Using home’s previous sales in appraisals

The problem of giving too much weight to previous sales (or not enough)

By Ryan Lundquist

Excerpts: It must be worth more than it sold for in the past, right? In many cases, YES. But sometimes NO. Let’s talk through some things to consider when pulling comps and noticing a previous sale. I find many of these points coming up lately in conversation, so I hope this is helpful.

8 issues are discussed.
Here are a few
2) Unique property:
3) Unicorn buyer overpaid
8) Not penalizing because it sold too low

Closing advice: I recommend paying close attention to previous sales to get clues to understand how a property fits into the market. But don’t get so stuck that you don’t see the most important thing – current comps.

Good topic I have not seen discussed in detail before. Worth reading. Lots of comments!!

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Condo vs. Townhouse for appraisers

Is It a Condo, a Townhouse, a Site Condo or None of the Above?

Excerpt: When appraising townhouses, I always search the MLS for both single-family attached sales as well as condominium sales. Why? It’s because at times, there is confusion between the differences. Often I see real estate agents list townhouses as condos when they are not actually condos and visa versa.

I totally understand why. When it comes to townhouses, it is impossible to know from an outward appearance whether or not it is a condo, or not. Before we get into that, what is a condominium and what is a townhouse?

Well written article. Worth reading.

My comments: The first question in appraising is always “what are you appraising?”. Some appraisers just look at what structure is there. You are appraising the form of ownership, the land and what is attached to the land. With condominium form of ownership, you own the airspace. It does affect what you can do with a home. Some people don’t like HOAs and dues. I sold my house on the water in 2008. There was a large rear yard that was on a “tidelands lease” with an annual payment to the city. It was recently re-listed and only included the original 4,000 sq.ft. lot, not the leased land. Both showed up on plat maps. I wonder what the appraiser for the sale will say about it?

About 20 years ago I appraised a detached home in a project built in the 1980s with both attached (stacked condo style,  duets – sets of 2 semi-detached homes, and townhome (attached) style) plus detached homes. The owner, the HOA president was surprised to learn that they were all condos. I had a title report I showed to him. (The detached homes are now called site condos.) Another nearby small development of sets of two homes (duet or semi-detached) built in the 1960s did not have any common ownership or dues. I have seen these in other nearby cities also.

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Appraisals and Altered Listing Photos

Digitally-doctored listing photos are on the rise

Excerpts: It will cost $2.40 for a paint job, $24 to replace flooring, and $40 to remove a wall or add a swimming pool.

Digital photo manipulation has become so widespread and cheap that home sellers are increasingly using the technology to spruce up their listings, the Wall Street Journal reported. This has the potential to create new headaches for end users, investors, appraisers and brokers…

Furthermore, with federal regulators pushing for automated appraisals that will make use of online listings, the hazards of doctored images could be spread to the general public.

My comments: How do AVMs and CU deal with this? Appraisers can always contact the agent to confirm what the home looked like. CU robo emails/calls to agents and somehow integrate this into the data?

Lenders and AVMs are now using agent MLS comments. I recently spoke with an appraiser where the lender disputed one of her comps because the MLS mentioned it was “close to shopping” and she did not. Yes, it was very close to a historic shopping street, but there was little to no off street parking on this street, as it was taken up by employees in the stores. The comp had 9 off street parking places for 2 units and sold for a premium price. Typically there is 1 or 0 parking spaces per unit in the historic apartments on the comp’s street. I recently tried to go to an open house on the street. The closest parking space was 3 blocks away. I skipped the open house. The agents often mentioned “close to shopping” to say something positive about their listing’s location.

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Zestimate Obsession and an Appraisal

Obsessively Checking Zestimates

Excerpts: If you own a home, or want to own one, chances are you’ve spent some time with one of the many apps that estimate home values. As real estate prices have risen in recent years, watching one’s equity grow – at least on paper – has become something of a national pastime. Some would call it an obsession.

“I check my Zestimate way more than my 401(k),” said Bradley Reed, a homeowner in Cleveland, referring to Zillow’s proprietary tool.

“On a slow week, I might check it every other day,” said Krista Burns in Doylestown, Ohio.

Listen or read the story and twitter comments, see some fotos, etc. Add your comment at the bottom.

My comment: Zesimates are free, but often not accurate. They work well in newer conforming subdivisions, but not well with older homes.
I listen to the marketplace podcast almost every day, listened to this one last week, and really liked it. Fortunately, with this link you can read the transcript or listen to it plus read some twitter comments. I know that real estate agents have lots of problems with it. I wonder how many appraisers look at Zestimates? You may be surprised!! Some even include it in their appraisal reports and explain why their value is different.

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AMCs and Respect for Appraisers??

AMCs and Respect for Appraisers??

By Rachel Massey, SRA
Excerpt: …an example of an AMC that is not paying attention to the comments from the declination. If an appraiser declines due to coverage area, then it should not be reassigned. But also, if appraisers decline because the fee is inadequate, is upping it a paltry $25 going to cut it? In the time between the initial order and the subsequent, ten days passed. Had the AMC picked up the phone and started calling appraisers, they may have had much better success at finding someone who first of all covers the area, and second of all, would tell them how much it would take for them to take on the assignment. AMCs and Respect for Appraisers??

My comments: Worth reading plus the appraiser comments, of course!!

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Agent square footage and sales prices for appraisers

Agent’s Source Of Square Footage May Affect Sale Price

Excerpts: If you use county tax assessor information as a square footage source in your listings you may want to rethink this. I recently did a study to see how homes sold based on where the agent got their information from and I have to say what I found was intriguing. Agent square footage and sales prices for appraisers is important.

The Greater Alabama MLS, of which I am a member, provides the source of square footage information that is included in the listing. The four sources include tax records, seller, building plans, and appraiser.

Below the article are links to some other good posts by the author on this topic.

My comment: Very interesting analysis and graphs. My MLS is the same, except “other” is included and tax records is the default. Tax records are iffy in California as Prop 13 passed in 1979 and records have not been updated since then, unless there is new construction. Also, what assessors include in GLA can differ from what the current market does. Some neighborhoods and properties are reasonably accurate and some are way off in my small city.

I have done a lot of relocation appraisals, where 2 or 3 appraisers appraise the same house. If we had the same square footage it was sorta suspicious… Some measure to the half foot, rounding up or down, some use decimals, etc. It is not exact.

I can really see a demand for using appraiser measurements. I will be writing an article in my paid newsletter soon about this topic. There are a few appraisers who do them, including discussing pricing and liability.

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Bots replacing appraisers?

Sorry, home appraisers, bots are coming for your jobs

NOTE: This post was published in December 2018. This topic has been going on for a very long time since AVMs started in the 1970s. 

Federal regulators are looking to change appraisal rules to allow for more automated appraisals
Excerpt: Such a change could prove lucrative for upstart property valuation companies that use algorithms, artificial intelligence and drones to value homes. If these rule changes had been in effect last year, roughly 214,000 additional home sales, or some $68 billion worth, could have traded hands without an appraiser. Bots replacing appraisers?
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Plan to Reduce Human Appraisals May Lead to ‘Wildly Inaccurate’ Estimates 
From NAR: 
Excerpt: Automated home evaluations likely would take the place of in-person appraisals for qualifying properties-a move appraisers warn could lead to inaccurate estimates and more sellers who are unrealistic about home value.

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Bolwoningen Ball Houses – difficult appraisals!

Bolwoningen Ball Houses

 Excerpt: Bolwoningen consists of 50 sphere houses. The balls are made of cement, reinforced with fiberglass. They are mounted on the base in the form of a cylinder. Each sphere’s diameter is 18 feet and each has 11 round windows. The layout of these structures is quite unusual. In the center of the sphere there is a bathroom and a tiny bedroom, and a living room and kitchen, are located on the second floor-level. The house can be completely disassembled and transported to any other place (the weight of this building is only about 2755 lbs). In addition, this building can be placed not only on the ground, but also on water, on a stationary platform. Bolwoningen Ball Houses – difficult appraisals!

Locals didn’t quite appreciate the vision of the architect, but there are plenty of tourists, who would love to visit or even experience living in these futuristic houses.

My comment: Fascinating!! It was built in 1984 and is surrounded by standard homes. Check out the 2 links above and/or google bolwoningen ball houses

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Sheds vs. outbuildings for appraisals

Are Sheds Outbuildings?

Excerpts: Often, when appraising homes, I see MLS listings that call a shed an out building. Ask any appraiser and they will likely say that a shed is not an outbuilding. So, are sheds outbuildings?…

In appraising properties, there is a big difference in value between a shed and a large outbuilding. Most of the time, at least in my market, sheds really do not add any significant market value to a home. However, a large out building can add tens of thousands of dollars in value to a home…

Well written and worth reading:

My comments: I never really thought about this before, even though I see a lot of “sheds”…

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Wearing shoes in a house for appraisal

The Ugly (and Filthy) Truth About Wearing Shoes in the House

Excerpts: “Shoes off, please.” A reasonable request? Or are those fightin’ words?

Arguably, no other three monosyllabic words have ever led to more irritated house guests, resentful homeowners and thriving sales of shoe racks, slippers, and sing-songy, passive-aggressive signs. (“Since little fingers touch our floor, please remove your shoes at our door!”)… “So many germs and bacteria can be brought in from your shoes, including toxins and E. coli,” Mitzner explains…

“So, if one removes their shoes,” he asks, “what about all the potential bacteria on their socks?” Plus, even if you abide by a strict rule of “no shoes,” you can’t escape the fact that the interior of your home is still covered in germs, Adalja says. How reassuring.

While there are scientific arguments both for and against pulling off footwear the moment you enter the front door, experts do seem to agree on one thing: To minimize the risk of getting sick, go out of your way to keep a clean home.

My comment: I hate taking off my shoes in a house!! I have to put them, or disposable booties, back on when going in and out of the house. But, since reading this article, I am so glad I have hardwood floors with no carpets and no small children ;> Of course, the bottom line: it is their house and they can decide.


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