That's how it is supposed to work. Funny thing though, it usually seems to work a bit differently.



Dave Edmunds said:


> The law.


One of the keys to getting ahead in business is how to find legally acceptable ways around "the law". 


Alice In TX/MO said:


> 1. Realtor had seller change dates on a contract.
> 2. Title company made up random numbers for property tax computation on the closing statement.
> 3. Title company and realtor colluded to misrepresent the existence of an easement.
> 4. Title company denies responsibility for errors.
> ...


I don't think I have ever had any title company get it right the first time around.


GTX63 said:


> Creative financing, owner carry backs, CODs, secondary lenders, etc are methods for getting what you think your property is worth.


This is the answer to the OP's question



GTX63 said:


> People fleeing states like California and New York, for example, may have the cash to overpay for property in states with lower costs of living. 500k buys a tract house on a slab and a 1/4 acre in Oregon, but may get you 100 acres and a farm in Georgia. Retirees and those with capital gains money can bypass the banks and set their own values, regardless of the local market.


Of the four houses that can be seen from my house, two of them are occupied by such people. Fortunately they seem to be purposely fleeing the leftist chaos and don't have intentions of bringing that chaos here.



Dave Edmunds said:


> Not being specific to the question and trying to hijack the thread for personal reasons. Sorry you're so lonely and angry.


You came to a DISCUSSION BOARD with a question, then get this kind of attitude with people who are trying to answer your question and have a discussion about the topic. Not a recommended way to get through life.



Dutchie said:


> An appraiser is, by law, an independent, disinterested third party. Anybody trying to influence an appraiser as far as value is concerned is breaking Federal law and is sanctioned severely. Unless you have knowledge of the real estate industry you have no idea the Federal laws and guidelines all players have to abide by. That includes Title companies.


And yet independent, disinterested third parties require referrals from lending institutions for their livelihood....

I'm not saying you personally were a lazy/dishonest/full of $hit appraiser. But that is my opinion of most of them that I have met and dealt with.


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## Dutchie (Mar 14, 2003)

> Dutchie said:
> An appraiser does not value properties according to the banks wishes. An appraiser values a property according to the market.


That's how it is supposed to work. Funny thing though, it usually seems to work a bit differently. 


I have been a certified appraiser since 2007. While I know there are appraisers out there who are less than ethical, generally speaking appriasers are not willing to risk their license.


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## Evons hubby (Oct 3, 2005)

Dutchie said:


> That's how it is supposed to work. Funny thing though, it usually seems to work a bit differently.
> 
> 
> I have been a certified appraiser since 2007. While I know there are appraisers out there who are less than ethical, generally speaking appriasers are not willing to risk their license.


No need to risk ones license. Just find appropriate comps and write an honest appraisal. The key seems to be in which comps are used.


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