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Archive for the ‘Appraisals’ Category

Jason Gonsalves worked hard to turn his 6,500-square-foot stucco-and-stone home in the suburbs of Sacramento into the ultimate grown-up party pad, complete with game room, custom wine cellar and an infinity-edge pool overlooking Folsom Lake. When interest rates fell recently, Mr. Gonsalves, who runs a lobbying firm, looked into refinancing his $750,000 mortgage. That’s when he got startling news—the home had dropped more than $200,000 in value while he was renovating.

Or at least, that’s what one real-estate website told him. Another valued the house at only $640,500. And these online estimates left him all the more confused when a real-life appraiser, assessing the house for the refinancing loan, pinned its value at $1.5 million. “I have no idea how those numbers could be so different,” Mr. Gonsalves says.

Figuring the Fuzzy Math of Internet Home ValuesRight or wrong, they’re the numbers millions of consumers are clamoring for. Web-driven companies like Zillow, Homes.com and Realtor.com are reshuffling the deck, giving home shoppers and owners estimates of what almost any home is worth. People have flocked to the data in startling numbers: Together, four of the biggest sites that offer home-value estimates get 100 million visits a month, with web surfers using them to determine what to ask or bid for a home, or whether to refinance.

But for figures that can carry such weight, critics say, the estimates can be far rougher than most people realize. Valuations that are 20% or even 50% higher or lower than a property’s eventual sale price are not uncommon, as the sites themselves acknowledge. The estimates frequently change, too—sometimes by hundreds of thousands of dollars—as sites plug new data into their algorithms.

All of the competitors make it clear their numbers are guesstimates, not gospel. “A Trulia estimate is just that—an estimate,” says a disclaimer on that site’s new home-value tool. Zillow goes a step further, publishing precise numbers about how imprecise its estimates can be. And every major site urges home-price hunters to consult appraisers or real-estate agents to refine their results.

Click here to read more from The Wall Street Journal.

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By S. Mitra Kalita, Wall Street Journal

(Please click here for the entire article about tips for home appraisals or click here to see more articles on my blog about appraisals)

Caution: Some of the advice—like home valuations themselves these days—might feel contradictory. But what they all agree on is to keep the look, feel and condition of the property as updated and cared for as possible.

  1. Spruce the house up. But appraisers caution that you don’t need to deep clean under couches and that a few dirty dishes won’t hurt your value. That car you’ve been tinkering on might…  In other words, think broom clean, not set design for a home-decorating magazine.
  2. Curb appeal also matters so mow the lawn, hack those weeds and trim those hedges. This can also help offset your house from unfair comparisons with foreclosures nearby.  An hour or two, for the most part, will set your home apart in the actual picture that the lender gets from the appraiser vs. the actual picture that the appraiser will provide of the (foreclosure) down the street.
  3. Keep a list of all the updates you’ve made and be ready to let your realtor hand it over; a sketch plan of the house indicating square footage also helps.  Remember the items that an appraiser might not notice, like a new roof or insulation. Don’t forget the minor items. For example, I mistakenly told the appraiser we hadn’t updated one bathroom but actually we had installed a new sink and had the tub sealed. That counts, according to the experts.
  4. Have comps on hand. Yes, you say this is the appraiser’s job but every little bit helps, “especially if they are aware of a property that sold without the aid of a Realtor (i.e. for-sale-by-owner),” says Mark T. Smith, the owner and president of Smith Appraisal Services in St. Augustine, Fla. That can mean it wasn’t posted on the Multiple Listing Service, and result in other delays by the time it gets posted through other government data sources.
  5. Be mindful of peeling paint. Government-insured loans such as FHA and veterans’ loans will require peeling paint to be removed in houses built before 1978. But don’t worry too much about a child’s scrawling on his bedroom wall, unless it’s going to require a whole new paint job.
  6. Focus. “Don’t spend money that won’t yield a return on the investment. The best expenditures for most markets are paint, carpet, light and plumbing fixtures,” says Denver’s Mr. George. Prioritize what you do; if you’re the type of homeowner who has upgraded and fixed items as they broke, you should be fine.
  7. Location still matters. If there have been changes to the neighborhood, mention them, from a new playground to a new Whole Foods. If the area’s just been declared a historic or landmark district, let the appraiser know.
  8. Keep the $500 rule in mind. Appraisers often value houses in $500 increments so if there’s a repair over $500 that can or should be made, it will count against the property. Fix leaky faucets, cracked windows, missing hand rails and structural damage.
  9. Also remember the concept of “effective age,” the age the appraiser can assign to a home after taking into consideration updating and condition. “Say you have a cracked window, thread-bare carpet, some tiles falling off the shower surround, vinyl torn in the laundry room, and the dog ate the corner of the fireplace hearth, these items could still add up to an overall average condition rating as the home is still habitable, however your effective age will be higher resulting in comparables being utilized which will have the same effective age and resulting lower value,” says Ms. Zimmerman, who wrote the book “Challenge Your Home Appraisal” and runs a web site by the same name.
  10. Lock up Fido and Fifi. Appraisers say they get annoyed enough by homeowners following them around but a snarling, growling dog is even worse. Along the same lines, try to make the appraiser comfortable — if it’s cold out, put the heat on; hot out, the air conditioning.

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Scott Murphy, Atlanta Apprasier

Scott Murphy, Atlanta Appraiser

This is the fourth post in my series on metro Atlanta appraisals in 2011.  Please click here to see posts on:  market stabilization in Atlantaconsultation appraisals, and appraisal regulations. Click here to find out what to expect during a home appraisal.

In my final post about the state of real estate appraisals in metro Atlanta, I would like to talk honest about a phenomenon I’m seeing…..low appraisals on good arm’s length purchases that have skyrocketed over the past 12-18 months.

One reason for these low appraisals is due to the new regulations which sever contact between loan officer and appraiser – many appraisers now use this as a shield to allow themselves to be conservative.

But why would they want to be conservative? The number of lawsuits by lenders of appraisers has risen at a staggering rate. Furthermore, underwriters are feeling the pressure of the mortgage meltdown and are scrutinizing every appraisal.It is much easier for me to come in low – less work and less grief from the underwriter.

Professionally speaking, appraisers should never have an effect on the market. Our job is not to DETERMINE market value but to INTERPRET market value.

Arm's Length Real Estate Deals

Are appraisals getting in the way of solid arm's length real estate purchase agreements?

If there is a true arm’s length purchase agreement between a willing and knowledgeable buyer and a willing and knowledgeable seller – that is market value! That does not mean that we can always produce an appraisal which will justify it to the lender but the appraiser should make every attempt to let the market move on its own accord.

Appraisers are not allowed to revise their appraisal reports – even if I get them to agree that they were wrong – unless the underwriter gives them permission.

My ultimate goal as an appraiser is to help the market recover on its own in every way I can. If a low appraisal is not resolved everyone loses – the buyer, the seller, the agents and most importantly the market – because either the deal dies or the seller reluctantly reduces the sales price and that neighborhood just took two steps backwards!

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Scott Murphy, Atlanta Appraiser

Scott Murphy, Atlanta Appraiser

This is the third post in my series on metro Atlanta appraisals in 2011.  Please click here to see posts on:  market stabilization in Atlanta, low appraisals on arm’s length purchasesappraisal regulations, and what to expect in a home appraisal.

Consultation appraisal

The best way to protect yourself while selling your home may be to have a prelisting or a consultation appraisal.

The best way to protect yourself when listing your home is to consult with your agent and hire the most competent appraiser in the area to perform a pre-listing or what we call a consultation appraisal.

Our firm offers a product where we will come to the house and perform a thorough appraisal inspection. We will offer recommendations on repairs which may be required by a lender as well as optional improvements which would provide a significant positive return. We will complete our appraisal report and review it with you and your agent.

A consultation appraisal will allow you and your agent to choose the most appropriate list price for your home. And we continue to be your consultant all the way through closing:

  • When you receive an offer, call us and we will consult with you and your agent about the best counter offer.
  • We will also give you a list of items to give to the bank appraiser when he/she comes to your home.
  • Then most importantly, we will be there to defend our appraisal and help you in the event that the bank appraisal comes in low. We will write the letter of rebuttal to the lender – doing it in such as way as to outline all the deficiencies in the bank appraisal and offering concrete evidence and additional sales to support our value.

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Scott Murphy, Atlanta Appraiser

Scott Murphy, Atlanta Appraiser

This is the second post in my series on metro Atlanta appraisals in 2011.  Please click here to see the first post on:  market stabilization in Atlanta. More posts coming soon: low appraisals on arm’s length purchases, and consultation appraisals.

Appraisal regulations have eased a bit.Appraisal regulations are easing a bit as we transition from HVCC rules to the Dodd Frank Act. Appraisers will be more fairly treated and receive “reasonable compensation”.

One of the challenges for the appraisal business was the rise of the Appraisal Management Companies (AMC’s) which sought the appraiser who would do the job the fastest and the cheapest. This was most often not in the best interest of the real estate market.

Appraisers were rushing through assignments and justifying it based on the extremely low fees they were paid. This led to sloppy work and inaccurate appraisals. With the help of this recent legislation, appraisers are now given the time to accurately analyze the market and complete a competent appraisal.

The problem still remains however, that too many appraisal management companies do not have sophisticated assigning software to get the job to the appraiser with the most “geographical competence”.

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Scott Murphy, Atlanta Apprasier

Scott Murphy, Atlanta Apprasier

This is the first post in my four-part series on metro Atlanta real estate appraisals in 2011. Please check back soon to see posts on:  changing regulationslow appraisals on arm’s length purchases, and consultation appraisals.

Valuing real estate has never been an easy task for an appraiser. In the past it was difficult keeping up with steadily increasing value and today it is staying on top of every sale, dissecting it to determine if it is arms length, weeding through REO, Short Sales and other various distressed properties.

Since sales seem to be fewer than in the “glory days” of 2006 and 2007,  (and so many sales are from homes in a “situation”) it is often impossible to arrive at a truly meaningful and supportable value. Adding to the current market conditions, federal appraisal guidelines have changed a lot and the appraisal process is more challenging than ever.

Housing stabilization in inventory and foreclosure levels in Atlanta.

Scott Murphy, appraiser, is seeing a housing stabilization in inventory and foreclosure levels in Atlanta.

The good news is that we are seeing some stabilization in the Metro Atlanta real estate market. The inventory of homes for sale has dropped and the number of foreclosed properties has leveled off a bit. New home construction is happening again.

Atlanta’s real estate market stabilization is due to the huge drop in existing inventory of new homes and the unprecedented decline in the value of vacant land and developed lots. (It is not uncommon to see lots selling for $5,000-10,000 which just 2-3 years ago where selling for $60,000 – 80,000. This drop is just enough to allow a builder to be profitable when building a new home.)

The new homes we are seeing going up are somewhat more modest than those of recent past. Builders are reluctant to build enormous houses on speculation and buyers have had a dose of reality and are looking for smaller, less flashy homes. I feel this sector of the market, new home construction, will grow the quickest over the next 12 months. This should increase jobs which will bolster the economy as well as the real estate market.

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In a house appraisal, a licensed appraiser visits the property and writes a report that includes basic features of the property and an assessment of its value. Most people know of appraisals in the context of home sales because a lender orders an appraisal to ensure that the mortgage amount does not exceed a certain percentage of the home’s value.

Types

Two major types of appraisals for homes serve different functions. A market cost appraisal assesses what the home should sell for in the current housing market and is the type used by lenders to assess how much money to loan the buyer. A replacement cost appraisal is more commonly used in the sale of new homes and for other purposes, such as insurance.

Comparisons
As one step of the appraisal process, the appraiser compares the home to other comparable homes that have sold in the area within the past six to 12 months. In a quickly changing real estate market, the appraiser may limit the comparison to more recent sales for accuracy. If the buyer knows of any special circumstances that affected the sale price of homes in the area, such as a short sale due to a divorce or relocation, mentioning these to the appraiser can help keep the low sale prices from having too much of an influence on the home’s appraised value.
Neighborhood
Part of the appraisal considers the neighborhood in which the home is located. Factors such as having good schools, parks or shopping districts within walking distance and ample street lighting can increase the value of a home. A location near noisy or undesirable areas such as train tracks, busy roads or airports may decrease a home’s appraised value.
Home Structure
A home appraisal is not an inspection and therefore does not check to be sure that the appliances and plumbing all work well. Rather, it assumes the home is in good working condition. The appraisal looks at more basic information such as the number of rooms, type of flooring, layout of the home, square footage, the garage and yard and landscaping.
Considerations
Although an appraisal does not necessarily take a home’s cleanliness into account, the homeowner may want to tidy up the home before the appraisal to ensure that the appraiser is not hindered by clutter. Drawing the appraiser’s attention to the home’s best features or defining features, such as an addition, new roof, new windows or remodeled kitchen, may help increase the home’s value if these are noted on the appraisal.
Click here for more blog posts on Appraisals.

Read more: What Does a House Appraisal Consist Of? | eHow.com

 

 

 

 

 

 

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