A home owner hired me recently for some value perspective after there were three separate appraisals done on his house for sale. Since there was a huge discrepancy between the values and contract price also, the seller wanted to find out what his house was really worth. So he hired me to review the appraisals and talk with him about the market. And yes, I have permission to share this story.

Background: His house in the Sacramento area listed at $210,000 and had 7 offers right around $210,000 (conventional, FHA & VA), and a cash offer at $198,000.  Some offers asked for 1-3% concessions back to the buyer, but others did not. The first accepted offer was $210,000 and the second was $213,000.

Appraisal #1: This appraisal came in at $192,000. The appraiser made an adjustment for a declining market and a hefty adjustment downward for being located on a feeder street too. These adjustments essentially knocked off about $10,000 in value (and they weren’t supported in my opinion). All things considered, this appraisal looked low, especially in light of a pending sale the appraiser used in the report that subsequently closed at $195,000 (and was 200 square feet smaller with less upgrades – located on the same street).

Appraisal #2: After the first buyer moved on, a second buyer came along. The contract price was $213,000 and the appraisal came in right at contract. All things considered, it just seemed the appraiser was maybe reaching for the contract price on this one. Still, it’s amazing to see a $21,000 difference between the first two appraisals.

Appraisal #3: This was a review appraisal from the second buyer’s lender, and the value came in at $185,000. The reviewer did an exterior inspection of the property and the “comps” were simply not comparable. There is nothing similar about dirty distressed sales and the subject as a clean and upgraded home. Just because something has sold nearby does not mean it is a “comp”. This appraisal was good for nothing not the highest quality I’ve seen. The buyer was actually willing to pay the difference in cash between the contract price and a potentially lower appraised value, but the review coming back at $185,000 was a huge amount for the buyer to consider paying. This reviewer was probably paid very little for the job he did, yet his appraisal ended up playing a huge role in the transaction.

Any lessons we can learn? Situations like this aren’t pretty, but there are still some important take-aways to remember in this market:

1. Appraisers, do a better job.
2. Agents, be ready to answer questions and provide market insight to appraisers when they ask you questions about one of your sales or listings. In light of low inventory, it’s critical to obtain insight from real estate agents - especially on listings. Also, here are some tips for talking with appraisers in an HVCC world.
3. Borrowers and owners, if you’ve at the receiving end of a bad appraisal, ask the lender what their process is for doing an appraisal rebuttal or challenge, and then follow their guidelines. You may need to offer new comparable sales, market data or possibly obtain a new appraisal. If the lender is not willing to work with the new data, and you feel strongly the original appraisal is not accurate, you may need to switch lenders. Keep in mind the appraisal sticks with the property for 120 days if it is an FHA loan, but that’s not the case with a conventional loan. It may be worthwhile to consult with an appraiser who is a market specialist in your area also. The appraiser cannot advocate for your cause, but can provide unbiased market research for you. Here are some tips for how to challenge a low appraisal.
4. Let’s remember that market value and price are not always the same thing – even when inventory is low. Despite multiple offers, we won’t always see properties appraise at or above contract price.
5. This market is not easy for anyone to interpret, yet it’s easy to blame various parties for a deal not working out – particularly appraisers. In the case above, the shoddy appraisal work was clearly to blame, yet that’s not always the case when a transaction goes south. All I’m saying is let’s give blame where it is due and when it is due, but be objective in our critique.

Any questions, stories or insight? Why do you think there is such a difference in appraised value in situations like this? I’d love to hear your comments below.

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Twitter, subscribe to posts by email or “like” my page on Facebook

Questions to be prepared to answer for one of your listings:
- How many offers did you have on the property? Don’t just say “multiple”.
- What price levels were the other offers? Be specific if possible.
- Why was there a change in listing price? (if the price was lowered or raised)
- What attracted the buyer (and others) to the property?
- Why did you accept the particular offer instead of others?
- What have you noticed happening in the neighborhood market?
- What sales did you use to market the property? (opportunity to provide potential comps to the appraiser if he/she is appraising your listing)
- Were there any concessions in the purchase price? (money or anything provided to the buyer to help get the deal done).

Example information when an appraiser calls: “I had four offers on this one. 2 were over asking at $245,000 and the others were at $240,000. I stopped accepting back-up offers. The seller accepted the offer because the buyer seemed committed and able to perform. The seller also liked the buyer as a first-time buyer. The listing price was lowered 15K to get into contract immediately. I had about 50 calls on this property and probably 100 showings, so I know the price was really attractive. The bank was about to foreclose, so we needed an offer immediately. Buyers really liked the cul-de-sac, great room concept and “move-in” condition. The REOs in the neighborhood tend to sell for less since they often need new carpet and paint. Also, the school district boundaries change two streets over, so that was a selling point. Inventory is really low in the neighborhood, so this one really stood out – even as a short sale. All buyers asked for 3% in closing costs back, which is common.”

Does it bug you to talk to appraisers? This list might sound overwhelming or even annoying, but the questions are really aimed at understanding the way the market responded to your particular sale or listing. Most agents get this and do a great job, but sometimes a few agents give off a bothered vibe. Ultimately, keep in mind appraisers are simply trying to do their job, and talking to appraisers is a normative part of the real estate business. Specific information on current listings and pendings in particular helps appraisers gauge the current market – especially since there are sometimes few recent sales to use as comps. This means current listings are an important window into the market. Thankfully it’s easy to unpack answers to these types of questions in just a few sentences. Appraisers of course need to be the ones to ask the right questions, but if agents already generally know what appraisers might ask, that can only help.

We’re in this together. Thank you real estate agents for talking with appraisers. Thank you for returning phone calls and emails. Your insight is often valuable and it’s an essential step for appraisers to do their job (verify data and analyze the market).

I hope this was helpful. Let me know if you have any questions, stories or insight.

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Twitter, subscribe to posts by email or “like” my page on Facebook

Let me first say that there are three options to consider: 1) The appraiser missed the items in the final value; 2) The appraiser didn’t really think the items made a difference for the final value; 3) The appraiser considered the items in the final opinion of value, but didn’t make an adjustment for each item in the appraisal itself.

An example of switch plate covers: Do switch plate covers make a difference in value? Let’s look at two different switch plates from Lowes below. The nylon plate on the left costs $0.39 and the satin nickel plate on the right costs $6.54. If a house has 20 spaces for switch plates, the cheap nylon plates would cost $7.80 total, whereas the more expensive satin nickel plates would cost $130.80. The difference between the two types of plates is $123.00.

Does this mean your property is worth $123.00 more? Theoretically, if the market shows that a buyer is willing to pay $123.00 more for your house with satin nickel plates instead of a house with nylon plates, then the appraiser should consider the value impact. But realistically, appraisers aren’t going to focus on that type of nitty-gritty data (it would be nearly impossible to track down anyway), but the appraiser will often consider small ticket items like this in the final reconciliation of value. This means if your house is fairly similar to the comparable sales used in the report, but you do have quite a few extra features like more expensive switch plates, upgraded hardware, new baseboards, updated ceiling fans, new light fixtures, etc… the appraiser can take all these things into consideration during the final reconciliation of value and potentially reconcile your value to a higher end of the range instead of the lowest end of the range (if that’s what your many small improvements warrant of course). If you think that sounds crazy, let me ask you this. Have you ever made an offer on a house for $123.00 more because of switch plates?

Give the Appraiser a List of Updates: It’s helpful to the appraiser when the owner or agent writes out an itemized list of all recent improvements – whether big or small. Include costs too if you have them so the appraiser knows your bathroom remodel was $15,000 instead of $2,000. Basically, let the appraiser know about any way you’ve put money into your house – even switch plates.

What if the appraiser really did miss things that impact value? If you do feel the appraiser missed value in your report and you plan to challenge the low appraised value, then it’s time to pick apart the appraisal and send in some thoughts to ask the appraiser to take a second look and reconsider your points. But don’t bring up small things like switch plates and baseboards when you do this. Focus on the big-ticket items that are really going to sway value. Focus on the following:

Discuss any more relevant comps that the appraiser did not use.
- This is one of the strongest points you can make to help the appraiser reconsider the market.

Focus on comp selection, adjustments and items that impact value: 
- Did the appraiser use sales similar to the subject in condition?
- Is there a difference in the level of upgrades between the subject and comps?
- Are the neighborhood boundaries correct?
- Is there any big difference between the reported square footage or bed/bath count in the appraisal report in comparison to what you know to be accurate about the subject property?
- Is there a value difference between distressed and traditional sales in the neighborhood?
- Are there any major location differences unaddressed? Busy street? Next to gas station?
- Are current listings similar in price level to recent sales? Listings can often show us the direction of the market (up or down).

I hope this was helpful. Please let me know if you have any questions, insight or stories to share. I always welcome comments below as well as emails.

Do you have custom switch plates?

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Twitter, subscribe to posts by email or “like” my page on Facebook

Do appraisers pay attention to multiple offers and the price level of offers? Generally speaking, in my opinion multiple offers do say something about the way the market perceives a property at a particular price level. This is basic economics – supply, demand and what a pool of buyers are willing to pay. Obviously if buyers are consistently offering over the listing price, and there are no funky concessions built in to the offer, it’s hard not to think that multiple offers at or above asking price doesn’t say something about market value. However, it’s important to realize offers above asking price are not always indicative of the worth of a property or appreciating values for that matter.

Three scenarios where higher offers might not represent market value:

1) “Offer Above” Strategy: Some buyers are offering over asking right now as a strategy to get a contract accepted. After getting beat out of other purchases for weeks or months on end, buyers inevitably get tired and offer more money to secure a contract. I’m not talking about buyers offering higher because of rising values, but rather making an offer at a higher level solely to get into contract. The rationale is that it’ll be easier to enter contract at a higher price level and then deal with a potentially lower appraisal to negotiate the price back to a reasonable amount (market value). I cannot tell you how many times I’ve seen this strategy lately. Some agents I’ve spoken with have even rejected blatantly high offers because they are clearly a desperate attempt to beat everyone else out and get into contract. At the same time, the strategy has also backfired when the appraisal actually comes in at the higher level (that’s another blog post). The irony here is that appraisers sometimes get blamed for a “low appraisal” when the value comes in below the contract price, but with a strategy like this, the appraisal probably should come in below the contract price.

2) Spending Other People’s Money: Financing can definitely influence higher offers. After all, it’s easy to pay more for something when you’re not spending your own money. For example, FHA offers dominate the market right now in Sacramento, and they commonly come in higher than conventional offers because buyers only have to put down 3.5% of their own money. Many times buyers get down payment assistance too, which means they are literally putting zero money down. Additionally, FHA buyers tend to offer higher amounts to justify the seller giving a credit of 3% to the buyer to help cover closing costs. A higher offer like this ends up being a win-win because the seller nets the same amount as an offer without concessions and the buyer gets financial assistance to get the deal done. However, the question we must ask is if the more aggressive nearly 100% financed offers represent market value. For example, if there were 10 offers on a property and the top 3 offers over asking price were all FHA, and cash and conventional offers were at lower levels, it’s worth weighing whether financing has impacted the top three offers or not.

3) Overpaying Happens: Sometimes buyers simply overpay. This happens more frequently with cash buyers when there is no appraisal or lender used - especially when the buyer is from out-of-town or less familiar with the local market. While I’m not a baseball expert by any means, the example of the recent offer to purchase the Los Angeles Dodgers is a striking picture of potentially overpaying, and thereby very relevant for real estate folks to consider. Magic Johnson and a group of businessmen are shelling out two billion dollars for the Dodgers when the previous highest sale of a baseball team was the Cubs for $845 million in 2009. Again, I’m not a baseball analyst or sports team appraiser by any wild stretch of the imagination (I wish), but unless the buyer is seeing something nobody else is, this purchase sounds like it’ll be an outlier comp rather than set the standard for all other future sales. Time will tell though of course. We shall see.

Check out the following two graphs for a greater context on housing inventory in Sacramento County over the past year and the past decade.

The Bottom Line: All things considered, it’s important for appraisers to evaluate each transaction and understand the nature of the sale for the property being appraised as well as the comps. The appraiser will use closed sales and current listings to help establish value, but information pertaining to the number of offers and the price level of offers is also worth consideration because it usually tells us something about the market. However, multiple offers and contracts above listing price are not always an indicator for how the market really views the property because there are definitely other reasons why buyers might offer more than the asking price.

NOTE: This is not to say the market hasn’t been heating up lately. I’m only saying not every multiple offer scenario is indicative of higher values.

Any thoughts? I’d love to hear your comments below.

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Twitter, subscribe to posts by email or “like” my page on Facebook

1. Walk around the house in your birthday suit.
2. Let the dogs run loose to lick and bite the appraiser at will.
3. Lock your doors so the appraiser doesn’t have access to each room.
4. Watch ”adult” movies (this actually happened once…. yikes).
5. Let the appraiser surprise sleeping house guests. Rise and shine.
6. Make things as messy as possible.
7. Refuse to discuss any recent updates to your home.
8. Follow the appraiser around as much as possible.
9. Buy lavish gifts in hopes of boosting value.
10. Don’t make a list of recent improvements.

You know I’m only having fun, and I’m pretty sure you can sift through what I’m saying to understand a bit more how to be ready when an appraiser comes to inspect your property. If not, please read “What should you do before the appraiser comes?” If you have any questions, let me know.

Anything you’d add to the list?

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Twitter, subscribe to posts by email or “like” my page on Facebook

A teepee or mountain graph: As an example, let’s view the past thirteen years of sales in the Northbrook neighborhood in Antelope for a particular single-story model (1943 sq ft). If you’re not familiar with this pocket of housing, it’s a smaller subdivision located west of Watt Avenue and just north of Elverta Road on the eastern side of the golf course. At one time the 1943 model was selling easily above $400,000, but today’s market has seemed to hover between $175,000 to $200,000 over the past year for a standard property without massive upgrades (there was one incredibly updated sale at $225,000 over the past year). I know such a hefty decline is hard to grasp, but values in this neighborhood are not anything out of the ordinary for the Sacramento area since most areas tend to be selling at 2000-2001 levels right now.

What does a graph like this say to you? What do you think it shows?

By the way, I don’t always break down model match sales, but while preparing an appraisal in this neighborhood for the IRS, I thought a graph like this would really help to communicate clearly to my client since there were not too many sales around the date of the death of the owner (which is the date I used to value this property).

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

Here are five questions to ask yourself before giving comps to an appraiser:

1. Is the “comp” a replacement? Would buyers in the neighborhood market consider purchasing the “comps” instead of the subject property if the comps were still on the market? That’s really what “comparable” means. The sale should be similar enough that the buyer would have theoretically considered it as a replacement instead of the subject property. If the subject is a fixer, are the comps fixers? Do the comps have standard updates also or are they all remodeled?
2. Are your comps located in the same neighborhood? Keep the neighborhood boundaries in mind when selecting comps by asking yourself where else a buyer would shop for a similar property. It’s fine if there is a reason to use comps outside of the immediate neighborhood, but just make sure the neighborhood is really competitive to the subject neighborhood (not superior). Otherwise the sales really aren’t all that similar.
3. Are the sales of a somewhat similar size? It seems like I get “comps” from agents quite a bit that are incredibly different from the subject property in size. For example, if the subject is 1700 square feet, I wouldn’t be surprised to see sales around 2300 square feet show up in the stack of comps. This is fine of course if the market views these properties in a similar way or there is an extreme shortage of sales, but usually there’s a price premium for the extra living area. Does a buyer looking for a 1700 square foot house typically shop for a 2300 square foot house at the same time? Probably not in most cases.
4. Are the sales recent? If the appraisal is for a loan, most lenders want to see recent sales over the past 90 days. However, if there is a good reason to use older sales, the appraiser certainly isn’t bound to use sales only from the past quarter if they are indeed the best sales. Sometimes real estate agents will give “comps” that are 6-12 months old while ignoring more recent sales though, and that’s suspicious if there are solid recent sales.
5. What are your motives? I think it’s fine for real estate agents to share data for the sake of giving the appraiser insight into how they marketed the property. It’s great if the comps and commentary help answer the question as to which properties the agent used to market the listing. Ultimately agents want to advocate for the sales price, which is fine in the eyes of their clients, but at the same time agents can often say and do things that pressure the appraiser to “hit the number” – which is not fine. When advocacy for a client becomes coercion for the appraiser to meet a certain value, that’s not a good thing. That’s why it’s important to check motives and use language in a way that does not pressure for a higher value. Check out a previous post on talking to appraisers (things to say and not say) for helpful tips.

Sacramento area Realtor Steve Ostrom and I discussed this issue of giving comps to appraisers in a video below (or click here).

How do you communicate with appraisers? What things do you say and not say? Do you have any frustrations, tips or questions?

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

Get an Appraisal during a Cash Purchase:

1. If you feel like you’re overpaying (or your client is overpaying).
2. If you think an appraisal can be used as a bargaining chip to lower the price.
3. If the seller will not budge on the price and says, “show me an appraisal”. I’ve seen investors and owner-occupant buyers lower their purchase price by providing a credible appraisal to the seller. I had an investor client this year able to lower the price on two fire-burned houses by getting an appraisal.
4. If your funding source wants to see something in writing.
5. If you plan to rehab the house through NSP or another program, get an appraisal since it’s probably required already (I just finished an NSP appraisal yesterday).
6. If you are an out-of-town buyer, make sure you’re not overpaying. Investors from the Bay Area and out-of-state do tend to overpay because they are less familiar with the market. Moreover, when investors are coming from areas with higher values, lower prices can seem incredibly attractive, which only breeds an environment for overpaying. But even the two appraisals I did recently with all cash local buyers were overpaying (see last paragraph).

Don’t Get an Appraisal during a Cash Purchase:

1. If it’s painfully obvious you’re price is fair (just be sure).
2. If you specialize in the neighborhood and know prices and values like the back of your hand, why bother?
3. If the price is just a bit high, but it’ll kill the deal if you walk, it still might be worth it to go through with the purchase so long as the investment pencils out. That’s a very subjective point of course and everyone must ask how much they are willing to overpay for something.

Multiple Offers and Overpaying: I have noticed buyers tending to make offers higher than the sales price right now to get into contract. Since there has been a much lower inventory in the Sacramento area it seems like listings are hoarded by potential buyers. A byproduct of fewer listings has been buyers offering more than the contract price to beat out their competition and get into contract. All things considered, if paying cash, there is a risk of overpaying in a climate like this. I would simply say to be cautious and consider getting an appraisal if you think the number isn’t quite feeling right. The two houses I appraised recently in situations like this were in contract 10-15K too high.

Have you ever had an appraisal during an all cash situation? Why? Why not? What points or tips would you add to the lists above?

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

The Danger of a One-Mile Radius: Take the following image for example in the northern portion of Oak Park in the Sacramento area. If I were to search for comparable sales within a one-mile radius of the red dot below, a return of sales from all sorts of neighborhoods would come back. Portions of Med Center, Elmhurst, Curtis Park, West Tahoe Park, Midtown and East Sacramento really don’t compare well with the location of the house (red dot) despite being within one mile. This example shows very clearly how inaccurate it can be to simply use a radius to measure a real estate market.

Lender’s One-Mile Guideline: It’s true that most lenders have guidelines wanting appraisers to stay within a one-mile radius, but there is actually no official “one-mile rule” from Fannie Mae that appraisers have to follow. Of course, in a tract neighborhood with ample sales, there probably isn’t a good reason to use comps outside of one mile anyway, so that’s why lenders issue their own guidelines to say appraisers need to stay within one mile. But the appraiser can definitely travel outside of one mile if need be. Check out the video below (or here) on Fannie Mae’s guidelines for distance in appraisal reports:

Which comps should the appraiser use? Ultimately appraisers should utilize sales in competitive neighborhoods – whether those are inside or outside of a one-mile radius. Where would a typical buyer consider making a purchase instead of the subject property? That’s a critical question to ask when defining the boundaries of a neighborhood. In the case above, it would be highly important to stay as close as possible to the red dot in the photo, and not cross the freeway either because a typical buyer looking in Oak Park would not simultaneously be looking in Curtis Park, Elmhurst or other portions of Tahoe Park due to price differences. By the way, New York appraiser Jonathan Miller has an outstanding post entitled “What is a Comp?”

Why does this matter?

1. Appraisers: Appraisers need to select the best comps in their reports.
2. Not Bound: It’s important for everyone to know that unique properties, major fixers, historic homes, rural homes and oddballs are not bound by a one-mile radius.
3. Resale Value: Sellers and investors need to understand the neighborhood and how appraisers are going to view the subject neighborhood too in order to gauge resale value. Be careful not to base your price on a superior tract nearby outside of your neighborhood boundaries. Check out a post on the importance of knowing your neighborhood boundaries.
4. Giving Comps to Appraisers: When agents give ”comps” to appraisers while at an inspection, it’s best to give properties that are actually located in the same neighborhood or at least deemed competitive in a similar neighborhood (as opposed to nearby sales that meet a certain price level). Moreover, the “comp” should really be similar enough that the buyer would have theoretically considered it as a replacement instead of the subject property. I had an agent give me “comps” recently and one sale was located 7 miles away from the subject property. While the subject property is a bit on the unique side in a standard subdivision, the sale 7 miles away was in a totally different and superior market – and therefore not similar at all.
5. Zillow and Online Sites: Zillow has value for what it is, but doesn’t always understand the importance of tight neighborhood boundaries. See a previous post on Zillow and comparison to actual appraisals.

Any thoughts?

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

Why do appraisers give so little value to a pool? It seems silly to think a pool installation at $30,000+ would only yield $10,000 or so in an appraisal, right? Let me explain.

1) Market Interpretation: First of all, the appraiser should not be making a subjective value judgment, but is rather interpreting what the market is saying about what a pool is worth. The appraiser analyzes similar homes with and without pools to see if there is a reaction (price difference) in the market for the pool. For example, if homes with pools in a neighborhood have sold for $290,000 and homes without pools have sold for $280,000, assuming everything else is similar, the pool is worth $10,000.

2) Buyer’s Perspective: If a buyer was looking at two identical homes, but one had a pool and one had no pool, how much extra would a typical buyer pay for the pool? If the pool cost $30,000 for installation, doesn’t it seem unrealistic that the buyer would pay that much extra for the pool? (especially if the house is only worth $150,000). The same principle could be seen with a $30,000 kitchen remodel. While the remodel is very nice, a buyer might only be willing to pay $20,000 extra for that remodel.

3) Overimprovement: Pools are a classic example of an overimprovement because they cost more than the market is willing to pay for them. By the way, for the sake of your Jeopardy knowledge, the fancy real estate word for “overimprovement” is “superadequacy”.

All things considered, keep in mind a pool may be worth more or less depending on the type of pool, quality of construction, climate, neighborhood, season and particular real estate market too. There is no constant dollar figure for appraisers to use from some sort of “Appraiser Pool Cost Manual” because each real estate market is unique and may have a different perspective on a pool. For example, a pool in an active-adult HOA community that already has three pools at the clubhouse might be worth very little or nothing to prospective buyers, while a pool in a first-time buyer neighborhood ripe with families could be worth more. Lastly, while there is a loss in value when considering market value, a pool obviously has a very subjective value in use to the owner that makes the cost worth it.

I hope this has been helpful and given you some insight into how appraisers view built-in pools. Let me know if you have any questions or insight.

Did you have a pool growing up? Do you have one now? What are the positives and negatives of pool ownership?

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

I’m really interested to see how the new “Village” compliments the historic Curtis Park neighborhood. Curtis Park has such amazing character, so I hope the builders will be as sensitive as possible to the quality and craftsmanship found in the neighborhood.  Whatever the case, as long as the builder does a decent job, my guess is these units are going to be a very hot commodity because of the great location and close proximity to Downtown.

Some articles to read on Curtis Park Village:

- Toxic Clean-up Complete – Feb 16, 2012 SacBee
- A big day for Curtis Park developer - Feb 15, 2012 Sacramento Biz Journal
- See also Sierra Curtis Neighborhood Association and Curtis Park News.
- City of Sacramento Curtis Park Village Project Information
- Petrovich Development Company Project Summary

I’d really like to hear from Sacramentans on this matter and especially Curtis Park residents. How do you feel about the development? What are the positives? What are your concerns? The SacBee article seemed to indicate that residents are “cautiously optimistic” about the project. If you are a resident, do you feel that way?

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

There have been quite a few bills over the past few years proposing appraisers not be allowed to use distressed sales in their apprisal reports. As an example, H.R. 1755 was introduced in the House of Representatives on May 5, 2011 and says:

ARMS LENGTH TRANSACTIONS: The appropriate Federal banking agency shall require that entities used by financial institutions to assess or review underwriting standards and collateral values for real estate loans made by such institutions after the date of the enactment of this Act use comparable sales involving arms length transactions to make such an assessment or review.

(A) IN GENERAL- The term `arms length transaction’ means a negotiated real estate transaction between a buyer and seller in which such buyer and seller act independently of each other.

(B) TRANSACTIONS EXCLUDED- Such term shall not include any transaction involving a short sale or foreclosed property or any other distressed real property.

Can Congress Provide me Comps? I’m finishing up an appraisal on my desk right now in the Wild Wings neighborhood in Woodland. This neighborhood is unique and there are literally no other subdivisions in Woodland that compare to this secluded golf course community. Therefore the most adequate and competitive sales come from within the neighborhood (that makes sense, right?). The only problem is that 75% of all sales over the past 12 months were distressed (only 32 sales by the way). Moreover, I’m doing an appraisal of a 2,500 square foot house and 8 of 8 sales between 2300-2800 squafe feet over the past year were either REOs or Short Sales.

If a law was passed that stated appraisers could not use distressed sales, I would have a big problem in this neighborhood and many others like it. Thankfully I know how to do my job though and I can use sales like this and sift through which ones may or may not represent market value (and make adjustments if appropriate).

Would you support this bill? Why or why not? What is the motivating factor behind a bill like this?

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

Case-in-point: I appraised a flipped property in Elk Grove recently and my appraisal came back close to $10,000 below the contract price (but still above list price). While this is frustrating for the seller or listing agent, there was no ill-intent or agenda on my part. I could be blamed for bringing down the housing market and stalling a recovery, but I simply interpreted the market in this case. The lender’s appraisal department actually agreed with my appraisal too as we talked in-depth about why the appraised value was reasonable. Recent sales in the neighborhood did not support the contract price, current listings did not support the contract price, I did not use distressed sales for comparables (those were far lower than equity sales) and even offers on the subject property supported a lower value. The seller ended up accepting the highest offer – an FHA offer asking for closing costs back. All other offers were conventional or asked for no closing costs, and they all came in near or lower than the appraised value. The type of financing is not a definitive point for establishing value, but buyers not using their own money tend to make higher offers, don’t they?

Don’t forget to point the finger at the market: It’s interesting to me that appraisers are often blamed for a lack of recovery in the housing market. I wrote two days ago about the increase in the percentage of short sales in the 95757 zip code of Elk Grove. While this is encouraging news on some levels (less foreclosures), short sales also tend to sell lower than traditional sales, which means the housing market is ultimately weighed down if short sales represent 39% of all sales in a given zip code. Short sales usually have to be priced more aggressively to generate interest and/or close quickly before foreclosure. Some banks are not easy to work with either, which can also impact pricing too. I’m not saying at all that appraisers are not to face blame for shoddy work, but when the market has a total of 66% of all sales being foreclosures or short sales (as in the case above), it’s important to keep in perspective just how much the market is driving property values.

My points: 1) Give blame when it is due; 2) Market > Appraisers.

What do you think? Does this seem reasonable or am I off my rocker? What are the factors helping and hurting our housing market right now? What role do you see flipped properties playing in the housing market?

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

According to the Sacramento County Assessor, “An “escape assessment” is a correction to a property’s assessed value on the local property tax roll. The correction is made because the Assessor’s Office discovered a property or a taxable event that should have been assessed but was not. Current and/or prior year tax rolls may be affected. The most common reasons for an escape assessment are overlooked or unreported new construction, a missed change of ownership… or the removal of an exemption.”

Why am I talking about escape assessments? I just finished up some property tax consulting work for an East Sacramento home owner who needed research for his property’s value over the past four years. I love this type of work because it’s exciting to analyze the market for a number of years to establish a value over time. In this situation the owner inherited the property in 2008 from a friend, but the Assessor’s Office was not informed at the time of the death of the original owner, which should have triggered a reassessment. When the Assessor discovered the death and change of ownership, they sent the new owner a “Notice of Proposed Escape Assessment”, which basically means the Assessor’s Office enrolled new assessments for the property for the past four years. The home owner can appeal the values within 60 days of the issuance of the notice. Since the owner disagreed with the value put on the tax roll by the Assessor for 2008-2011, he hired me to show what market value was during each of these respective years.

NOTE: In situations like this the owner can appeal property taxes for multiple years in the past, but that’s not the case in typical “decline in value” situations. If you have been overtaxed for the past several years, for example, but you did not formally dispute your property taxes at the time, then there is nothing you can do once the appeals deadline passes on November 30 of the given year. All you can do is wait until the next year to appeal your property taxes.

Does that make sense? Let me know if you have any questions.

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

NOTE: In quite a few cases the “comps” provided by real estate agents are really not all that “comparable” to the subject property. It can be valuable when agents share their market insight with appraisers, but my advice to agents is to make sure the sales really are comparable and located in the same market area. This comes back to the difference between a property that is truly competitive / comparable (“comp”) to the subject and a sale that meets a certain price level.

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.