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9 Comments on Understanding Appraisals is Half the Battle
Marilyn, I think they should give us a lot more training on appraisals. The criterea for choosing comps is pretty narrow, and it really helps to understand which comps are ok to use and which are not. And yeah, they do make a lot of mistakes with size and bathroom counts and all kinds of other stuff.
patricia, Louisiana is working on a CE course for Realtors about appraisals taught by an appraiser. Wish it would be mandatory so everyone would be brought up to speed.
We have so much outdoor living here in SWLA with add ons that sellers think they can add that value as same sq ft when it is treated differently. An elaborate pool house won't necessarily be given same value an interior of a homes.
I think the biggest item to pull from this is the 300 sq. factor, or not to exceed. The pool down her is probably valued higher than what was presented. Matter of fact a home with out a pool is less desirable. Live in S. Florida and you soon will know why.
Marilyn good post. Good comps are a problem lately and the big debate is how much to add when the comps are short sales and foreclosed properties. This seems to be the most contentious area between Realtors and Appraisers right now since it's nearly impossible to avoid using them on regular sales. Any input on this at your seminar?
Winston, yes I know what you mean about pools in S Florida, I lived in Boca Raton and pools were like refrigerators, everyone came with one !!
Lorraine- this subject was addressed, foreclosed sales are not supposed to be used on homes that are are not foreclosure. If an appraiser has to use a foreclosure as a comp an explanation should be used and adjustments made to the comp. Our foreclosures here are typically in bad condition with no flooring, missing appliances, rotten wood, you name it. That is not fair to compare to a home in good condition. It was mentioned that if that is the only comp and the lender will not allow the appraiser to go out of the area, they should make appropriate adjustment and that the neighborhood averages are $xxx
Very interesting, Marilyn. In our area, the value of a pool is dictated by the cost of a moderately priced pool and how many homes in that subdivision have pools. Thus, if only 15% of the homes have pools, the resale value is much lower than in the higher end homes where 95% of the homes have pools.
Also, unless a room was enclosed WITH permits, it adds no value. We see a lot of homes where the original garage or carport was enclosed but not with county permits. Those poor appraisers then have to try to determine if the addition is made to be "typical" to the construction of the rest of the home.
Me, I don't think I'd want to be an appraiser - it's way too complicated and I applaud those good appraisers who go out of their way to make a transaction work.
Whenever I meet an appraiser, I ask at least one question (not too many..don't want to irritate them) about their appraisal criteria. I prepare detailed appraisal packages whenever I meet an appraiser and their input has helped me to get better and better at providing them the information they need. My goal is to get the sales price by making their job easier. I have not had an appraisal come in under value as a result.
Marilyn - great post - you are so smart to seek education on the appraisal process. Many agents would not bother to do this.
Marilyn,
I applaud your efforts to learn more about a process that affects your business. I wish more realtors would take the time to understand the process so they can intelligently argue when the situation arises. I understand that realtors have a job to do -- sell the home at the highest possible price -- but when they try to get me to change a value wth the same old arguments ("average price per SF in the neighborhood is ...." and "if I have a buyer and seller who agree then it must be market value!") I pretty much just stop listening. A little education on how the process works will get you a lot farther with most appraisers, and IMHO make you a better realtor.
Also, I want to point out that there is no 300sf guideline. Fannie/Freddie have general guidelines, and they PREFER that comparable properties range no more than 20%. That goes for most of the big items, like lot size, age, square footage, etc.