The real estate agent marketed the property as three bedrooms, Tax Records said it was three, but then the appraiser said it was only two. What the heck? Let me share with you a situation I encountered recently where an appraiser (me) ended up removing one of the “bedrooms” from the room count because of a functional issue. Let’s look more closely below. I’d love to hear your take in the comments.

The layout of the house according to the agent:

It’s not normal to have a layout like this, right? Imagine getting up to go to the bathroom at night and walking through someone’s room to get there. The middle room really wouldn’t have much privacy either, right? I can also picture a kid in the middle bedroom setting up a taxation system and charging his brother for passage from the rear room.

The layout of the house according to the appraiser (me):

I pulled three-bedroom comps before seeing the property, but I was surprised to discover it wasn’t really a 3-bedroom home because of a functional issue. I know this seems like a subjective call to axe a bedroom, but the functional issue definitely limits the use of the middle room, so it was not considered a bedroom. It’s too bad there was not more foresight when the addition on the rear of the house was done so the floor plan would be more functional. As a side note, I could have labeled the rear room as a den instead of the middle room, but since the rear room was larger in size, I thought it would more likely be used as a bedroom by the market.

Key Takeaways:

1. Describe correctly: It’s important to describe properties correctly for the sake of clarity and even potential liability. This is true for both agents and appraisers.
2. A Bedroom with functional obsolescence: I imagine some real estate professionals would call this a 3-bedroom home with functional obsolescence because one has to travel through a “bedroom” to get to a different bedroom. In my mind this was not a functional three-bedroom home, so I chose to describe it as a 2-bedroom home, but I would understand if someone wanted to describe it differently.
3. The market’s response: The question becomes how to value something like this. Should we compare it to 2-bedroom or 3-bedroom homes? Well, it’s not really a regular 3-bedroom home, but it’s not really a traditional 2-bedroom home either because it has the extra space (den). Ideally, we should find a 2-bedroom property with a separate area like a den, office, or something else that is similar. If we’re lucky we might find a few sales with functional obsolescence (fat chance). Lastly, if the subject property has sold a few times in recent years, we might go back in time and see how the market valued the home. What did it compare to at the time of its previous sales?
4. Tax Records isn’t the definitive authority: Just because Tax Records says it does not mean it’s accurate. In this case the home was functionally two bedrooms despite Tax Records saying it was three. As much as we want to trust Tax Records, sometimes we have to look at what is actually there and then try to understand why there is a difference between public records and reality. For reference, here are 10 reasons why public records and the appraiser’s square footage are often not the same.

I hope this was helpful. I’d love to hear your take in the comments.

Radio Interview: By the way, I did a radio interview last week on 105.5FM in Sacramento. Realtor Jay Stoops had me on his show. You can listen to our 20-minute conversation below (or here).

Questions: Is this a 2-bedroom home or a 3-bedroom home in your mind? Any other insight or stories to share? Did I miss anything?

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