Appraisals and Water Frontage

Appraisals and Water Frontage

Steven W. Vehmeier

Excerpts:

What about an off-site water view?

In a large townhouse-style condominium complex, there were only eight units that had water views. The view was of a section of the Intracoastal Waterway. It was from the second floor only, and over a six-foot high concrete block wall and across an open field. The builder charged more for those units because of the partial view.

My research discovered that the open field had just been purchased by a group that was building a four-level high-and-dry boat storage building. That bit of news made quite a few folks very unhappy and had a distinct impact on the value of those units. The moral of this story is that when you see open land between your subject property and the water, review ownership and the local building and zoning department’s comprehensive land use plan.

Water rights play a major role

With many water fronting properties, the topics of “riparian and/or littoral rights” (and the “prior appropriation doctrine” in the western states) come into play, along with several other issues. Those topics are fodder for other lengthy blog posts all by themselves. Appraisers should familiarize themselves with their state laws regarding water frontage and related rights, as they can vary from state to state.

Among the rights that come with real property ownership is the right to exclude others. When oceans, lakes, bayous, estuaries, rivers, streams, and ponds are involved, this right is a large part of what property purchasers are paying for.

To read more, click here

My comments: Worth reading, especially the last section “Final thoughts on the topic.”

I have lived in my island city for 42 years and had two waterfront homes, with docks, during the first 30 years. Both had many water related issues. One was on a tidal canal and built around 1943. Over time many homes along the waterfront, including mine, had non-permitted structures built over the water. The canal was owned by the state with an unclear easement for building beyond the rear lot line. The property owners asked me to do appraisals on the homes, including the rear structures but did not like my very high fee. It was so complicated the state and the city gave up trying to straighten it out.

The other home, built in 1946, faced a small bay off an outlet to a large part of San Francisco Bay. The large rear part of the lot was owned by the state and the city, which was leased to the homeowner. When the state said they were considering giving public waterfront access along the rear of all the homes unless we paid an annual lease fee, based on the extra lot square footage, we agreed to pay it.

I always wondered what other appraisers thought about these issues. They may not have even recognized or asked about them. Appraisers called very rarely.

I will never forget one of my first house appraisals here. The owner said it had a Bay view but did not mention you had to stand on the toilet to see through the window. After that, I told them the view had to be from a chair that you sat in!

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Green Home Appraisals – Ideas for Appraisers

5 Tips for Appraising Green Homes

By McKissock

Excerpts:

1. Consider each home on a case-by-case basis

You must independently determine whether there is sufficient information available to develop a reliable opinion of market value for each individual property. That will depend on the extent of the differences between the green home and other types of houses in the neighborhood. It will also depend on the number of such properties that have already been sold in the neighborhood.

5. Compare improvements to those in the neighborhood

Any improvements should conform to the neighborhood in terms of age, type, design, and materials used for their construction. If there is market resistance to a green home property because its improvements are not compatible with the neighborhood or with the requirements of the competitive market because of adequacy of plumbing, heating, or electrical services; design; quality; size; condition; or any other reason directly related to market demand, address the impact to the value and marketability of the subject property.

To read more, click here

My comments: I have “Mediterranean” (mild) weather, without much solar. If you live in an area with high summer and/or low winter temperatures, there are probably more solar installations. Many classes are offered by various appraisal CE providers. Check with education providers, such as McKissock, the Appraisal Institute, and local offerings.

What are Pass through Bedrooms for Appraisals

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Does A “Crazy” Neighbor Lower Value?

Does A “Crazy” Neighbor Lower Value?

By Jamie Owen
Excerpts: It’s tax appeal season, and I’ve had several homeowners say that they feel their neighbors are negatively impacting the value of their homes for different reasons. Is that the case? Can that be the case?
The homeowners of one property stated that their neighbors are a nuisance. My clients said that one of their neighbors has people coming and going until late in the evening, most evenings. They also complained about there being noisy. Additionally, they claimed that the neighbor directly behind them is not a very nice person and is always causing neighborhood trouble.
Meanwhile, in a different neighborhood, a different homeowner claimed that their home was suffering a loss of value due to their neighbor’s home not being kept up and needing repairs and updates on the exterior. The neighbor’s property is an eye-sore.
The long-winded point I am trying to make is that the appraiser will need to find some evidence to support the claims that a neighboring property is really creating a loss in market value to its neighboring properties.
To read more, and see some fun animated gifs and videos, click here
My comments: As always, Jamie often writes about appraisal topics from a different “angle”! I have a crazy next-door neighbor also, who waits for me to come home to “attack” me with some perceived problem… since 1986 when I purchased the property.

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Appraisers – The Past and The Future

Appraisers – The Past and The Future

The Path that Brought Us Here

by Richard Hagar, SRA

Excerpts: A wise man by the name of Jim Irish, former chief appraiser for the Federal Reserve Bank out of Topeka, Kansas, once told me something very profound: “The government is rarely proactive but always reactive.” Translation: laws, rules, and guidelines are usually developed after a problem smacks us upside the head. Since hearing this, I have found that it also applies to large enterprises.

Appraisers continued to tell lenders that they drove by each of the comparables used in the report. Years later, when lenders, Fannie Mae, Freddie Mac, FHA, and the VA spot-checked reports, they found out that the condition or location of many comparables didn’t match what was reported. So, the reactive response was to require the appraiser to affirm, under penalty of perjury (which stands to this day), and provide original photographs of each comparable.

Failure to inspect triggered client engagement letters stating the absolute requirement to personally inspect each of the comparables, provide original photographs, and create a system that inspects the photographs and can tell when a photograph is used twice or sourced from the MLS or county—clients know who’s lying to them and fees are lower because of it.

To read more, click here

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Prepare for Change

by Richard Hagar, SRA

Excerpts: In my career, I’ve been through four major changes in the market and our business, so what’s about to happen isn’t my first rodeo. I’m going to point out some things that will make a few people angry. However, I’m trying to help by pointing out how you can become better and profit from the change.

Waivers

Both Fannie Mae and Freddie Mac allow “appraisal waivers” (loans where no appraisal is required), and in the past, waivers were limited to fewer than 5% of the loans they purchased from lenders. However, their waivers have increased to 48% of their loan purchases over the past year. Imagine that 48% of the loans no longer require an inspection or appraisal.

Prior to 2022, Fannie Mae’s UAD system reviewed approximately 20,000 appraisals a day produced by approximately 40,000 appraisers. This indicates that appraisers were providing one appraisal every other day. Now, consider that waivers reduce the rate to an appraisal once every 4 days. Ouch.

To read more, click here

My comments: I have known Richard Hagar for a long time. He can sometimes be negative or even harsh but has good ideas

The future of residential appraising(Opens in a new browser tab)

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Fannie ANSI Update – 19 New FAQs

Fannie ANSI FAQs Update

Updated Standardized Property Measurement Guidelines – 19 new FAQs, 5 Pages

Excerpt from the short Fannie email sent 3-15-22 at 8 AM (Pacific time): “…Are you ready? We’ve updated the Standardized Property Measuring Guidelines fact sheet to include more answers to your frequently asked questions. Thanks to all the appraisers, AMCs, and lenders who submitted questions.”
My comment: There are no changes to the first page, including comps measured differently and the exception process. Links are included for references in Fannie’s Selling Guide in the Guidelines.
FAQ topics include:
Q5. When common practice in the local market differs from the ANSI standard, can the appraiser modify the subject’s GLA to conform to local custom?
Q8. The ANSI standard specifically notes that the definition of above and below grade could cause some houses to have no above-grade finished square footage.
How should appraisers report GLA in this scenario?
Q9. How will lenders know that appraisers used the ANSI standard?
Q15. Will appraiser adherence to the ANSI standard cause confusion when the subject GLA differs from other sources such as MLS or public record?
Q16. How should appraisers account for rooms located in above-grade finished areas that do not qualify as GLA under the ANSI standard?
Q18. The GLA of comparables available to appraisers may not be based on the ANSI standard. How should appraisers manage this issue?
Q19. How should appraisers value finished areas that the ANSI standard does not include in GLA, such as where the ceiling height is less than 7 feet?
To download the PDF to read the answers and other FAQs,  click here
My comments: Read This Document! I have been waiting for an update to the one-page original Fannie document since it was first released about 3 months ago. There are many, many issues when using ANSI for lenders and AMCs. Appraisers sent many questions to Fannie and made comments during webinars with Fannie.
If you’re looking for a class, webinar, or other ANSI info, go to www.appraisaltoday.com/ANSI

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Neighborhood Boundaries for Appraisals

Gentrification, neighborhood boundaries, and bias

By Ryan Lundquist 

Excerpts: Photo used with permission (thanks, Vicky).

Sometimes, crossing the street can make all the difference for value. In short, if we don’t understand where a neighborhood starts and ends, we might choose the wrong comps.

Q&A #3 How do we know neighborhood boundaries?

Okay, this is a big question, and it could easily be a dissertation. For starters, let’s consider what Fannie Mae says about neighborhoods:

Fannie Mae: “The appraiser should provide an outline of the neighborhood boundaries, which should be clearly delineated using ‘North,’ ‘South’, ‘East,’ and ‘West’. These boundaries may include but are not limited to streets, legally recognized neighborhood boundaries, waterways, or other natural boundaries that define the separation of one neighborhood from another. Appraisers should not reference a map or other addendum as the only example of the neighborhood boundaries.”

Other thoughts (mine): I think sometimes we focus only on major streets, but let’s also consider school boundaries and even how neighborhood associations or city websites define areas. But also, where would residents themselves draw the lines? And where would buyers be hunting for a home before shopping somewhere else? All these things could be clues.

To read more and see lots of maps and graphs, click here

My comments: Excellent analysis of specific neighborhood boundaries with maps and graphs, of course. Worth reading. The Jan. and Feb issues of the monthly Appraisal Today has this article: Does my neighborhood really need to be analyzed? Parts I II By Tim Andersen, MAI. The best neighborhood explanations I have ever read!!

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How Do Driveways Affect Appraised Value?

What’s The Size of Your Driveway?

By Jamie Owen
Excerpt: It really depends on how the appraiser is looking at it. Are they reporting the width of the driveway, the depth, or how many cars can fit on the driveway?
Most appraisers reflect the width of the driveway. Why? For one thing, many lenders prefer the driveway size to be reported this way. This is likely because it is less subjective. For instance, if the appraiser reports the driveway size based upon the number of cars that can fit on it, what kind of automobile are they using for their measurement? After all, a driveway may be able to accommodate a larger number of smaller cars than bigger ones.
Does it affect value? As is the case with nearly every aspect of a home, the answer is, it depends.
For instance, in high-density neighborhoods where street parking is limited, the size of the driveway could make a difference in value. On the other hand, in other high-density neighborhoods, many homeowners may use public transportation. If this is the norm for the neighborhood, the size of the driveway may not have any impact on value.
To read more and see fun animated gif, click here
My comments: Worth reading. Lots of topics are covered. Check out the fun animated gifs, etc.
In San Francisco, for example, off-street parking is at a premium in many neighborhoods. My brother bought a house 25 years ago with no off-street parking (primarily single family homes). I warned him, but he really wanted the house. It was a hassle then, but now, it is very difficult to find parking as many neighbors rent rooms to tenants with cars.
A significant issue with ADUs is where will the car(s) park? Will they take up the neighbors’ on-street parking?
I moved to San Francisco in 1968 and worked in a lab 20 miles away. The closest parking was 2-3 long blocks away when I got home from work. I moved from Tulsa, OK, where there was lots of parking everywhere. I never lived in a place without off-street parking again!
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Haunted House Appraisal Adjustments

Inspired by Italy, a Conical Home in Indiana

Excerpt: On the market for $424,900, the home consists of two main silolike buildings with shake conical roofs. Inside the round compound is a total of 3,111 square feet of living space.

The design was inspired by the trulli homes of the Itria Valley in Puglia, Italy. They were typically built from limestone and had conical roofs. The structures were chiefly designed as temporary shelters or storage areas in the 19th century. Today, they endure as charming residences in southern Italy. Back in Indiana, this home’s architect, Evans Woollen, combined details from trulli homes into his design.

“The house is a midcentury version of a 200-year-old village in Italy,” Landrigan says.

To read more and see lots of photos, click here

 

Top Ten Reasons Why It Is Great to be an Appraiser Humor

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Appraising Fixer-Uppers

What About Those Fixer-Uppers?

Insights from a Seasoned Appraiser
By Steven Vehmeier
Excerpt: We’re all familiar with the term “fixer-upper.” For many different reasons, properties can come on the market in less-than-par condition. The degree and cost to cure become an issue to buyers and sellers, and a challenge for appraisers. At some point, it’s no longer “normal market value minus cost to cure equals as-is value.”
The terms “entrepreneurial incentidddve” and “entrepreneurial profit” are typically discussed in terms of investment property, but the principles involved can also be applied to the many fixer-uppers—whether the buyer is a “purely investor type” or an “owner-occupied investor type.” Maybe a couple of new terms should be discussed: “sweat equity incentive” and “sweat equity profit.”
To read more, click here
My comments: Most of my appraisals are for estates (date of death). I have never appraised a home that was ready for sale when the person died: staged, new paint and floor coverings, yards cleaned up, etc. I very seldom have any repair estimates or structural pest control or home inspection report.
I always assume the home is empty of furniture and “broom clean,” which I learned doing lots of REOs in the past. If a home is cluttered with personal stuff, the price will be lower. But, it can be fixed easily and inexpensively. If it is a mess, I tell the executor to call me when it is cleaned out so I can see what the walls, floors, kitchen countertops, etc. look like.  If I can’t see, I disclose this in the appraisal and do my best to figure out a condition estimate.
Very few MLS listings here are not fixed up for sale. I look for “fixer”, “contractor”, “as is”, “handyman”, etc. in the description.

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What is Included in Appraisal GLA (sq.ft.)?

Stairway to Confusion – What is Included in GLA?

by C. Brett Bowen
Excerpt: There has been considerable discussion over the years about gross living area (GLA) measurement standards. The ANSI Z765 standard gets the lion’s share of the attention, and is the most widely referenced standard in the industry by far. It can also be the most difficult to interpret, particularly when it comes to stairs. Here’s why.
It is primarily important to recognize two very important facts:
 1) a standard is nothing more than the definition of a unit of comparison
 2) it is the appraiser’s responsibility to be consistent with that definition.
First, what do I mean when I say that a standard is nothing more than the definition of the unit of comparison? The unit of comparison for something is critical to the understanding of that thing.
Second, as an appraiser, consistency with the definition is actually more important than which definition is chosen.
To read more, click here
My comment: Worth reading. I have seldom used ANSI. The standards were developed for new home construction. I have appraised many homes on hillsides, with often only the garage at street level (or just a driveway). Many historic homes, on level streets, have different types of “basements” converted to living area: above grade, partly below grade, etc. If I worked in suburbia, ANSI would work better. I use what the local market tells me.

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