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.

Appraisal Stuff

How much value does a pool really add?

By 18 Comments

What is a built-in pool worth? I get asked this question all the time. Well, let’s look at some fresh stats to help show why there isn’t a one-size-fits-all answer.

New Pool Stats: I pulled some stats and I’m excited to share these. If you aren’t local, does your market look similar regarding pools? Also, what other property features besides pools could we look at this way?

BIG POINTS:

– There are more pools at higher prices
– There are less pools at lower prices
– The percentage of pools differs greatly by location
– Some areas have tiny lots, so there are less pools
– The market expects a pool in some price ranges

THE HUGE VALUE POINT:

It’s easy to get stuck giving the same value adjustment every time we see a pool, but the market doesn’t pay the same amount for a pool everywhere because buyers have different expectations based on location and price range. So a pool probably isn’t worth anything in Antarctica while it’s worth way more in Arizona. As local stats show, in some areas like Granite Bay, buyers hands-down expect a pool to be present while in other places pools are extremely rare. Of course just because a pool is not common doesn’t mean it doesn’t add value. I’m just saying this gives us pause to consider the value of a pool might not be the same everywhere. 

SORRY: I know I didn’t answer the question in my blog title, but that’s on my purpose. My goal is to give us something to think about rather than a bogus adjustment that isn’t going to apply everywhere. But if you do want to find out what a pool is worth, start comparing homes with and without pools to see if you can discern a price difference.

MARKET UPDATE VIDEO: Here’s a market update I did a few weeks ago. It’s about 40 minutes. Enjoy below (or here) if you wish.

SPEAKING GIGS THIS WEEK: On Friday I’m talking at the Gold County Women’s Council of Realtors. Then on Monday night I’m talking at the Real Estate Round Table (at a tavern). 

I hope this was interesting or helpful.

Questions: What stands out to you about the data above? What is the most or least value you’ve ever seen for a built-in pool? Anything to add?

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

Tax Records is not the definitive source for square footage

By 49 Comments

Why is the appraiser saying it’s only 1,400 sq ft? Tax Records shows the home is 600 sq ft larger. This issue comes up ALL the time, so let’s talk about it.

MY BIG POINT: I can’t speak for every market across the country, but I’ll say there can be a difference between what the building department has on file for a house and what is listed in the Assessor’s Records. In my market Realist is what we call Tax Records and that data comes from the Assessor. In my experience it is usually pretty good, but sometimes it’s completely off because it doesn’t actually reflect what is permitted. This means we need to look to a source that does (or should) keep reliable records on building permits. And that source would be the building department instead of the Assessor. 

The truth: The Assessor’s records are generally reliable, but I’m just saying sometimes they’re not. Why is this? At times it’s as simple as the original builder not turning in accurate information when a house was built. Or maybe an owner took out permits but official records were never updated. Of course we’ve all seen instances where the tax roll shows two units on one lot, but there’s really just one house nowadays. Let’s not forget sometimes owners do an addition without permits, so the Assessor might actually be correct even though the house is technically larger or has even sold on MLS as a larger home. For reference, here are ten reasons why an appraiser’s sketch might be different.

TWO SITUATIONS ON MY DESK:

1) Garage included in the square footage: I recently measured a house for a Realtor that was about 1,100 sq ft despite Tax Records stating it was nearly 1,600 sq ft. Based on my sketch it looks like the Assessor had the garage included in the square footage for whatever reason. I’ve definitely seen basements included in the square footage too.

2) Non-permitted area included: I’m also working on something where the tax roll shows an area at nearly 2,500 sq ft but about half this space isn’t actually permitted. Look, most of the time Tax Records is pretty much right (especially in tract areas), but in this case it’s scarily inaccurate. One of the problems is in Sacramento County home owners can “correct” property characteristics in Tax Records by submitting a sketch from an appraiser. I get the idea here, but what if the area in the sketch was not actually permitted (and the appraiser hopefully disclosed that in the report)? It would seem like verifying square footage as permitted would be a nice touch when adding square footage into the tax roll, but I’m afraid that doesn’t always happen. It certainly didn’t happen in the case on my desk and I’ve seen many other instances where an area that was not permitted ended up being reflected as square footage in the Assessor’s information (and then Realist).

UPDATE: The chief appraiser at the Sacramento County Assessor’s office commented on my post and I wanted to link to it here. I think he provides some helpful context (and he’s a really nice guy).

Closing advice: If something doesn’t seem right about the square footage, start digging further. Most of the time you’re likely going to be able to trust records, but sometimes they’re going to be off. So when something doesn’t smell right about the size, quality of work, setbacks, etc… it’s time to call the building department to see what permits are on file. I never rat out an owner either, so I don’t call and say, “Hey, this house measured 2,300 sq ft, but what do your records say?” Nope. I would call and ask, “Can you help a brother out? What do your records show for square footage and anything else that has been permitted?” Also, if you’re in Sacramento, here is a link that shows building permits online (you’re welcome). Lastly, remember that it’s not enough that permits were pulled. Were permits finaled? That’s the real question.

I hope this was helpful. This could honestly be a dissertation and what I’ve written only scrapes the surface. Please add your comments below.

Questions: Any stories to share or advice about relying on Tax Records (or not)? How is your market different than mine? Anything to add?

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

That place where shiplap & murder meet

By 25 Comments

There’s going to be a new home renovation show that focuses on murder houses. How crazy is that? It’ll be called Murder House Flip and it’s going to air in 2020. I can already imagine adding shiplap to the walls to erase a heinous history… Anyway, here are some things on my mind.

1) Not the home’s fault: Often when talking about notorious homes we hear things like, “It’s not the home’s fault” or “It’s unfair to penalize the house.” I get that, but let’s remember buyers aren’t just purchasing the home. They’re inheriting all the stories and history too. Anyone who has ever owned a home knows this is true because neighbors will definitely tell you about the previous owners and especially anything big that happened at the property. While a home is technically innocent, it doesn’t mean buyers aren’t discerning or making judgement calls about value.

2) Stigma fades: A property with a crime in its past can certainly have a diminished value, but the loss in value may not last forever. What I mean is right after a gnarly situation buyers might react quite negatively, but over time the tendency is to care less, forget, move on, or not even know what happened decades ago. It would be like saying, “A man was murdered here yesterday” compared to “A man was murdered here in 1917.” Would there be a difference in your mind? Maybe so. But for something really notorious the question becomes how long stigma can last. This is why I’m watching the John Wayne Gacy property. The original home was actually demolished, but can stigma remain with the site despite the new home?

3) No one-size-fits-all adjustment: How much does a murder affect value? There’s no one answer to satisfy all situations. It likely depends on when the murder occurred, the nature of what happened, and whether it took place inside or outside. It could also depend on the price range or location as some sub-markets are more sensitive than others. My experience locally is buyers at lower price points tend to be more forgiving about certain issues compared to higher price points (generally speaking).

4) One buyer vs the market: It’s possible a particular buyer might not care about a property’s history, but market value isn’t just about one buyer. What would most buyers pay? Last year I ran a poll about the alleged Golden State Killer’s house and asked people to consider if there would be any price impact if this home came to the market. It was a fascinating conversation with many layers, but one thing that kept coming up was the idea that one buyer might not even care. That’s true. But again, market value isn’t just about what one buyer would do. It’s like this. Imagine lining up 100 qualified and interested buyers. What would be reasonable for them to pay? That’s sort of what market value looks like.

5) Crunching numbers: I appraised a murder house recently and interviewed about ten local real estate agents who sold a murder property in the past. Here’s a blurred view of my data collection. Some agents said there wasn’t any impact to price and others would say stuff like, “It probably sold $25,000 lower.” In short, the answer wasn’t always the same, which meant I had to consider which data points were relevant for my situation. This is huge because it’s easy to find one murder house and call it a day because now we have data. But what happened with one home under $200,000 may not mean anything at the $800,000 price point. Thus some data toward the lower end of the market ended up being less relevant during my appraisal.

An episode of Murder House Flip in Sacramento: There’s going to be an episode set in Sacramento to focus on the Dorothea Puente property. If you didn’t know, she was an older woman who ran a “boarding” house in the early 80s, but instead of giving clients respite she drugged them, buried them in the backyard, and collected their social security checks. This property has sold four times in the past twenty years as seen below.

By the way, there was a documentary made about this house and the owner has even given tours. This goes to show another aspect of a famous home is monetization. In this case though the owner donated tour proceeds toward organizations working with the homeless.

Keep in mind entire books are written about this stuff and I’m only scraping the surface here. I hope it was interesting or helpful though. 

Questions: Are you going to watch this new show? What stands out to you above? Any other thoughts?

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

Low appraisals, weed, & rent control

By 30 Comments

I’ve been getting lots of phone calls and emails about low appraisals over the past couple months. Is something in the water? What’s going on? Let’s talk about this briefly. Then I have some quick thoughts on weed and rent control.

5 things to remember about “low” appraisals:

1) This is common when the market slows.
2) This is even more common in a declining market.
3) It should happen if the contract is too high.
4) It can spur negotiation instead of kill a deal.
5) The value of course is too low sometimes.

The problem: During the housing “bubble” we expected appraisers to always “meet value” so to speak. Yeah, that wasn’t good. But it seems like the residue of that expectation still exists today. So when an appraisal comes in lower than the contract price, it’s often treated like a grave market sin when in fact this should be something that happens from time to time. I know this sounds a bit Pollyanna to say, but I’d like to see the real estate community view appraisals this way instead of thinking appraisers should “hit the number” all the time. Appraisers have an important role to play in the market and if they’re doing their job correctly it won’t always lead to smooth escrows.

Botched appraisals and what to do: Of course we don’t live in a perfect world and appraisers legitimately miss value at times. I’m not glossing over that frustration and I realize there are horror stories out there. When this happens it’s reasonable to go through the lender’s process of asking the appraiser to reconsider the value. I don’t think any appraiser looks forward to this, but it’s part of the business, which is why I advocate for data-informed conversations and ethical protocol. In fact, here’s some tips and a form I suggest using if the lender will allow it (otherwise you’ll need to use the lender’s form).

Note to appraisers: I know this post will not sit well with some colleagues, but this is a part of the business and my goal here is to elevate the conversation (and hopefully only see rebuttals when they need to happen).

Rent control: I have an upcoming interview about rent control with an appraiser colleague in the Bay Area (and I’ll likely do others too). We’ll talk through rent control dynamics and some things to consider for value. In the meantime, here are two quick thoughts. One, rent control is a huge deal, but we’re going to need some time to really understand the fine print as well as its effect on the housing market. The temptation is to look for an immediate impact, but we might need years to fully understand the effects. Secondly, rent control will change the way properties are advertised. Gone are the days of saying things like, “Rents are below market and you can raise them to X amount after buying.” The problem is market rent isn’t so straightforward any longer because not all units can be legally rented at the same level. Remember, rent control does not apply to single family homes. My advice? Be careful with assertions about market rent. 

Landlords getting huge weed fines: There was an illuminating piece by Capital Public Radio on Sacramento fining landlords when tenants turn rentals into “grow” houses. We’re talking big money too as the story highlights an example of a $137,000 fine. The author of the piece states the City of Sacramento has issued almost $100M in penalties over the past two years. I’ll let lawyers figure out if this is legal or not, but from a market perspective this is something to watch. What are the positives and negatives of this type of enforcement for the housing market? How will this affect investors?

I hope this was interesting or helpful.

BIG MARKET UPDATE: I’ll be giving a deep market update at SAR on September 24th from 10:30-12:00pm. My goal is for everyone to walk away with an understanding of how the market is moving, ways to describe it, and some ideas for business in 2020. Sign up here.

Questions: What is the sixth thing to remember about low appraisals? Any stories to share? Any thoughts on rent control or the weed dynamic right now?

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