David Saks: March 2008

David Saks - Real Estate Broker - The Real Estate Mart of Tennessee, Inc. - 4040 North Watkins-Suite #4 - Memphis, Tennessee 38127 - Phone (901) 357-4663

The Saks Equation : Part I

 

                                         saks equation

I appreciate any discussion of Broker Price Opinion and how it may affect opinion of value as opposed or in colligation with an appraisal. I greatly value your thoughts.

Before a property is sold at foreclosure, auction or tax sale I don't know whether or not an appraisal would be necessary in most cases. Please correct me if there are exceptions.

Perhaps when financing a short sale the appraiser would step up to the plate because an appraisal, performed by a licensed appraiser, is an opinion of value for a subject property utilizing a concept of market which may rely on locality and other factors and principles which determine valuation such as supply and demand, competition, change, surplus inventory, usage and other factors including balance which examines the nature of the equalization of factors which either oppose each other or move together.

Since the appraisers judgement and experience are relied upon in the process, an appraisal is considered the concretized opinion for the lender. And since loan to value is in question, if a REALTOR® is performing a broker price opinion I do not believe that a REALTOR® can use the term "value" in the opinion because value is not being established, only comparative sales data that may support an "opinion" of appraised value. I know that this is a grey area for our legislators and ethics committees. I believe that the expression used in the opinion, either BPO or appraisal, of which one must consider most important to the process, is 'value'.

Since there are so many varieties and types of value, and since each type may possess an assortment of subclassifications, appraisals undertaken for the lender appear to represent a particularly delineated value represented accurately and precisely. I'm not sure whether or not this may be allowed by an agent / REALTOR® performing a BPO because of a more relaxed assessment of market value. It might be said that an appraiser is establishing absolute market value while the broker price opinion establishes generalized market value.

Perhaps my unrefined algebraic notation (The Saks Equation) suggests that :
 
{amv} + {bpo} / 2=avo or av
or
(appraised market value + broker price opinion divided by 2=absolute value opinion or absolute value)

This way, the lenders would have to listen to REALTORS® before they make a decision based on any opinion.

Perhaps financing legislation will be enacted one day requiring lenders to review the BPO if an REO, or other property, is listed by a REALTOR® or any real estate brokerage. I hope that someday it will and that many new outstanding and rewarding opportunities for members of our profession will become available so that we may add new a level of professionalism to the many great services we already provide.

Part II will provide an example.




David Saks



Time&Temp Memphis

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