2012 in Review- An Appraiser’s Personal Perspective

December 24, 2012 at 7:44 pm | Posted in Uncategorized | 1 Comment
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In November 2011, after a long search for our next home, my family was in escrow with plans to close by Christmas.  We told the kids that we wouldn’t decorate our current house but would make that the first priority in the new house- a week before Christmas.  This was a resale home in a neighborhood that we had been eyeing for some time.  It needed minor updates but was ideal for many reasons.  As an appraiser who had been looking to move for the prior two years, this was the end of a long and painful process.  You see, I’m too smart for my own good…

As an appraiser, I’d like to think I have a pretty keen sense of the real estate market (like a financial planner does…).  I can quickly estimate the value range of a home and I know good neighborhoods.  As the real estate market was in its nadir in 2010, we were just looking for the right deal.  On top of that, besides appraising homes all over the valley, I worked for a servicer of Fannie Mae defaulted loans, doing nationwide appraisal fraud investigation- so I knew that the pipeline for distressed homes was endless- think the Sta-Puft Marshmallow man of shadow inventory. staypuft I would not overpay, and it was a buyer’s market.  I have friends who buy houses at auction- fix and flippers.  We weren’t looking to get in that game ourselves, just use those sorts of resources to get a home at auction.  But we don’t have the cash available to buy a houe outright.  We’d need traditional financing.

However, this proved to be more difficult than anticipated.  At first my wife and I were very particular about neighborhoods.  We’d research the homes coming to auction over the next 60 days, check them out and then put in a bid.  However, so many auctions were cancelled or postponed, that the ratio of homes actually going to auction on the dates scheduled was like one in ten.  So despite this arduous research and planning, we were only able to bid on four houses during a year’s span- and in every case, we lost out by just a few thousand dollars.

This process was made worse by the fact that we had previously seen short sale listings- that take forever to close, and they actually closes during the time that we had been searching through our process.  A friend of mine actually put in a bid on short sale and has subsequently moved in.  So with this in mind we decided to expand our search to the Multiple Listing Service.  Through this process, we actually found a home that fit our criteria and placed a full price offer on a home that appeared to be slightly undervalued.  Our good friend loan officer told us that we would have no problem with the loan- despite a HAMP loan mod in 2010- and we didn’t even need to rent out our current house (though we would)!

Well, as my wife worked at a bank, her in-house lender got wind of our move and asked “why don’t you do the loan through the bank?  It will essentially be a free loan since you’re an employee.”  At this we decided to have the in-house lender do our loan.  Our friend told us that he couldn’t beat that deal and we decided that it was the best route to take to save a few bucks…

We un enrolled the kids from their schools, their classmates threw them going away parties and gave them goodbye cards, we met up with some renting friends from the neighborhood for a little celebration, got a carpeting quote and placed a down payment through Home Depot, we had the inspection done and we had the appraisal done.  We even had a tenant lined up with rent several hundred above our mortgage payment.   All was well- until the loan officer told us that loan wouldn’t go through because of our loan modification- despite the fact that they were already aware of it and said it wouldn’t be a problem.  But not to fear she told us, she had another lender who said they could do the deal- it would just take another two weeks.  A week later and now the middle of December- the day after school let out for Christmas, we were told that this second lender had also balked at our loan.  We were devastated and slightly pissed off and we started venting about it with our friends.  Everybody and their brother heard of our plight and assured us that they knew someone who could do our loan- even our friend lender who we were supposed to work with from the get go.  He was astonished that our loan was dead and assured us that his in-house underwriter was already aware of our situation and was ready to fund our loan.

However, this would mean another three weeks minimum as we’d be starting from scratch.  We’d be pushed out to mid January, school would have already started, and still, we had doubts that it would go through.    The president of my wife’s bank actually approached us and offered to give us a private loan for 12 months until we could get conforming financing (they don’t keep residential loans in house).  We respectfully declined.  So after some praying and discussion, and insight from a local real estate expert… my wife and I decided to back out of our deal completely with the notion of starting from scratch in the new year.  Total out of pocket expenses- $250 for the inspection, $400 for the carpet down payment.  But we had already packed our entire house so our garage was filled with stuff- ready for the move.

Christmas was fine with a rush decorating job but we were happy nonetheless.  Kids were a little confused but started up school again in our district at their old schools.

In January, we found a remodeled house in the MLS.  We threw caution to the wind and placed a full price offer the day it was listed (through our original lender) and lost out to a cash bidder who offered less.

At about the same time, I appraised my first home in a brand new tract of a neighborhood that had been heavily depressed over the past several years.  This house was selling for $30,000 more than resales of the same utility!  I was astounded.  I subsequently did about 30 houses in that subdivision and whenever I went there, people were packed in the sales office.  Competitior sales offices were also packed.

In February, the loan officer from my wife’s bank WAS FIRED for INCOMPETENCE!!!!!!

We placed an offer on another MLS house- full price, lost out to a cash buyer.  A friend who fixes and flips and did over 50 deals in 2011 had gone through the first quarter of 2012 wihtout finding a single house.  Investors had started to pay 10 percent over “zestimate” on auction homes- simply to get the homes and in most cases rent them out immediately.  Another fix and flipper had reworked his margins but was having a slower year.  My wife started unpacking boxes in about April.  We discovered clothes that we forgot we had.  I appraised many more homes with increasing prices.  We found none for ourselves.  My work doing Fannie Mae Appraisal Fraud review continued robustly.  There was a never ending supply of bad loans.  Yet the talk of the press was “recovery” and it was legitimate.  Or was it?

Sales were up, but in most cases- at least in Phoenix, it was investors, and they were paying cash.  The common man (AKA me) couldn’t buy a house despite being qualified.  And we couldn’t exactly overbid because of the fear of the appraisal coming in low and not having the funds to make up the difference.

In our favor was the fact that we never had to move in the first place.  Our house is beautiful and big enough for us and more.  We have views of two mountain ranges, are on a golf course and have a beautiful oasis pool that my wife designed herself.  We have a very good (modified) loan and our payment will stay low throughout its duration.  By the way, our renter friends whom we celebrated with a year ago?  They literally justed moved into their new construction home last week.

Am I too cheap?  Am I too conservative?  Am I too “smart” for my own good- despite the countless lost opportunity costs associated with being frugal?  The answer is undoubtedly YES with a little sarcasm around the quoted “smart”.  The house we were in escrow with is now worth 20-percent more.  There are very few homes on the market that we like and now they are listed for 30-percent more than they were a year ago, and quite frankly, we can’t afford that.trend

The good news is that all our moving boxes are out of the garage so we can park our cars there, we painted some rooms that needed it badly, and our home value has also gone up about 30- percent- but we’re still $60k in the hole.  From a personal perspective, we ended up where we started, but from a professional perspective, I can confidently tell you that whatever reasons you use to explain this recovery, it has been legitimate in 2012.  Where will things go in 2013?  If you can’t figure me out already, I have faith that the combination of fiscal cliff, high unemployment, increasing entitlements and lack of “real” buyers will cause things to slow down if not reverse- sort of a dead cat bounce.  But since I’ve made that proclamation, you can rest assured that we’ll continue to go up!  Have a Merry Christmas and Wonderful New Year filled with happiness, and good fortune!

Visit our website at http://www.advantageappraisalsllc.com, and if that doesn’t roll off the tongue, just try http://www.appraiserdude.com. Or now you can follow us on Twitter at @appraiserdude AND we just added a Facebook page for you to “like” at http://www.facebook.com/appraiserdude. Give me a call at 480-544-1217 if you have any questions. I look forward to working with you.

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What Can a Homeowner do to Ensure a Better Appraisal?

September 16, 2011 at 6:11 am | Posted in Uncategorized | 4 Comments
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For the last few years, a divider really has been put in place that supposedly improves transparency in the appraisal process. And while it may have some supposed benefits that help to eliminate fraud and inflated values, it really has screwed things up for the consumer. Now don’t get me wrong, a home is worth what it’s worth and “better comps” are typically not “more appropriate” comps. So when the borrower truly doesn’t know his house’s worth and he relies on one of the popular real estate websites that magically estimates the value sight unseen, then a certain dollar amount is planted in that borrower’s head. Well, when they start the loan process and pay $400, or $450, or $500 for an appraisal that used to only cost $350, now they’ve gone down a road that resembles a casino in Vegas.

Why is it a gamble? Because you really never know what kind of appraisal you are going to get. First of all, most lenders utilize Appraisal Management Companies (I shudder at the idea of capitalizing that), which means a middleman who serves as the barrier between the lender and the appraiser. That appraisal fee is then paid to that AMC who then looks for the cheapest and fastest appraiser they can find. And I’m not kidding when I say that some of these AMCs would offer as little as $120 to an appraiser to do the job. So let’s estimate low on the consumer fee of $400, subtract $120 and that leaves the AMC with $280 for essentially being the barrier. Now I’m not saying that these AMCs shouldn’t make money; they do have staff and overhead and sales people. But the actual appraiser doing the work gets 30 percent of the total fee? Does that seem fair?

Well an HVAC company may charge like $60 per hour to work on your air conditioner and the technician may only get $20 per hour. So that’s a good parallel right? Actually, no, because if your AC causes a fire and burns your house down, you don’t sue the technician- you sue the company. The appraisal is still signed by the appraiser who has his state issued license and his mandatory errors and omission insurance. If you have an issue with your appraisal, the AMC doesn’t care about it at all.

Now I’m not complaining about this process except in spirit- you see the “good” appraisers don’t play this silly game. They won’t drive from one corner of a metropolitan area to the other corner simply to get some work. These good appraisers have a little more pride. They have branched out into non-lender appraisals like bankruptcies, divorce or estate settlement. They only work with small lenders who are exempt from the AMC process and thus can still get full fees. They only work with the reputable AMCs (yes there actually are reputable ones) who value the work of an appraiser. These AMCs collect $400 from the client and pay $325 to the appraiser.

But what about the (let’s not say “bad” because they’re not necessarily bad) inexperienced, desperate, low self-esteem appraisers who will do this work for less than full fee? Well, in many cases, these are the appraisers who come to appraise YOUR house… yes it’s true- not always, but often.

So if you’re buying a home, the appraiser will get a copy of the contract and will find the listing in MLS (if it’s available) At least that way he will have an idea of what value is “needed”. Now before you jump on me about hitting a value, let me explain… if your house is in a newer tract neighborhood where every other house is the same floor plan and there are lots of sales and there are no foreclosures or short sales and the economy is stable, etc. etc. then there’s an efficient market. But it’s not like that. Today you may have several sales that sell on the exact same day- a short sale that is immaculate and sells for $200,000, a bank owned plain Jane model that sells for $205,000, an investor flip that sells for $225,000 another short sale that sells for $180,000 and a fixer bank owned that also sells for $205,000. So how much is YOUR house worth? The point of knowing the contract price is to at least have a number to check your work against.

There have been PLENTY of times when I came in lower than the purchase price and guess what- a few days later, I get a revised contract with the purchase price now matching my appraised value. On the other hand I’ve also come in low and had angry Realtors, AMC underwriters and $10 per hour AMC processors getting all up in my Shiite for killing their deal- and this is AFTER HVCC which was built to eliminate pressure. Again, knowing the contract price is a good check for your work.

But with a refinance, it’s completely different. You don’t see an estimated value or loan amount- it’s just an appraisal request- it’s actually a little daunting at times because the appraiser is actually being asked to do his job without guidance. What a strange concept- I don’t mean hand holding, but actual free reign to appraise a home for what it’s worth. It’s sort of refreshing. However, I just had one last week- a refinance where the owner lived in another state so they were having their rental property appraised for refinance. The last loan amount was $250,000 and the house is now worth $180,000. Do I think that they will get their refinance? It’s none of my concern… I’m helping the bank make a decision by providing them with data. If they shouldn’t do the loan, then they shouldn’t do the loan. But then again, I do wonder what might go through that borrower’s head. How much did they pay (in this case, they paid $350 and I got $350), what gave them the idea that their home was worth more?

But refinances are such a rare bird nowadays and they make up a very small portion of my volume- I’d say less than 3 percent in 2011. So this is where I come to giving some advice to people looking to refinance.

First of all, I gave you the background on the appraisal ordering process to prove a point- you have no control over who appraises your house. However there are some precautions you can take.

  1. Check your home value on one of the popular websites. You can actually put in your address and they will give you a value based on their own proprietary system- whether or not it’s accurate, it’s a start.
  2. Get some perspective of your own house.  EVERYONE thinks their house is the nicest one around.  After all, they did pay for the lot premium and upgraded carpet padding, and upgraded vinyl flooring and they’ve got 2 extra feet in their garage and they have a soft water loop… WAKE UP!!!  You’ve been sold on BS!  You bought your house from a SALESperson.  So if you come down from you attitude that your house is awesome:
    1. Look at the sales in your neighborhood.  See what features they have.  If there is a rare open house, take a look- and then track if and when it sells and for how much.
    2. Make friends with your neighbors- only for the sake of getting into their house so you can compare it to yours.
    3. Find the close by neighborhoods that have homes similar to yours and see what they look like.  Are the common areas nicer?  Are the lots bigger?  Is the builder better?
  3. Are you ready for my pitch?  Are you ready for my angle and reason for writing this blog entry in the first place?  Here it is… Get some real data that an appraiser would use to appraise your house.

So how do you get real data that an appraiser would use to appraise your house?  Simple.  Call a local appraiser.  That’s right, go to Google or Bing and do a search for “your city appraiser” and you just might find a good appraiser.  Try it now.  Click this link and you’ll see what I’m talking about (and no it doesn’t go to porn!)  And when you get there, click on Advantage Appraisals- which of course is my company.  The point is that when you find that local appraiser in Cicero, Illinois or Hollywood, Florida or wherever you are, give him a call.  And be honest with him.  Let them know that you plan on refinancing and you want to know if you should proceed.  Here’s the possible outcomes:

  1. no answer (most common)- he’s out of business, which is an unfortunate reality of what HVCC did to my fellow appraisers across the country
  2. reply of “I can’t do that”- he’s clueless and is one of those $120 appraisers
  3. reply of “That’s illegal”- he thinks he knows what he’s talking about but he doesn’t.  Remember, you’re asking for data, not analysis
  4. reply of “I’d love to help you, but you’ve got to realize that regardless of what I provide for you, when you do get the actual appraisal, you might get some schmo who doesn’t know your neighborhood, drove 100 miles to get to your house and is only getting $120 to do all that work because he’s a loser appraiser”  That’s probably a good appraiser 😉 because that’s the exact conversation I had today.

The homeowner told me his situation and I told him “I will pull comparable sales based on what public records shows for your home.  Assuming that I am appraising your house today, I will pull comparable sales that a reasonable appraiser should find given your characteristics and typical lender guidelines for appraisal requirements (recent sales, similar style, similar age, actives, pendings, etc.  How the actual  appraiser (because it sure heck won’t be me) analyzes that information is up to him.  If you don’t get your appraisal for another 90 days then this information will be essentially worthless.  I won’t provide you with a report- just sales and listings.  But with that data, you can make a more informed decision on if you should proceed with your refinance.  Total cost- $55.”  To which he replied “Sounds like an easy decision and you should market this service to others”  After the call, the process was complete in an hour and the guy was ecstatic.  Guess what, I technically did an appraisal.  I created a workfile and I will keep it for the requisite number of years.

But here’s the next point of advice. The homeowner asked me if when the appraiser calls to set up the inspection appointment whether he should tell him that he has comparable sales for him.  My reply was “Heck no!  We appraisers are a proud bunch and if you happen to get a good appraiser and pull that line, you’ve immediately touched a nerve.  The “I know how to do your job” Realtor, borrower or loan officer is considered a douchebag to an appraiser.  As unprofessional as it may sound, and perhaps a generalization that is exaggerated, you don’t want to run the risk of offending an appraiser.  I told him that the best course of action is this.  When the appraiser calls to make the appointment, find out where he’s coming from- that’s it.  If he’s within 30 miles you should be ok.  But if he’s over 30 miles away, that’s a huge red flag.  You might want to google his name and look him up on the state licensing website to see if his license is in good standing.  Again, this applies to our world of cheap and fast appraisals.  If you’ve got a bad feeling, call your lender and tell him that the appraiser gave off bad vibes and you want another who is closer, or Certified, or designated or whatever it takes to put your mind at ease.  But you must do this before the appraiser actually comes to your house.  Once the inspection is done, if you get that vibe, you will probably have to pay extra for a second inspection.  I personally will drive over 30 miles for a full fee good client.  And if I don’t know the area well enough, I will get to know it (as I am legally required to do) before I appraise that home on the opposite side of Maricopa county.  Secondly, when he gets there, be cool.  Make small talk, and then you can present the data that you received from your local appraiser for only $50.  Stroke him first with “I don’t know how to do your job, but I’ve got some sales that you probably already have.  Just figured I could save you some paper by printing it out for you.  Some appraisers might refuse it, but again, the “good” appraisers will at least courteously thank you and  take the information.  Sure you might find it strewn across the community park later that afternoon, but the “good” appraiser will at the very least compare it to the data he already has.  Chances are he has the exact same sales, but he just might realize that you provided him with one or two good ones that he missed because the Realtor input it wrong in MLS.

Besides that, it really is a gamble.  But I’d sure as heck like to play a game with better odds- like Baccarat or Blackjack, than slot machines or Roulette.  Unfortunately, we live in a world with a lot of one-armed bandits- so watch out!

Visit our website at http://www.advantageappraisalsllc.com, and if that doesn’t roll off the tongue, just try http://www.appraiserdude.com. Or now you can follow us on Twitter at @appraiserdude AND we just added a Facebook page for you to “like” at http://www.facebook.com/appraiserdude. Give me a call at 480-544-1217 if you have any questions. I look forward to working with you.

Appraisal Nightmare

March 14, 2011 at 7:07 pm | Posted in Uncategorized | Leave a comment
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So I got an appraisal request a few months back. I don’t recall the exact date, but let’s just say that it got lost in the shuffle. I’m writing about it because the client called to check on the status about 10 days later, at which point my reaction was “ummmmm”. This is totally out of character for me as despite my “organized chaos” system, I never misplace a file in process.

Here’s a little background on this particular order. It was for an older home on the west side of town- so like 55 miles away. That’s way out of my preferred coverage area, but back in 2006 I appraised that same house for the same borrower and out of state small bank. Back then it was worth a decent amount. Large lot, nice home, horse property, well kept. Turned out that the borrower was going to cash out some of his equity to start a business- back then.

When I got the call to reappraise the home now, I instinctively accepted the work- not because I mind the drive, but because I had established a rapport with the contact at the bank- despite the fact that I never received any other business from them. Also, my business has changed since 2006. Back then I was doing triple the volume of work for a fee split. So when I’d drive across town to do an appraisal, I’d have at least 1 or maybe up to 3 others that I could knock out the same day. Today I only do full fee work and since there is no split, I actually turn down most work that is outside of a “convenient” coverage area. However, with this case, I accepted the assignment…

So when I got the call from the client, I went to look up the prior order so that I could print out the prior sketch. This is great for “redos” as you really don’t have to remeasure the property or re-enter a lot of the basic information like the neighborhood description, legal information, address, construction materials, etc.. I just bring a copy of that sketch and make notes about any changes since the last time. First problem was that sometime over the prior 4 years, I changed computers and I had to retrieve the old file. I had the work file of the property of course, but I really needed that electronic copy of the appraisal. I then pulled comparables based on the basic property characteristics and considering where the market is today, that was like pulling teeth as volume of sales has gone way down. So i got some good sales and made the trek out to the home…

When I got there I was in shock at what I saw. The house had been modified, and when I say modified, I mean the floorplan had changed. So I had to remeasure the home from scratch. No problem- I’ve got my trusty Disto laser tape measure. But of course, instead of being 1,600 square feet, now the house was 2,700 square feet. So now the comparables I brought with me are bad. I always pull comparables based on the property characteristics before I visit the home- BASED ON WHAT I THOUGHT WAS THE HOME! As a small shop, I make hay while the sun’s shining and in this case, I had no trusty internet access and no way to pull different comps. I have subsequently purchased a Droid, so that won’t happen again. I called an AMC that I’ve worked with for years so that maybe they could help- no joy as they were all out of the office. Meanwhile I’m thinking “I do not want to drive back out here! I do not want to drive back out here!”

Finally, I called up my old mentor in California- heck he’s an appraiser so he walks the walk. I have to give him the MLS website URL from memory, give him an over the phone lesson on how our MLS works and then give him what I think are good search criteria. It took half an hour but by gosh, we did it. He was able to provide me with 4 closed sales and a few pendings and actives that would help me out. I drove those homes, snapped my photos and headed on back- to the East side.

Now some apprasiers would simply leave and then pull data on their own later. Then they’d copy photos from the MLS and use those for their reports. And some better apprasiers would do that and then go back out and take photos of the comps. But I’m too lazy to make that second trip. And I’m an appraiser who recognizes that you need to physically see each sale in order to compare it to the subject. I’m not trying to brag too much here- just show how a little knowhow can make up for not being as prepared as you think you are.

Visit our website at http://www.advantageappraisalsllc.com, and if that doesn’t roll off the tongue, just try http://www.appraiserdude.com. Or now you can follow us on Twitter at @appraiserdude AND we just added a Facebook page at http://www.facebook.com/appraiserdude. Give me a call at 480-544-1217 if you have any questions. I look forward to working with you.

Life Cycle of a Home’s Value (2005-2009)

November 12, 2009 at 6:18 pm | Posted in Uncategorized | 3 Comments
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As we all know, the real estate boom of the past decade is over as we knew it.  Like many, I was fortunate to have bought my first house in 1999.  And 2005/2006 was the beginning of the end.  I mean, we all knew that things were out of control, but like dot coms and tulips, you just had to buy or you were labeled an idiot by those who were already making loads of money.

And similar to buying, people were able to custom build their dream homes- they’d get a construction loan from a local bank, buy a lot for a quarter million and then go nutso gonzo as they built the end all be all of custom homes- not personally for most, but we’re talking essentially a home built from step one with owner direction.

A few years ago, I was fortunate enough to work with a few local banks that were helping people build their dream homes.  And what they’d do is get an appraisal based on the finished product.  This is called a “proposed construction” appraisal.  And essentially it’s the same thing as a normal one, but it’s based on the hypothetical assumption that the home will be built as described in the blueprints and any other documentation that shows the finish of the home.  So even though the home wasn’t even started, I’d use current comparables to estimate the value of the finished product.

Now when it takes a year to build a home, the assumption (and bank business decision) is that the market values will stay the same or continue to go up…

Case in point:  I got an assignment to do an appraisal on a home that was just completed- this was in July of 2007.  It was a custom home on an acre in Queen Creek.  I go out there, do the normal appraisal and based on the closed sales from July 2007 or thereabouts, the home was worth $875,000.  Now the original construction appraisal had it pegged at right around a million dollars, so losing $125k in value is a big chunk of money.  Either way, based on what the owners put down, the loan went through.  And please keep in mind, I don’t know if every deal goes through.  It’s not the Appraiser’s job to care if a deal goes through.  This was more of a curiosity thing and I was friends with the loan officer.

Custom home I appraised in 2007

Custom home I appraised July 2007

Literally 3 months after this- we’re talking October 2007, the same loan officer called and said that they owners now wanted to take out a home equity line so that they could do their yard, put in their pool, etc.  Ironically, the owner owns a landscaping company so I figured he’d have an in- at least with the landscaping.  But anyway, I did the new appraisal and unfortunately, all the now new comparables painted a different picture.  Let’s describe this era as “the beginning of the end” or the “world of wishful thinking”.  Now, only 3 months later, the home appraised for $780k- that’s right, almost $100k lost in 3 months.  Needless to say, the homeowners did not get their home equity line.

And now is where I go into the mindset of that era.  Back then, I would get calls from loan officers- and I’m talking about the ones that I knew, and they would be in the process of taking a loan application for a borrower.  I would do a limited desk appraisal based on county records and present the loan officer with the applicable comparables in the neighborhood and invariably, the loan officer would ask if there was anything else (as if I’d be holding out the “good comparables” just to upset them).  When they realized that they couldn’t get a 80% loan, they would ALWAYS take the attitude of holding off for better comps…  Now my gut- based on my insight of the market, told me that there would not be any better comps, but it’s not my job to influence or predict.  So a month later when that same loan officer would call for the same property, let’s just say that my “told you so” news wasn’t always taken so well.  After all, it’s the Appraiser’s fault that home values were dropping right?  Shoot the messenger, etc.

So anyway, beyond seeing that deals aren’t going to happen (based on appraised value and my limited knowledge of either what they were hoping their home was worth coupled with what county records shows as their original mortgage amount), I simply move on with my life.  I’ve got enough of my own things to worry about to be concerned about every homeowner- that would drive a person insane.

So, let’s flash forward to 2009- November to be exact.  I just got an appraisal request for this same property that I’ve described to you above.  First off, let’s just say that that is such a statistical improbability that images of being struck by lightning- twice, come to mind.  Now back in the heyday of refinancing, I’d appraise the same home 3 or 4 times in a 2 year period.  But that was because the homeowner was refinancing with the same loan officer while rates went down and values went up.  But in today’s world of foreclosures and declining markets, it is now a statistical anomaly.

When I pulled up the county records of the home, I recognized the street name and neighborhood and wondered if by chance it was the same home, and  then I saw the owner’s name and it all came back to me.  As it turns out, the owners of said home couldn’t get their home equity line and have lived in the home for the past two years.  But now they are short selling the home.  Even though it’s not in any way my fault, I know that it was my appraisal that stopped their “progress” back in ’07.  So when I called the Realtor to go see the home, of course I asked if the homeowners still lived there- and of course they do.

Long story even longer… his mother was there when I inspected the home, so no uncomfortable conversation.  And at least I didn’t have to remeasure this bad boy as custom measures tend to take a little while.  But as you can see by the photo, nothing has changed- in fact the house is already a tad run down and neglected with uneven pavers, some of the stone accents missing, etc.

Custom Home 2009

Same Custom Home November 2009

So that’s my story.  Any questions you might have are welcome… oh wait, did you want to know what the home is selling for right now?  Do you really want to know what that “million dollar home” is worth today?  Alright, I’ll tell you- but you need to leave me a comment!

$342,000.

Visit our website at www.advantageappraisalsllc.com, and if that doesn’t roll off the tongue, just try www.appraiserdude.com. Or now you can follow us on Twitter at @appraiserdude.  Give me a call at 480-544-1217 if you have any questions. I look forward to working with you.

Should a Realtor Meet the Appraiser?

October 20, 2008 at 3:45 pm | Posted in Uncategorized | 2 Comments
Tags: , , , ,

The Appraiser is an objective party in the real estate transaction. There should be no outside influence on his opinion of value. So what’s the point of a Realtor meeting the Appraiser when he does an inspection?

Well, to be honest with you, it all depends on your knowledge of appraisal practice, your confidence in the Appraiser assigned to the home, and your own knowledge of the market of the home.

If you:

  • know enough about how appraisals are done
  • know that three model matches sold within the past few months within a mile of the subject
  • know that those sales closed for prices that are higher than your subject property contract price
  • know that your house is nicer than those aforementioned comparable properties
  • know that all three closed sales were listed in the Multiple Listing Service
  • know that all three closed sales were listed correctly in the Multiple Listing Service
  • know that all three closed sales were arms-length transactions

…then you really don’t need to mee the Appraiser. This is what’s known in the industry as a “lay-up” or a “slam-dunk”. Not sure why they are basketball references, but oh well.

But if you answered no to any of these questions above, then you have to start thinking about things. If you answered no to more than one of these questions, then you have what could be called a complex appraisal.

What that means is that the Appraiser will have to really earn their pay by finding appropriate sales, considering the local market and recent transactions. Now there might be three sales but one is a bigger home, one is a smaller home and one has a swimming pool (while the subject doesn’t). And the Appraiser will use those sales and make adjustments accordingly to determine market value. But as your transaction gets murkier and murkier, then the Appraiser will have to pull out more experience and knowledge in order to find appropriate comparables.

Say there are no sales within a mile. There are no sales within 3-6 months. The subject is 2000 square feet and the most recent sale is a 3500 square foot house from 7 months ago. Well, now we’re getting into a situation where it’s a good idea that you meet the Appraiser. You’re not going there to try and influence him or strongarm him or act like he’s an idiot. You want to meet him to help educate him on the transaction and how it came about.

Assuming that the buyer loves the home, has done his research and the seller is agreeable with the contract price, then obviously there is some sort of meeting of the minds. That’s where you as a Realtor comes in. Here’s a little insight- I cover Maricopa AND Pinal county. That’s a lot of land. And I can honestly say that I’ve appraised homes in every city or town within those counties. But that doesn’t mean that I have intimate knowledge of each and every one. One of my clients does a lot of business in Fountain Hills- which is about an hour from our office. So I know that area pretty well. Of course when clients look me up online they typically find me because of where my office is based, so you bet that I know my own town. But there are some cities that I might do an appraisal in once a month. And with so many neighborhoods within each city, it’s even less frequent that I do the same neighborhood more than once per year.

The Realtor on the other hand usually sells within a certain area, or takes buyers to a certain area, so they know their neighborhood very well. Is the school district way better than everywhere else? Did they just open a new shopping center which everyone loves? Are most listings sold within a few weeks while neighboring cities might sellin 3-6 months? Those are factors that the Realtor should have good knowledge on. Don’t get me wrong, the Appraiser should know enough about the neighborhood to do the appraisal, but you never know.

So, if you feel that there might be a value issue with the appraisal based on any factors mentioned above, or any other ones not mentioned, then tell the Appraiser that you have prepared some information that he could use. Don’t say it in a way like he’s an idiot- because he just might tell you to not bother (yes we have egos too, and nobody likes to be told how to do their own job). But then bring printouts of the comparables that the buyer considered. Bring printouts of the closed sales that you best feel represent the market- and hand write notes about the property- someone died there, rental property that was trashed, major remodel, etc. Bring printouts of recent newspaper articles that might show great hightlights of the community. Bring data that shows why this neighborhood is one of the rare pockets that is not declining in value. Bring your business card. Bring a bottle of water (if the Appraiser refuses, then guess what- you have a bottle of water to drink!).

Here’s the worst case scenario- you leave, the Appraiser leaves, and when he’s at Starbucks, he throws your data away without even looking at it. But a good Appraiser will appreciate this rare jesture and he will compare your data to his, and he will throw away the ones that he’s already found- heck, he might have the exact same data that you have. But I’ll tell you from my personal experience… Every once in a while the Realtor provides me with a sale that I didn’t find. Either the zip code was wrong in MLS, or it was listed in the wrong grid, or maybe it just closed the day before. Every once in a while I find that I’m in one of those Twilight Zone pockets where there is a waiting list to buy a home and people ARE still paying a premium (very very very rare).

And if you are able to meet Appraisers like this without coming across as a know it all Realtor who’s too busy and is too important and too good looking, then you will gain the respect of someone who meets a lot of homeowners. Who knows, you might even get some business out of establishing that relationship with an Appraiser whom you might never see again. We’re all a team in the real estate industry so it baffles me when I encounter a loan officer, an escrow officer, a Realtor, or even a homeowner who just can’t help but make things difficult for the rest of the team.

Visit our website at http://www.advantageappraisalsllc.com/, and if that doesn’t roll off the tongue, just try http://www.appraiserdude.com/. Give me a call at 480-544-1217 if you have any questions. I look forward to working with you.

Sincerely,

George

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