appraised Values

[SHANE704]

(Holding white flag) Im an appraiser, dont shoot!

Matador is correct. Things like new floor covering and new roof dont add value. Reasoning is that every house has these items. If the item is in bad enough shape or damaged then the "cost to cure" the problem is deducted from the value. Getting a new roof only negates this deduction. but if the roof you had wasnt damaged and you changed to a metal roof or if the floor covering (example, carpet) was fine but you wanted hardwood, then there is no value difference.

Our golden rule is "Cost doesnt equal value". Its all based off of what other houses like your are selling for.

Same thing, with a shop or garage...Doesnt matter what it cost...Its a matter of how much value a shop or storage building added to a house that has sold. Usually 1/4 to 1/3 of what it cost...a $25,000 swimming pool, the day its finished, may get you $8000 on an appraisal.

I will also agree that the appraisal process is not an exact science...and it is based off of historical data.

This is not my line of business so i take your word for it.............
but for some reason i cant see how replacing formica counters with granite and linolium floors with real hardwood doesnt change the value. I know it boils down to what someone is willing to pay, but chit Id be willing to pay more for those changes simply to the fact that I can move in and not have to do them myself. And if i was a seller, I wouldnt sell it if didnt increase value.

Those changes would effect value. The 2 huge key words in the appraisal process is "quality" and "comparable". changes like those would up the quality and if enough changes in quality are made, then higher quality comparable sales are needed.

[blgros1]

10-4,,,,,,,,,,,that makes sense

[SHANE704]

(Holding white flag) Im an appraiser, dont shoot!

Matador is correct. Things like new floor covering and new roof dont add value. Reasoning is that every house has these items. If the item is in bad enough shape or damaged then the "cost to cure" the problem is deducted from the value. Getting a new roof only negates this deduction. but if the roof you had wasnt damaged and you changed to a metal roof or if the floor covering (example, carpet) was fine but you wanted hardwood, then there is no value difference.

Our golden rule is "Cost doesnt equal value". Its all based off of what other houses like your are selling for.

Same thing, with a shop or garage...Doesnt matter what it cost...Its a matter of how much value a shop or storage building added to a house that has sold. Usually 1/4 to 1/3 of what it cost...a $25,000 swimming pool, the day its finished, may get you $8000 on an appraisal.

I will also agree that the appraisal process is not an exact science...and it is based off of historical data.

Since you are an appraiser, let me Ax a Qwerstion. Do appraisers usually look and bank foreclosure sales in their appraisal process? For example, if a house in my neighborhood is purchased off a foreclosure list at a significantly lower cost than usual, will that be factored into a new appraisal?

Not normally...if its a single sale in the neighborhood that was foreclosed and is a short sale then no. But if your neighborhood has 3 or 4 foreclosures in it, then we will have to take a closer look....

[TODO]

Ster, they are supposed to use Arm's length sales. That basically means a sale between a knowledgable buyer and a willing seller. Bank sales, short sells, etc. are in distress and thus not arms length. If i had my house appraised and a foreclosure sale was a comp, i would call foul. However, some of these really rural appraisers may have to use them just because theres nothing else out there. In that case they should be adjusted upward for the conditions of sale.

[SHANE704]

Ster, they are supposed to use Arm's length sales. That basically means a sale between a knowledgable buyer and a willing seller. Bank sales, short sells, etc. are in distress and thus not arms length. If i had my house appraised and a foreclosure sale was a comp, i would call foul. However, some of these really rural appraisers may have to use them just because theres nothing else out there. In that case they should be adjusted upward for the conditions of sale.

well said

[wingman21]

I am not an appraiser either, and recently asked many of these same questions during a purchase. It blows my mind that a bank thinks its a good idea to disclose the purchase price before the appraisal comes back, but just look at all the other great decisions banks have made in the last 5 years.

[swamprooter]

increase heated/cool space = increase appraisal

[SHANE704]

just an fyi for you guys that are thinking about building or adding on, it takes 3 things for an area to be considered heated and cooled living area.

1) Heated and Cooled
2) Accessible from inside the main living area
3) Finished in similar quality to the rest of the house

[BUCKWHEAT]

I feel your pain. I had an appraisal done on my house several months back and the fellow had to be smoking crack. He appraised my house at roughly $61/sf and three months later my next door neighbor sold his house for just over $98/sf. His house was only on the market for a month and he had several offers all in the the ballpark of the one he took. My house has been completely renovated and my neighbor's has not been renovated. They are roughly the same size, within 100sf. Like in all professions, there are some folks who don't know their booty from their elbow.

[Smoke68]

just an fyi for you guys that are thinking about building or adding on, it takes 3 things for an area to be considered heated and cooled living area.

1) Heated and Cooled
2) Accessible from inside the main living area
3) Finished in similar quality to the rest of the house

Would this pass?

[riverat]

I am not an appraiser either, and recently asked many of these same questions during a purchase. It blows my mind that a bank thinks its a good idea to disclose the purchase price before the appraisal comes back, but just look at all the other great decisions banks have made in the last 5 years.

You "sort of" are thinking right. These banks you are talking about that have ruined it for all banks were mainly on the west coast, arizona, florida etc, thus ruining the appraisal policy that all banks must follow now.

The "pool" comment is not on the bank but on banking reform that was passed and most all banks are required to do it this way.

[Odis]

Shane704 and TODO are exactly right! I too am an appraiser although I don't do residential work so I cannot speak with authority to that kind but have been an appraiser in excess of 20 years. I've scanned these posts and do have a few comments.

First, there is a type of appraisal known in the appraisal field as a "Drive By". Generally, from what I understand the client (the lender, NOT THE BORROWER) doesn't want to pay for a complete observation of the property. I've been asked many times to do these on commercial properties and don't respond; never do them and will not do them because I don't think they are fair to all parties (borrower and lender). I think the client is trying to make a loan and asking the appraiser is there is anything blatantly wrong with the property that is obvious from an exterior observation. My thoughts are the client (the lender) has a number in mind they are trying to lend. They want to know if the property's value AT LEAST represents a number that corresponds to their loan to value ratio (different based upon their lenging criteria, lender by lender). Again, I don't do residential work and really can't speak with much authority on it!

As far as telling the appraiser the sales price or anything prior to doing the appraisal, THAT'S A FEDERAL LAW! FIRREA was established (I think in 1989) after the Savings & Loan Crisis. FIRREA required States to implement Appraisal Licensing but also required appraisers to prepare appraisal reports in compliance with the Uniform Standards of Professional Appraisal Practice (USPAP). As part of USPAP, at least for commercial properties, the apprasier is to disclose and ANALYZE any prior sales within the past three (3) years, I believe it is a shorter period for residential properties (less than 3 years). What this means is that the appraiser is to state, within the appraisal, the current price or if it is listed, its sale's price and provide some analysis of it (Basically I view that as an opportunity in the appraisal to say whether or not the current sales price is supported by sales of similar properties). Say a property sold for $100,000, 6 months ago, the buyer spent $20,000 on it, this is an opportunity for an appraiser to say whether or not borrower's investment in the property is supported by sales activity. In many instances I've asked borrowers the sales price and they refused to verify it, I'll state that in the appraisal, they must have something to hide.

Next, there is a term known as "geographical competence". Part of USPAP addresses this, if an appraiser is not "geographically competent" he/she should not accept the assignment unless they are willing to become 'geographically competent" to prepare the appraisal. This is an issue dealt with by all appraisers although most appraisers will not admit to being incompetent geographically.

I also saw something in the post about cost not equaling value. Have you ever tried to drive a car off the lot where you bought it and tried to sell it the next day? Good luck getting what you paid for it. I'm dealing with that right now on a property I appraised in 2005, either about to decline the assignment or hurt somebodies feelings in a large way.

As far as using foreclosed sales as comparables in a report. Adjustments should be made for these types of differences among the sale properties. For instance, a property sells (that was not a foreclosure) at $100/sf, another property that was a foreclosure sold for $90/sf and there are no other sales in the area that are remotely comparable. There would be a conditions of sale adjustment, for +10/sf to the foreclosed property sale.

OK Guys, I said all I can think of about the posts that I read. I'm sure ya'll have got something to say. Remember, I don't do residential work
Odis

[Smoke68]

As far as telling the appraiser the sales price or anything prior to doing the appraisal, THAT'S A FEDERAL LAW! FIRREA was established (I think in 1989) after the Savings & Loan Crisis. FIRREA required States to implement Appraisal Licensing but also required appraisers to prepare appraisal reports in compliance with the Uniform Standards of Professional Appraisal Practice (USPAP). As part of USPAP, at least for commercial properties, the apprasier is to disclose and ANALYZE any prior sales within the past three (3) years, I believe it is a shorter period for residential properties (less than 3 years). What this means is that the appraiser is to state, within the appraisal, the current price or if it is listed, its sale's price and provide some analysis of it (Basically I view that as an opportunity in the appraisal to say whether or not the current sales price is supported by sales of similar properties). Say a property sold for $100,000, 6 months ago, the buyer spent $20,000 on it, this is an opportunity for an appraiser to say whether or not borrower's investment in the property is supported by sales activity. In many instances I've asked borrowers the sales price and they refused to verify it, I'll state that in the appraisal, they must have something to hide.

Odis, I guess I should clarify. I wasn't implying that appraisals were being conducted incorrectly by giving the appraiser the purchase price of the property they are about to appraise. I was inquiring about the rationality of it. If it is required by federal law, then my question would be "why is this federal law in place?"

Disclosing prior purchase prices of said property, got it. That makes complete sense. But disclosing the purchase price of the current sale to which the appraisal will be compared is unnecessary, it seems to me. The ability of the appraiser to comment on a purchase price can easily be done WITHOUT KNOWING THE ACTUAL PURCHASE PRICE (caps for emphasis, not yelling). The appraiser could simply conduct the appraisal using past sales numbers of said property and multiple comps. The value is the value. Whether the purchase price turns out to be higher or lower shouldn't matter to the appraiser. It matters to the bank managing the loan, and they can take it from there.

That being said, I know things aren't going to change anytime soon. I've just never understood WHY this all made sense to some bureaucrat at some point in history.

[digger]

Not trying to hijack and kinda on the same note.How do they appraise your house for tax purpose,they I assume the state came thru a few yrs ago and reappraised the house's in our county and the appraiser must have been from around the rez or somewhere cause I could'nt sell my(bank probley would'nt loan that much) house for what it appraised for.I have a pretty big house 3,800 sqft heated and cooled but it's in Calhoun county not Madison and that's how I feel they appraised it.

[jdbuckshot]

the Real to-date value of anything is whatever you can sell it for.

i knew when i built my additional garage that it would appraise for a dime on the dollar, but i wanted it.

The guy that appraised my property was super good, he looked in every room in the house, light fixtures, took tons of pictures, made drawings and i feel like he did a good apprasial.

Its the guys like my brother is dealing with, that says things like, "oh i don't even need to get in the house, as long as i can get in the front yard i can get what i need" how can they be accurate?