appraised Values

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jdbuckshot
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appraised Values

Postby jdbuckshot » Thu Jul 19, 2012 8:52 am

i really question the appraisal process.

i purchased a home 2008 - appraised value of $120k

ripped out carpet add hardwood floor - entire house $2000

poured a new concrete patio in the rear 32'x 10' $2200

put a new metal roof on the house $6000

built an additional garage, not connected to the house 20'x24' with garage door, completely insulated, and with 100 amp electrical service. fully finished on the inside. $10,000

Total cost was $20,200.00

New appraisal done last week, -- appraised at $123k

Just doesn't seem right to me.

My little brother had an appraisal done and the appraiser told him he did not need to get in th house.

How does that make any since? i know its only worth what somebody will pay for it, and the best way to know that is by looking at comps, and i have a bad one about a street over that flooded and got remodeled and sold for 50K.
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Smoke68
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Re: appraised Values

Postby Smoke68 » Thu Jul 19, 2012 8:57 am

Just a question to add to the original post. What's up with telling an appraiser what the purchase price of a home is before doing the appraisal? Why does he need to know? Funny how the appraisal comes within $1500 of the purchase price.
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Re: appraised Values

Postby mfalkner » Thu Jul 19, 2012 9:02 am

Yeah I've been shanked like that before; market gets softer and comps go down. Best to wait it out if you can. And appraisers differ in the amount of effort they put in. Now banks want to pick from their "pool" of appraisers rather than necessarily use someone local who may know your area better. It lowers their risk but is not necessarily a fair appraisal. But in most cases, they with the gold make the rules.
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Re: appraised Values

Postby matador1 » Thu Jul 19, 2012 9:12 am

Disclaimer- Not an appriaser but I see them every day.

I think your problem is that the things you have done didn't really "add value" meaning that value comes from heated and cooled square footage addition.
The roof for example is something that every house has, even though you have a new one.
If garages are common to the other properties all you didi was 'catch up". Am I making sense?

Also, there may be lower comparables since you bought your home that the appraiser was forced to use bringing down the curve or average.

I totally agree with you that the appraisal process can be very hard to undrestand soimetimes. there are so many variables that go into it and remember it is a "profesional opinion."

Of course, had you locked with me I could challenge the value something that other lenders can't. :D
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Re: appraised Values

Postby matador1 » Thu Jul 19, 2012 9:15 am

Smoke68 wrote:Just a question to add to the original post. What's up with telling an appraiser what the purchase price of a home is before doing the appraisal? Why does he need to know? Funny how the appraisal comes within $1500 of the purchase price.
MS is a non disclosure state meaing that your sales price is not listed in a public place. So most appraisers ask so they can put it in their report. That has nothing to do with your current value.

As for the vlaue almost always being close. A red flag to a mortgage comany underwriter is a value being way higher than the purchase price. For this reason to avoid complications appraisers have began this practice as of 5-6 years ago. It's irrelevant though as the sales price is what dictates the value of future sales. Make sense?
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SHANE704
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Re: appraised Values

Postby SHANE704 » Thu Jul 19, 2012 9:25 am

(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.
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Re: appraised Values

Postby TODO » Thu Jul 19, 2012 9:29 am

I feel your pain but have you paid any attention to the residential real estate market over the last four years? It has TANKED! That is true across the nation, the region, the state, everywhere pretty much. A lot of folks are bad underwater, especially in more metro locations that saw a lot of speculative development. I would say your doing pretty good comparatively speaking.
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Re: appraised Values

Postby jdbuckshot » Thu Jul 19, 2012 9:30 am

What about appraisers that don't go inside the house?
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Re: appraised Values

Postby SHANE704 » Thu Jul 19, 2012 9:35 am

mfalkner wrote:Yeah I've been shanked like that before; market gets softer and comps go down. Best to wait it out if you can. And appraisers differ in the amount of effort they put in. Now banks want to pick from their "pool" of appraisers rather than necessarily use someone local who may know your area better. It lowers their risk but is not necessarily a fair appraisal. But in most cases, they with the gold make the rules.
this is the part that even I dont understand. We appraise very rural properties and have a hard time finding truly comparable sales around here. If heard stories of banks sending appraisers from Tuscaloosa and Starkville to Waynesboro...There is no way in hell they can accurately appraise a house when they have more than likely never been to Wayne County before. If you send me to Tuscaloosa to appraise a house, I would be lost...I may could get close but the appraisal wouldnt be anywhere near as credible as an appraisal completed by someone who lives and works there. When getting a loan, now in MS you can choose which lawyer you want to do the title opinion and close the loan but you can't choose the appraiser. If it were me, though, I would stress that I wanted a local appraiser...
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Re: appraised Values

Postby SHANE704 » Thu Jul 19, 2012 9:39 am

jdbuckshot wrote:What about appraisers that don't go inside the house?

There are 2 main appraisal forms a 1004 ("full appraisal") or a 2055 ("drive-by")

Its up to the bank to order the appraisal that they need. 90% of loans require a 1004. However, some refi's such as HELOC's and inhouse loans, a 2055 may suffice.

2055's dont require any interior inspection and many times the heated and cooled living area is based off of property tax info....1004's are actual living area based on appraiser measurements of the house and an interior inspection.
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Re: appraised Values

Postby Smoke68 » Thu Jul 19, 2012 9:40 am

SHANE704 wrote:(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.
Thanks for chiming in Shane. I guess my thought process works like this, and please correct me where I'm off.

-A property's value is what it could reasonably be expected to sell for in the market as it currently exists.
-The appraisal's purpose, in a mortgage situation, is to inform the bank of this value in order to verify they are not making an unsecured loan.
-The appraisal is used in conjuntion with the purchase price (and loan amount) by the bank to determine the risk.

Why should the purchase price of the property in question be made known to the appraiser before the appraisal is conducted? I would see the logic in making that information known after to appraisal for the purpose of including it in the report. That would seem to have the potential to undermine the accuracy of the appraisal itself.

I'm not a banker, so this really doesn't matter to me. It's just a question I've always had when looking at the process from the bank's perspective.
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Re: appraised Values

Postby edub20 » Thu Jul 19, 2012 9:44 am

jdbuckshot wrote:What about appraisers that don't go inside the house?
Known as a drive by appraisal and it's basically done to make sure there is no extensive damage to the outside and the house is intact. These are often done then compared with homes that are close in mileage and close in sq ft etc...

It all depend on why the appraisal is being requested.

Not an appraiser either but had 5 done by Bank of America(owner of the loan at the time) recently on a house i purchased Tuesday. They did drive by's and in house
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Re: appraised Values

Postby blgros1 » Thu Jul 19, 2012 9:48 am

SHANE704 wrote:(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.
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Re: appraised Values

Postby Ster » Thu Jul 19, 2012 9:51 am

SHANE704 wrote:(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?
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Re: appraised Values

Postby SHANE704 » Thu Jul 19, 2012 9:53 am

Smoke68 wrote:
SHANE704 wrote:(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.
Thanks for chiming in Shane. I guess my thought process works like this, and please correct me where I'm off.

-A property's value is what it could reasonably be expected to sell for in the market as it currently exists.
-The appraisal's purpose, in a mortgage situation, is to inform the bank of this value in order to verify they are not making an unsecured loan.
-The appraisal is used in conjuntion with the purchase price (and loan amount) by the bank to determine the risk.

Why should the purchase price of the property in question be made known to the appraiser before the appraisal is conducted? I would see the logic in making that information known after to appraisal for the purpose of including it in the report. That would seem to have the potential to undermine the accuracy of the appraisal itself.

I'm not a banker, so this really doesn't matter to me. It's just a question I've always had when looking at the process from the bank's perspective.
That has always been a questionable practice in the appraisal world. We are supposed to analyze the sales contract to make sure what we are appraising is the same thing that is being sold (Lot size, storage buildings, if there are any concessions, etc) and to make sure it is a legal contract. Also like Matador said, if the sales price varies greatly from the market value, a red flag pops up. This is only on houses being sold. On refi's we have no idea what the refi amount is....this was the big goal they wanted to accomplish by establishing the HVCC.

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