• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Sacramento Appraisal Blog | Real Estate Appraiser

Real estate appraisals for divorce, estate settlement, loans, property tax appeal, pre-listing and more. We cover Sacramento, Placer and Yolo County. We're professional, courteous and timely.

  • About
  • Appraisals
  • Order
  • Ask Ryan
  • Areas
  • Classes
  • Press
  • Trends
  • Share
  • Contact

Appraisal Stuff

Dude, my house is worth more now, right? Because of that one thing.

June 19, 2019 By Ryan Lundquist 12 Comments

My house is worth more now, right? Or maybe it’s worth less because of that one thing? I get questions like this all the time, so here’s some thoughts swirling through my mind. Skim the headings or dig in. Anything to add?

Questions I’ve heard recently:

  • Will prices rise because a nearby restaurant got a Michelin Star?
  • Did my value go up because of the new arena in Downtown Sacramento?
  • My house is worth more because Lady Bird was filmed here, right?
  • Is my house worth more because of that $5M record sale?
  • Would values decline if a new hotel is constructed 1.5 miles away?
  • A new Starbucks down the street makes value go up, right?
  • Will it damage neighborhood values if there’s a cannabis facility nearby?
  • Will a new gas station impact neighborhood prices?
  • Will the Golden State Killer’s house affect my value?
  • Are values going to decline if the school district is taken over by the state?
  • How will adding a casino nearby affect value?
  • Will prices go down if that new teaching hospital happens?

Not a dissertation: Many of these questions are truly complex and they could be research papers. At the same time we read some of these and think, “C’mon man, there’s no way that impacts value.”

Quick truth: We can get so trigger-happy about thinking everything makes a difference for value, but that’s just not the case. It’s like when a home owner says, “Yo, I got a new faucet in the bathroom. How much does this add to value?” Probably nothing. The market just isn’t that sensitive.

My Michelin Star poll: I ran a poll on Twitter after getting a fantastic question about whether Sacramento’s first Michelin Star would be a positive for the surrounding residential neighborhood.

This wasn’t a scientific survey, but it’s interesting to hear what people think. I tend to agree with the majority too. My sense is the Michelin Star will give bragging rights to neighbors, but I’m not sure buyers would truly pay more in an entry-level area to be closer to a top-tier restaurant. Keep in mind if this restaurant did begin to help the commercial market thrive, then maybe that could spill over into the residential market. Otherwise let’s not overthink this.

Generally speaking: If something has little impact on an area, it’s probably not going to affect value much. Let’s remember that when making value claims and thinking through issues. But if something persuades or dissuades buyers, then it could be a big deal for the market. In other words, will people buy or rent for more or less because of the thing? This is the type of market-based thinking we need to consider.

The arena: As an example, the new arena in Downtown Sacramento has been a game-changer because it’s drawn people and other businesses into the city. It’s been a catalyst for development in the immediate market. But that doesn’t mean a buyer ten miles away would pay more for a house because of the new arena. I say fat chance.

Lady Bird: Would someone pay more for a house because the movie Lady Bird was filmed in the neighborhood? I’m not saying the answer is NO, but I just haven’t met a buyer yet who said, “I totally paid more because of Greta Gerwig’s cinematic masterpiece.” Objectively speaking, I can only find four listings that mention the movie too, and that may be telling.

Two takeaways:

1) One thing: Let’s be cautious about looking for value under every rock. What I mean is it would be wise to remember not everything we encounter is going to sway buyers to pay more or less.

2) Support: Let’s think critically and be sure to look to data to support our value conclusions. At the end of the day we can make claims about how a certain something impacts the market, but what do stats and data actually show? That’s what matters most.

“Beyond the Bubble” article: I wrote a piece for Comstock’s Magazine this month called Beyond the Bubble. These are things on my mind lately with so much talk about whether we’re in a bubble or not.

Questions: What questions have you been asked lately? Have you seen one type of business or something else impact an entire area? What do you think of any of the questions above? Let’s chat.

If you liked this post, subscribe by email (or RSS). Thanks for being here.

Share:

  • Click to share on Twitter (Opens in new window)
  • Click to share on Facebook (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)

Filed Under: Appraisal Stuff Tagged With: appraisals, appraisers, buyers, contributory value, Michelin star, paying less, paying more, questions, real estate bubble, Sacramento Appraisal Blog, sellers, The Kitchen, Twitter poll

Photoshopping & price per sq ft in real estate

June 4, 2019 By Ryan Lundquist 21 Comments

I have a new way to explain how price per sq ft works in real estate. It’s helpful but maybe a little creepy too. No matter what, we need word pictures in real estate to explain concepts, so let’s chat.

The big idea: Using a price per sq ft figure from a different house is sort of like photoshopping someone else’s body on your own. It just might not fit.

Instagram model vs dad bod: Think about it this way. When we use a price per sq ft figure to price a home it can be like taking an Instagram model’s body and putting it on a dad bod. It just doesn’t belong or fit. The problem is we’ve imposed something entirely different on another thing, and it looks awkward. The same holds true in residential real estate when we hijack a price per sq ft figure from a dissimilar house down the street and use it to price a property. Thus if we’re not careful we can end up pricing a “dad bod” home like it was an Instagram model simply because we priced according to model metrics instead of other dad bod sales… Okay, let’s not take this analogy any further. Do you catch my drift though?

Pick your poison: This example isn’t intended to tackle all aspects of price per sq ft, but only help stir conversation. I actually use Starbucks cups and Lamborghinis too, but that’s just me. My advice? Use what works for you.

One more thing. I’m writing as a guy who is currently on a diet, so I’m definitely not poking fun at the reality of dad bods.  🙂

I hope this was helpful (and not too creepy).

Is Blackstone selling? I see Invitation Homes (Blackstone) has a handful of properties listed on the market right now. These could be non-performing assets of course, but we have to ask if they are starting to sell off some inventory too. Stay tuned.

Sign giveaway: Last week I wrote about people who are leaving the market, and I’m giving away the shabby chic signs I made on this Facebook post.

Video: Here’s a video I made to talk through the danger of abusing price per sq ft. Enjoy if you wish. It’s about six minutes.

Question: Does this example work? How do you explain how price per sq ft works in real estate? I’d love to hear your take.

If you liked this post, subscribe by email (or RSS). Thanks for being here.

Share:

  • Click to share on Twitter (Opens in new window)
  • Click to share on Facebook (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)

Filed Under: Appraisal Stuff Tagged With: appraisal advice, appraiser in Sacramento, choosing comps, comp selection, overpricing, Price per sq ft, price per sq ft explanation, pricing mistakes, pricing too high, Sacramento Appraiser

When the best comps are four years old

May 8, 2019 By Ryan Lundquist 11 Comments

Do appraisers have to use comps from the past 90 days? Nope. Of course not, but this idea is still pretty common. The truth is sometimes the best comps are much older. Usually they’re not four years old, but they were in this situation. Let’s talk about it. Anything to add?

Warning: This post is a little longer on purpose.

Some details: The subject is located in Old Folsom and was built less than ten years ago whereas most neighborhood homes were built many decades ago. The subject is about 2500 sq ft with a 572 sq ft Accessory Dwelling Unit (ADU). It had a high-quality of construction and the builder nailed the architecture because it resembled the old world charm found in nearby homes.

My appraisal & the sale: I did an appraisal before the subject was on the market to assist the owner in pricing the property. This home was listed by Gail DeMarco at $899,999 and it sold for $925,000 in only six days of market exposure. It had four offers too. By the way, I appreciate getting permission to share about this property too.

Lack of recent comps: There were no recent similar sales. Zero. Most other areas of Folsom are much newer in age too, so using other neighborhoods wasn’t ideal in my book. This is why I chose to focus on older sales to understand the neighborhood market.

The city vs the neighborhood: I looked up sales to get an idea of what buyers have been paying historically in Old Folsom. Lately there hasn’t been anything above the low $700s, but if I look back in time I can see two outliers in particular. Could those be clues for me?

The best comp: As I looked back in time I found a neighborhood sale that was ideal as a comp because it was newly constructed, had era charm (higher quality), and it also had an accessory unit. It’s like the heavens opened up and gave me a gift. Yet this sale was from 2015. Doh!! But then again, this property sold twice on the open market and commanded a price premium both times, and that helped show what the market was willing to pay for something unique.

I wondered how this one comp competed with the rest of similar-sized sales in Folsom too, so I made some visuals. This gave me clues into what was competitive in the past during both sales. In other words, which areas of town did this property compete with when it sold in 2006 and 2015?

How much has the market changed? I gauged the increase in value since 2015. The market had increased about $125,000 to $150,000 since this property sold based on the trendline on the graph and other sales, so I gave a huge adjustment up in my report. By the way, if you don’t know how to graph, you can always try to see the market by comparing sales in 2015 vs 2019 or maybe crunching numbers on a CMA. But then again, why not learn to graph?

Okay, this is getting too long, but that was some of my process.

CLOSING THOUGHTS:

1) Be sure to look wide enough: Sometimes we focus so heavily on comps over the past 90 days, but there might not be any. At times we need to look much further in time to get a sense for how a unique property might fit into the market. Whatever we do, let’s just be cautious about imposing such a narrow view that we miss older sales that might be relevant. Usually we might have sales within the past 12 months, but this was a unique case. I’d recommend finding more than one comparable sale too because one data point might not be enough to get a sense of value.

2) Keeping lenders happy: Lenders like things to be neat and often ask appraisers for very recent sales, but in my mind there just wasn’t anything adequate to use that was recent. This would be a really ugly appraisal for a lender, and it’s why I told the owner that the appraiser for the loan was going to have a hard time finding two other similar sales that were more recent. I don’t know what the appraiser did, but part of me hopes at least the appraiser used this one older sale because it was the best (in my mind).

3) Crunching old data but using new sales: It’s possible to use old data to help understand the market and still focus on new comps. So in a case like this you could study much older sales but then choose to focus on much newer ones in an actual appraisal or CMA.

4) The fine print of lenders: Keep in mind lenders do sometimes have requirements for how old comps can be. For instance, FHA wants all sales to be within 12 months. So if a buyer here was using FHA, I could study older sales and even give weight to this older sale in the comments in my report, but I wouldn’t actually use this as a comp in my appraisal.

REAL ESTATE AGENTS: If you happen to be having a conversation with an appraiser about sales you used to price the property (without pressuring the appraiser to meet a certain value of course), I suggest you generally try to focus on more recent data because lenders tend to get fixated on new sales. Yet don’t be afraid to talk through older stuff. Just be sure older sales are truly relevant though. For instance, in the case above it would be okay to share this one comp from 2015 because it was truly the best one. But you hands-down need current stuff too.

I hope that was interesting or helpful.

CLASS I’M TEACHING: I’m doing my favorite class at SAR on May 28th from 9am-12pm called “How to Think Like an Appraiser.” Sign up here.

Questions: Anything else to add? What would have you done in this situation?

If you liked this post, subscribe by email (or RSS). Thanks for being here.

Share:

  • Click to share on Twitter (Opens in new window)
  • Click to share on Facebook (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)

Filed Under: Appraisal Stuff, Resources Tagged With: accessory dwelling unit, ADU, complex appraisal, Historic Folsom, new house in old neighobrhood, Old Folsom, Old Town Folsom, unique property, using old comps

How much is that new roof & AC unit worth?

April 23, 2019 By Ryan Lundquist 23 Comments

“I paid $25,000 for a new roof and AC unit. How much is that worth in an appraisal?” I get questions like this all the time and my answer can be frustrating as I say, “It depends.” Here’s my thought process though and why I can’t just rattle off a quick number. Anything to add?

The full amount: A new roof and AC unit are costly, and sellers often want to pass on the full cost to buyers. The idea is, “Hey, I spent twenty five grand, so the buyer is going to reimburse me.” But cost doesn’t always equal value, and it’s not so common for buyers to pay “dollar for dollar” either.

Boring & bling: A roof and AC unit are definitely important, but they’re sort of boring maintenance items instead of bling. What I mean is buyers don’t tend to visit a property and say, “Oh my gosh, did you see that epic new roof? I’m in love.” Nope, they tend to be more impressed with the latest trendy features instead of the age of the roof or AC unit.

Bare minimum: Buyers expect a working roof and AC unit as a minimum. Lenders definitely expect a roof with a minimum of two years of life also. This is why buyers aren’t always willing to pay big bucks for these features because on some level they simply expect them to be adequate already.

Long-term improvements: A roof and AC unit are going to be an advantage for decades, but a buyer might only be in a house for 10 years. So it probably doesn’t make logical sense to pay for the benefit of the entire lifespan of these items in one instance. In other words, the seller has added marathon improvements, but buyers may not pay that during their sprint to purchase.

Location: An AC unit in Antarctica probably isn’t too valuable, so on some level we have to consider location. On a related note, the higher-end of the price market might react differently compared to the lower end of the market. The truth is buyers in some locations or price points are going to be more informed or picky about certain features. Let’s remember energy efficiency can be a factor here too in light of extra savings.

The comps: At the end of the day we have to look to the market for the answers. I tend to consider all the things above, but I also have to be careful not to impose any of my general thinking on the appraisal. Here’s the key. What have buyers been paying for these features? As we look at comps, what seems to be a reasonable amount that buyers would pay? Let’s study comps to begin to get clues about value. 

I know, I didn’t actually answer the question. But that’s not my goal here. My goal is to highlight some important thinking as we try to find the answer.

I hope that was helpful or interesting.

CLASS I’M TEACHING: I’m doing my favorite class at SAR on May 28th from 9am-12pm called “How to Think Like an Appraiser.” Sign up here.

Questions: What point stands out to you the most? Anything to add?

If you liked this post, subscribe by email (or RSS). Thanks for being here.

Share:

  • Click to share on Twitter (Opens in new window)
  • Click to share on Facebook (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)

Filed Under: Appraisal Stuff Tagged With: adjustments in appraisal reports, appraisals, appraisers, coming up with adjustments, contributory value, how much for new AC unit, how much value for a new roof, how to think like an appraiser, regional sacramento blog, Sacramento Appraisal Blog, thinking like an appraiser

  • « Go to Previous Page
  • Go to page 1
  • Go to page 2
  • Go to page 3
  • Go to page 4
  • Interim pages omitted …
  • Go to page 101
  • Go to Next Page »

Primary Sidebar

Connect with Ryan

 Facebook Twitter LinkedIn YouTube Pinterest

Subscribe to Weekly Post

* indicates required

Search this site

Blog Categories

  • Appraisal Stuff (401)
  • Bankruptcy (3)
  • Divorce (4)
  • Estate Settlement (6)
  • FHA Appraisal Articles (56)
  • Internet (53)
  • Market Trends (439)
  • Photos from the Field (126)
  • Property Taxes (70)
  • Random Stuff (225)
  • Resources (560)
  • Videos (161)

Blog Archives: 2009 – 2019

Lundquist Appraisal Links

  • Appraisal Order Form
  • Appraisal Website
  • Rancho Cordova Appraiser Website
  • Sacramento Appraisal Blog Sitemap
  • Sacramento Real Estate Appraiser Facebook Page
  • Twitter: Sacramento Appraiser (@SacAppraiser)
  • YouTube: Sacramento Appraiser Channel

Most Recent Posts

  • My real estate mind never shuts off
  • How might rent control affect the housing market?
  • Street names & hot stats with an asterisk
  • Thoughts on PG&E and the housing market
  • That place where shiplap & murder meet
  • Does the market really change every seven years?
  • When sellers care too much about the Zestimate
  • Zillow has officially entered the market
  • Not everything is getting multiple offers
  • When 1,000 square feet doesn’t count

Disclaimer

First off, thank you for being here. Now let's get into the fine print. The material and information contained on this website is the copyrighted property of Ryan Lundquist and Lundquist Appraisal Company. Content on this website may not be reproduced or republished without prior written permission from Ryan Lundquist.

Please see my Sharing Policy on the navigation bar if you are interested in sharing portions of any content on this blog.

The information on this website is meant entirely for educational purposes and is not intended in any way to support an opinion of value for your appraisal needs or any sort of value conclusion for a loan, litigation, tax appeal or any other potential real estate or non-real estate purpose. The material found on this website is meant for casual reading only and is not intended for use in a court of law or any other legal use. Ryan will not appear in court in any capacity based on any information posted here. For more detailed market analysis to be used for an appraisal report or any appraisal-related purpose or valuation consulting, please contact Ryan at 916-595-3735 for more information.

There are no affiliate links on this blog, but there are three advertisements. Please do your homework before doing business with any advertisers as advertisements are not affiliated with this blog in any way. Two ads are located on the sidebar and one is at the bottom of each post. The ads earn a minor amount of revenue and are a simple reward for providing consistent original content to readers. If you think the ads interfere with your blog experience or the integrity of the blog somehow, let me know. I'm always open to feedback. Thank you again for being here.

Copyright © 2019 Sacramento Appraisal Blog