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.

Eric Peterson with Praxis Capital: We remove the chain link fences 100% of the time. We do the same to a house with bars on the windows. When buyers see this stuff they immediately think about safety concerns. It’s not the mindset you want to instill in a prospective buyer. If the houses around our target property have chain link fences, we likely will pass on the house. It’s just all about perception and no one wants to make a huge purchase decision while worrying about the safety of the street. 

Jeff Grenz with Erik Berry & Associates 916-425-3228: When I am evaluating homes for investor purchases… If the only home on the street with a chain link front yard fence is the home I’m evaluating, I include a cost to remove the fence, a few hundred dollars…but you can’t remove it from adjacent homes. Landscape and presentation of the subject and adjoining homes impacts the speed of the sale, and ultimately the price. Chain link yells “DISTRESSED”

When I see chain link in the front yard, I start looking for why… where is the big dog? Is there a high crime problem? Is there loitering? Will a potential buyer be asking the same thing and how many will pass by without even looking? I will lose prospective buyers.

It’s an economic decision…. as you lose prospective buyers and narrow your field, it costs more time to sell and you have to discount, both of which devalue the property.

Dennis Lanni with Housing Group Fund: It would not matter to me, but the chain link fence represents what kind of neighborhood it is. It tells me that safety is a concern, sort of like security doors but worse.

Kaleena Amuchastegui with Capri Property Real Estate: Automatically what comes to mind when you mention a front yard chain link fence is a home in an undesirable neighborhood, there is just something about chain link that screams it’s needed to be there to protect a home, not to mention it’s a huge eye sore in my opinion. I think of older neighborhoods that are run-down, I think of areas with higher crime rates… I know that if we acquired a property with a chain link fence around from auction there is a 90% chance we would remove it. I also know we would never add a chain link fence to a property.

Max Boyko with Team Hybrid Real Estate Services: Of course what I think and my investors think can be a different thing, but I would say chain link fences are definitely one of the most unappealing items in a neighborhood. It varies case by case, but primarily my investors would take them out, which I agree with. I wouldn’t say they would pass on a property if it was a good deal, but it takes away the appealing factor and creates a sense of poor security in the neighborhood, which may turn off potential buyers

Please note if you have a chain link fence, nobody is targeting you or saying you’re bringing down the neighborhood. These are simply the opinions of experienced real estate agents and investors. Of course, it may be worth considering what they are saying since they are constantly buying properties to fix and sell on the open market. Clearly they’re in touch with the perceptions of buyers, what makes a difference in property value and the reality of how important impressions are for a neighborhood. If certain elements of fence design give off a negative impression for the community, what can be done about it? What options exist?

If you want further information, I wrote a series last year called “Blight Week” that might provide some more insight into this important conversation. I wrote a previous post that shows a variety of different types of fences and considers the influence a front fence can have on a property. I firmly believe any neighborhood that is experiencing signs of decay has the potential to see better days with a little intention. There is always hope and we can find and experience that together too.

What do you think about chain link fences? Do you agree with the specialists 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.

1) Timeline: If your loved one passed away recently and you need to file your taxes very soon, it makes good sense to obtain an appraisal in a timely manner so you can communicate well with the IRS. In other words, if your loved one passed away within six months before you file your taxes, it would likely be prudent to order the “Date of Death” (DOD) appraisal within that timeframe. This is the most common scenario I encounter for the bulk of my estate appraisal workload.

2) Alternative Valuation Date: I mentioned the Date of Death (DOD) appraisal already, but the IRS has also made allowances for a home owner to obtain an Alternative Valuation Date (AVD) six months after the date of death of the owner. Basically, if the market has declined in value after six months since the date of death, you can use the appraised value six months later to show your estate has decreased in value over time due to market circumstances. In this option you would need two appraisals, both a DOD and AVD. If the market has been hit hard, this could be a huge advantage for you for tax purposes. Granted, you would pay for two appraisals (use the same appaiser), but the savings in light of a large decline should far outweigh the cost of the appraisals.

3) CPA / Attorney Advice: Make sure to carefully weigh your options and the implications of using a DOD or AVD appraisal. You should definitely consult with your CPA and/or attorney to talk through which options would be most beneficial for you depending on your plans for the property and the implications for taxation based on using a DOD or AVD.

I am familiar with the estate planning appraisal process, IRS guidelines for appraisals, and I also run an estate appraisal website. Please contact me with any questions. I am always very glad to help answer questions and meet a need for property owners in what is often a difficult time of life.

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.

How have you seen buyers respond to a location near a power tower? What do you think is the main turn-off in the minds of buyers? Visual pollution or a potential for health risks due to electromagnetic fields?

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.

Improved Site – Cost to Demo = Market Value

In a valuation like this I would not just consider the raw land, but also the contribution of value for any other improvements too – namely water and sewer on the site (hence the term “improved site”). But the cost to demolish the property also must be considered in a case like this because a buyer in his right mind wouldn’t pay money for an inhabitable house that is well beyond a reasonable cost-to-cure.

The moral of the story? Just because a house exists does not mean it has value. In so many cases a house can be salvaged, but in some cases a house just needs to meet a bulldozer instead.

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’d like to hear about your situation with a “low” appraisal and what you did about it. How did the appraisal impact your deal?

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.

While we’re on the subject of Wilton, here are all sales in Wilton over the past five years. What do you see? Does anything stand out to you? The trend in many other areas of Sacramento tends to have a much sharper decline, but that’s less of the case here. What makes Wilton different in your mind? If you live in Wilton, what do you find desirable about the community?

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 cost to repair the large hole is very minimal, but it’s still a safety issue for occupants, which means it is something that needs to be repaired for an FHA loan. I’ve actually seen this issue twice in the past month on investor flips in the Sacramento area, so clearly it’s not something that is being cured every time by sellers before the appraiser heads out.

Here is a photo of a “before” and “after” of a firewall breach. Have you seen a hole as such cause problems before in a house? Might rodents be able to get into the house this way too? Can you think of any other issues this might pose?

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.

Any thoughts 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.

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.

Any other insight or thoughts about the affect of distressed sales?

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.

Q: How many layers on a roof will FHA accept?
A: “FHA will accept a maximum of 3 layers of existing roofing. If more than 2 layers exist and repair is necessary, then all old roofing must be removed as part of the re-roofing. (4905.1 REV-1, 2-12)”

Q: How much life does a roof need to have left?
A: The roof should have at least two years of physical life left. If the roof does not have two years or looks like it is in really bad shape, the appraiser should call for a roof inspection. This means the roof will have to be certified by a professional to have at least two years of physical life left. If the roof has less than two years of life, then it must be repaired or replaced.

Q: Is it a problem for an FHA loan if the roof is flat?
A: As long as there are no issues pointing toward potential roof problems (such as stains on the ceiling or badly rotted eaves), there is no reason to be alarmed. Straight from HUD, “FHA no longer mandates automatic inspection of flat and/or unobservable roofs. The appraiser must note in the appraisal that he/she could not adequately observe the entire roof area and state which area(s) were unobservable. As with any other type of roof the appraiser is to look for signs that would indicate a possible roof problem. Based on the information reported, either the appraiser or underwriter may call for a roofing inspection.”

Q: Do appraisers have to inspect the attic for an FHA loan?
A: Yes. The appraiser must do a “head and shoulders” inspection of the attic. FHA states the home owner is responsible for making sure the appraiser has clear access. What are appraisers looking for in the attic? Read a previous post HERE. By the way, I’m curious if you find most appraisers to be actually inspecting the attic. I heard from a Sacramento home inspector recently that he has never seen an appraiser with a ladder at an inspection. Hmm…

Q: Are gutters required for the roof?
A: No, they are not. However, as the HUD Handbook 4150.2 tells appraisers: “Check for readily observable evidence of grading and drainage problems. Proper drainage control measures may include gutters and downspouts or appropriate grading or landscaping to divert the flow of water away from the foundation. If the grading does not provide positive drainage from the improvements, make a repair requirement. Note any readily observable evidence of standing water near the property that indicates improper drainage.” In short, gutters are not required, but on the other hand one of the potential repairs to solve a drainage problem could be gutters.

I hope you feel like you know a bit more about the way FHA views a roof now.

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.

What do you think?

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.