W
elcome, new appraisers! As Chief Appraiser for a national AMC, I’m excited to introduce you to the dynamic field of real‑estate appraisal. Mastering how inventory swings—whether tight or plentiful—will set you apart. The market shifts with supply, demand, rates, and confidence, each change demanding sharp judgment, deep knowledge, and flexibility.
### Shortage: The Tight‑Market Challenge
When inventory dips, demand outpaces supply, driving prices up, sparking multiple‑offer battles, and shortening listing periods. For appraisers, this creates several hurdles:
- **Scarce Comparables**: Fewer recent sales mean you may need to rely on older or less‑similar comps, increasing adjustments and lender scrutiny.
- **Contract‑Price Pressure**: Buyers may pay well above list, forcing you to verify that the price reflects true market support rather than emotion.
- **Rapid Market Shifts**: A sale 60 days ago may no longer mirror current conditions; you must analyze listings, pending sales, and active inventory to justify your value.
### Surplus: The Buyer’s Market Risks
An excess of homes tilts the scale toward buyers, often lowering prices, extending marketing times, and prompting seller concessions. While more data seems helpful, it introduces its own complications:
- **Declining Values**: Sellers cut prices to attract buyers; you must detect downward trends and adjust comps accordingly to avoid overvaluation.
- **Seller Incentives**: Closing‑cost help, repairs, or personal property must be quantified and reflected in the appraisal, requiring a deep dive into contract terms and seller motives.
- **Too Many Comparables**: With many similar properties at varied prices, selecting the most relevant and recent comps—considering condition, upgrades, and exact location—is critical to avoid mispricing.
### Time Adjustments: Your Essential Tool
Time adjustments are vital in fluctuating markets. They capture how values evolve over time, ensuring your appraisal mirrors the current market. Follow these steps:
1. **Track Trends**: Monitor property value movements to decide if and how much adjustment is needed.
2. **Document Rationale**: Clearly explain each adjustment in your report—showing your work is now more important than ever.
3. **Use Reliable Data**: Leverage market reports, indices, and MLS‑integrated software to support your adjustments.
4. **Don’t Skip Them**: Even a “no adjustment” decision requires justification and documentation.
### GSE Expectations
Fannie Mae and Freddie Mac demand thorough trend analysis and appropriate time adjustments when values rise or fall. If local data is scarce, you may use the FHFA House Price Index, but you must explain its relevance to the specific market activity. All adjustments, sources, and methods must be fully documented to withstand scrutiny.
### Adaptability: The Core Competence
Whether the market is tight or abundant, your role is to deliver a credible, defensible opinion of value. This requires technical mastery, real‑time market awareness, GSE compliance, and sound professional judgment. As cycles shift, your ability to adapt and support every conclusion remains the hallmark of excellence.
We at AXIS are a learning community ready to support you. Reach out with questions or guidance needs at [email protected].
Jim Jenkins
Chief Appraiser
AXIS Appraisal Management Solutions
