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Here’s an updated graph of the unemployment rate in Sacramento County through February 2012. The current unemployment rate released from EDD is 11.2%. This is definitely high, but thankfully lower than the peak of 13.2% in July 2010. The past few months have been flirting with 11.0%, so let’s hope we break into 10.0% at some point this year (that would be nice). By the way, feel free to use this image on your blog or website. Please just keep the image intact and feel free to link back.

It’s amazing to see a history of unemployment over the past decade, isn’t it?

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.

Sometimes I get a stack of “comps” from real estate agents during my appraisal inspections when meeting the agent at the property. Are they good ones? Sometimes they are, but since many times they aren’t, I wanted to highlight some important questions that might be useful to Sacramento area agents (and anyone) when selecting sales to share with the appraiser. I hope this is helpful.

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.

Does code enforcement use Google Earth? It’s pretty obvious if they did, they might find a “recycling” operation going on at this home in Sacramento County. I came across this one the other day while talking to an investor on the phone. It’s hard to say what has been happening for sure at this property, but it smells like a chop shop at first glance. What does it look like to you?

There are definitely areas where most backyards and front yards tend to be filled with debris, but that’s not the case in this neighborhood. As you can see from an expanded aerial view, most houses are not hosts to yard junk.

Clutter and property value: On a serious note, cluttered houses tend to drive down property value around them. I’m not being judgemental or targeting certain people at all. This is simply true. After all, nobody wants to live next to a perpetually unkempt property because it’s a hotbed for all sorts of issues. It’s true that theoretically a house can only contain clutter in the rear yard and have no evidence of an issue from the front. However, if there’s an issue with hoarding or something illegal going on (not just a lack of ability to care for a house), it’s not uncommon to see evidence from the front yard too. I guess it’s a bit like life. We can put our best foot forward and hide our issues, but eventually they’ll come out.

Hoarder House Video Tour: Here is a video tour of a hoarder house I inspected a while back. It’s amazing to see how much clutter can fill one house (and sad at the same time). Watch the video below or here. Yes, I had permission from my client to shoot this video.

Isn’t it amazing what we can find out about activity in houses while online? Have you seen something similar before? How have you seen unkempt front or rear yards impact a neighborhood or street?

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.

After completing two appraisals in the past 10 days for buyers for all cash transactions, I wanted to throw down some thought about getting an appraisal when paying all cash in the Sacramento area. I think there is a time to do that and also a time to not do an appraisal. This isn’t legal advice, but here is my opinion:

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.

After completing a vacant land appraisal in Carmichael recently, I wanted to share a graph of land sales over the past 14 years. Below you’ll find all residential lot sales between January 1998 to March 2012 (acreage and smaller lots – anything listed as “residential” in MLS). These are only sales through MLS and not private sales that may have occurred.

The decline has been hefty, hasn’t it? Yet lots are still moving (just at very low levels). What do you see? Does anything surprise you?

While we’re on the subject of land, let’s take a look at nearby Fair Oaks too. It’s a bit of a similar trend to the graph above, isn’t it?

By the way, for anyone who purchased to speculate during the peak years of the market (or even build, but you got caught in the market at the wrong time and could not build out your land), I would suggest checking your property tax bill to ensure you’re paying at levels consistent with today’s market instead of 2005. I helped a client recently lower his assessed land value in Sacramento from over $1,804,000 to $340,000.

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.

It’s interesting to see the sales history of a 4-plex subdivision in South Sacramento. There are 30 units off 24th Street in the Meadowview area and only 3 out of 30 units have not transferred in the past 4-5 years. Or in other words, 90% of units have sold in recent years. The purple dots below represent sales over the past 3 years and sales beyond that were labeled accordingly.

What does this tells us? This shows me how much turnover there has been since the bubble burst. For example, one unit sold for $560,000 in 2006 and then resold in 2011 for $155,000. It used to be really difficult to pick up a fourplex under $400,000, but that’s not the case anymore. Also, I’m reminded of investment strategy as well as risk. Some investors make purchases and then sit on them for the long haul before reselling, whereas others are looking to purchase and then resell in a relatively short time period.

Mistakes Investors Make: By the way, here is a video I did with Sacramento real estate broker Joel Wright on mistakes investors sometimes make when purchasing real estate. I think we saw some of the mistakes Joel mentioned

Holes in a Fourplex: I inspected one of these units years ago and it was an odd situation since there were actually large holes in the walls of each unit big enough to let me access the entire fourplex. I could simply make my way through each hole to get to the next attached unit. This was actually a bit on the creepy side though since the property was powerless, stripped and clearly had a problem with squatters.

Was it still four units or just one big unit? 

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.

It’s often believed that appraisers need to use comparable sales only within a one-mile radius. But that’s not really accurate or a good methodology for valuing a property either. Appraisers should really use competitive sales located in the neighborhood or a similar neighborhood – regardless of whether they are located within one mile or not. Besides, has there ever been a neighborhood in the shape of a one-mile radius anyway? That would be interesting.

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.

The Sacramento River is one of my favorite places because of its beauty. Every time I spend time on the River or appraise a house along the River or Delta, I have to remind myself to be content as I drive back to my tract home. 

Today I wanted to share some research I compiled recently during the course of an appraisal assignment along Garden Highway (next to River for those who don’t know). Here is a scatter graph of all single family sales on Garden Highway in Sacramento County over the past twelve years. There are not many sales of course, but it’s clear that property values have declined in recent years to resemble values nearly a decade ago (that’s a very common trend in the Sacramento area). The market has really struggled also to break the barrier of $1,000,000 lately. This does not mean all properties are worth less, but only that buyers have not paid above $1,000,000 for any listings on MLS in a few years. It seems too that some sellers will list high and then withdraw their properties from the market when they are not selling for the prices they want.

Do you spend much time on the River? What do you do? What stands out to you about the graph 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, Facebook, Twitter or subscribe to posts by email.

As promised, here is Part II of a video I shot a few months back in December of a Sacramento fixer house awaiting a flip. This one definitely needed some loving and over the past few months it’s been completely rehabbed. If you remember, this house actually had $48,000 in code enforcement fines too. Thankfully a remodel like this helps improve the image of the neighborhood and it drives out squatters too. I met up yesterday with a friend at Housing Group Fund to walk through the house to see the after version. Enjoy some before and after pics throughout the video. If you subscribe by email, click here to see the video. 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.

When will you hear back from the Assessor? It could be a matter of months, but ultimately it can take up to two years. The County of Sacramento states “The time limit for the Assessment Appeals Board to act on an application is two years from the date of filing.” In my experience it seems The Appeals Board typically gets back to owners within a year, but sometimes longer and others times only a matter of months.

Do you still have to pay your property tax bill at the higher level during an appeal? Unfortunately yes. This is often frustrating for home owners, but it’s the way the system works. Verbatim from the Assessor’s Office, “You must pay the original bill timely to avoid penalties, pending the outcome of the review or appeal.” Keep in mind Sacramento County will issue you a refund from your overpayment if your property taxes get lowered through the appeals process.

How long does it take Sacramento County to issue a refund after a successful appeal? Your refund should come within 95 business days. Don’t expect to be the exception either. You’ll get between $100-125 back for every $10,000 in property reduction. If you were overassessed by $50,000, for example, you would get $500-625 back in your pockets. From the Assessor’s website:

All offices involved in the property tax process (Assessor, Auditor-Controller and Tax Collector) are experiencing a historically large volume of these reductions. When the Assessor’s Office determines a reduction in assessed value is appropriate, a roll change is processed and certified to the Auditor-Controller, typically within 15 business days. The Auditor-Controller will issue a corrected tax bill within 20 business days and deliver it to the Tax Collector for further processing. If a refund of paid money from the original bill is required, it is normally issued within 60 business days after the corrected tax bill has been calculated. You should anticipate the assessment changes will take up to the full 95 business days to be processed.

Is it still worth it to appeal despite having to wait? You have to answer that question for yourself. I think if there is money to save, it’s absolutely worth it in my opinion, and the appeals process is the only way to obtain a reduced value (unless the Assessor reduces your property value automatically due to their own research). It may be frustrating to wait, but the alternative is to overpay taxes. I have successfully appealed my property’s taxes three times and I always enjoy getting a refund to check to keep my hard-earned money in my pocket. If I have to wait a while to get money returned to me, I can live with it.

I hope this was helpful. Let me know if you have any questions, check out other articles on property taxes and visit my property tax appeal website for additional information.

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 is a glimpse of the unemployment rate in Sacramento County over the past 10+ years from 1999-2012. We’ve seen the rate drop from the peak of 13.2% in July 2010, and lately the county is flirting with unemployment around 11.0%. The most recent rate statistics for January 2012 from EDD shows an unemployment rate at 11.1% in Sacramento County.

What stands out to you about the graph?

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.

It’s always nice to get good news for clients. Recently I got wind that the Assessor’s Office in Sacramento County ended up agreeing with my opinion of value for a client, so the client will now have their property taxes reduced by $190,000. That’s a saving of about $2,400, so my client should get a fat refund check in the mail soon. That should help with rising gas prices, huh?

NOTE: The image above is a snippet of the ”Tax Change Withdrawal” form in Sacramento County. These forms sometimes leave home owners confused because property owners are fearful of what the form really means. After all, nobody wants to sign the wrong form and accidentally stop an appeal. But in this case the withdrawal at hand is something good because the purpose of signing the withdrawal form is to formally accept the revised value and thereby pull out from the appeals process. Read more here if you are wondering about signing the Tax Withdrawal form.

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.