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Being realistic about a range of value in real estate

October 27, 2015 By Ryan Lundquist 18 Comments

If an appraisal came back at $327,462.44, would you be concerned? For starters, I think most of us would scratch our heads and wonder how in the world the appraiser got so precise at 462 dollars or 44 cents. Either the appraiser is an absolute value wizard or something else is going on. I can’t speak to why an appraiser would reconcile value that precisely, but I do want to kick around the idea of a range of value in real estate. I’d love to hear your take in the comments below.

range of value in real estate - image by sacramento appraisal blog

Sometimes we get so locked into thinking a house is only worth a certain amount. Most of us wouldn’t get so exact like the example above, but we do often say a house is only worth whatever the contract or list price is. Thus if the appraisal comes in lower, everyone is frustrated. Let’s consider the following points though.

  1. There is always a range of value: When we sell something on Craigslist, we list a certain price, and we’d like to get that price, but realistically we would probably be happy with an offer somewhere close to the price. For instance, I am trying to buy a drill press on Craigslist right now (for woodworking, which is one of my passions). I found one the other day listed at $150. I offered $100, and the owner said no. I then upped my offer and through conversation discovered the owner wasn’t really set on $150 at all, but rather $125 to $150. If we lined up other buyers for this drill press, they’re probably not going to say market value is exactly $150, but they might instead think market value was anywhere from $125 to $160. In other words, nobody would bat an eye if the drill press sold at $125 or even $160. This is exactly how it works in real estate in the mind of buyers. When assigning value to a property, buyers are going to look at similar homes, consider their budget and loan approval amount, and ultimately be comfortable with a reasonable price range. For instance, buyers might consider a realistic price for the house above to be $323,000 to $330,000.
  2. Appraisal Comes in $1000 lower than contract price: So buyers make offers on the property, and the seller accepts an offer at $324,000. The appraiser comes out and appraises the property at $323,000. When this happens, many agents say, “This is ridiculous. Why could the appraiser not just give me $1000 more?” I get the frustration because if the contract price fits very nicely in a tight and reasonable range of value, it’s hard to see how the appraiser could argue against that as if the appraiser is an absolute value genius. I’m not arguing for the appraiser here in this example as you can hopefully pick up in the following comments. But I do want to remind us that appraisers cannot invent or give value – even $1000. If the contract price really is pushed above what the market would reasonably pay, and there is no way to really support that on paper (the appraised value has to be supported), it makes sense to see the appraisal come in lower. In this case it may be suspect, but I can’t say that for sure. For reference, it’s actually not fishy for an appraiser to reconcile the value at the exact contract price if the contract price is realistic. When the appraiser does this, the appraiser is simply saying, “Yep, the price is good, and I can’t argue against it.” The appraiser might say something like this in the report: “The sales price falls within the range of values indicated by comparable properties and represents a reasonable value for the subject property based on an analysis of comparable properties and market trends. Therefore the opinion of value in this report was reconciled to the sales price.” Of course this assumes the appraiser wasn’t “hitting the number” so to speak to make the loan work.
  3. Reconciling to the Lower or Upper End: Despite there being a realistic range of value for a property, sometimes it’s best to consider where a property is going to fit on the value spectrum. I find sellers sometimes struggle with this because they always want top dollar. But sometimes fetching the highest price in the neighborhood simply isn’t possible. Maybe the house just doesn’t quite compete at the very top of the range of value because of slightly less upgrades or some other minor issue. So an appraiser might look at sales at $330,000 and give those sales less weight in the final value because they are slightly superior, but then look at sales at $323,000 and give them the most weight because they are the most similar in market appeal. Additionally, if all the offers on the property were coming in around $323,000 or lower, the market has probably spoken, and it likely makes sense for value to be reconciled around $323,000. Or if we have one high offer at $330,000 and all other offers were at $323,000 or less, this might also say something about the market. Not always, but maybe.
  4. Willing to Budge on Contract Price: Sometimes it seems the real estate community gives too much weight to the original list price and the contract price. It’s as if the offer is made and then negotiation is over. There is no further budging. But there is still room for negotiation based on the pest report, home inspection, the appraisal, and a number of other factors. When new information is discovered through the course of a transaction, it should be okay to negotiate. Part of a lack of negotiation is the byproduct of a market with such low housing inventory. Sellers have been in the driver’s seat for years, so they have not had to negotiate as much. But as inventory presumably rises in years to come, this staunch belief about the contract price being holy is going to have to budge.

I hope this interesting and helpful.

A CHEAT SHEET FOR AGENTS TO USE: If you are a real estate agent, I highly recommend you communicate in detail about the property to the appraiser during the inspection (or before the appraisal is finished). Consider talking about any upgrades, the number of offers made on the property, price level of offers, and anything that might be relevant for the appraiser to know. Don’t pressure for a certain value, but help tell the story of how the market responded to the property. DOWNLOAD my “cheat sheet” for appraisers and please use it.

some of my recent projects

Questions: What else would you add? What is point #5?

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Filed Under: Appraisal Stuff, Resources Tagged With: appraisal at contract price, appraisal value, Appraised Value, home appraiser Sacramento, low appraisal, lower appraisals, Market Value, range of value, sacramento house appraisers

Limbo and low inventory in Sacramento

June 19, 2012 By Ryan Lundquist Leave a Comment

It’s been amazing to watch housing inventory become so scarce in the Sacramento area. In fact, sometimes it feels like a limbo competition where it just keeps going lower and lower. A few days back I met up with Joel Wright to talk about the bottom of the market and how low inventory is driving today’s real estate market. Below is an unscripted video of our conversation (click here to watch on YouTube).

By the way, does anyone else talk with your hands like me? I should probably duct tape my hands when doing videos, but then I might not be able to speak…

For a detailed analysis of the Sacramento real estate market, check out the latest Wright Report. I haven’t seen a more exhaustive local report. You may be interested to read Why did it appraise “low” even with multiple offers? and also How to talk with appraisers in this changing real estate market.

How have you seen inventory impact the housing market or your strategy in business?

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Twitter, subscribe to posts by email or “like” my page on Facebook

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Filed Under: Market Trends, Resources, Videos Tagged With: changing real estate market, home appraiser Sacramento, house appraiser Sacramento, Impact of few houses on the market, Joel Wright, Low Inventory in Sacramento Area, properties appraising for less, Sacramento real estate trends, video conversation with appraiser and realtor, what is happening in the real estate market, Wright Real Estate, Wright Report

What is the minimum height a crawl space must have for an FHA loan?

June 18, 2012 By Ryan Lundquist 2 Comments

What do buying cigarettes, joining the military and crawl space height for FHA loans have in common? The number 18. If you’ve ever wondered what the minimum requirement for crawl space height is according to FHA standards, it’s 18 inches. Well, technically our FHA Home Ownership Center (Santa Ana) says that 18 inches is considered a reasonable level or starting place, so there is room for interpretation on height to a certain extent. Basically though, the point is that there needs to be enough room to access the entire crawl space (not just part of it). This means if a property has 8, 10, 12, or 14 inches, it’s pretty hard to access a space that tight. That’s why 18 is a good number in the eyes of FHA.

crawl space for FHA - by Sacramento Real Estate Appraiser

Not Enough Space = Problem: If you didn’t know, FHA appraisers do a “head and shoulders” inspection of the crawl space to look around, so that’s how these issues are discovered. Appraisers are not required to look through the entire crawl space, but it’s easy to get the gist of what’s happening under the house by using a flashlight. Recently I was in the middle of an FHA appraisal inspection and noticed the crawl space was really uneven throughout. Some portions of the crawl space were 18 inches, but quite a bit of the crawl space was 12 inches or less (due to crazy additions, but that’s another story). I decided to contact my client to let them know what was going on because the expense for digging out the crawl space was most definitely not on the radar of the buyer. Sure enough, the buyer ended up backing out of the deal and the owner has decided to market the property to conventional buyers instead of FHA buyers.

Don’t Worry: Most houses do not have this issue, so if you’re a buyer or agent, this isn’t something to worry about. However, it’s simply something to keep in the back of your mind. If you see a crawl space, give a quick peek because it might help you determine if the house is eligible for an FHA loan in the first place. Lastly, the rules for crawl space height may be different in other parts of the country, so refer to your respective FHA Homeownership Resource Center.

I hope this was helpful to answer some of your questions. You can check out other FHA appraisal articles I’ve written, and definitely comment below if you’d like. Email or call with 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, Twitter, subscribe to posts by email or “like” my page on Facebook

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Filed Under: FHA Appraisal Articles, Photos from the Field Tagged With: access to crawl space for FHA loan, FHA and crawl space height, FHA Certified Appriaser, FHA Homeownership Center, FHA Minimum Property Requirements, home appraiser Sacramento, house appraiser Sacramento, tips from appraiser for FHA loans

What happens after you file a property tax appeal?

June 4, 2012 By Ryan Lundquist 2 Comments

Immediate results would be nice, but that’s not how it works in the world of tax appeals. The Sacramento County Assessment Appeals Board technically has up to two years to get back to property owners when they file a property tax appeal. I’ve personally not seen them take that long for my clients, though it is technically possible. I’ve been finding most of the 2011 appeals I did for home owners have been starting to get resolved over the past few months. The bulk of these appeals were turned in just before the deadline in November 2011. Some of them were resolved in about three months (that’s very quick), whereas others have taken more than six months (and I’m still waiting on some too).

What happens after you turn in your appeal?

1.  Letter in the Mail from the Appeals Board: After you’ve filled out the Application for Changed Assessment and the Assessment Appeals Board has reviewed your file, they’ll send you a letter in the mail (or if I’m your agent, then I get the letter and handle everything for you while you relax). This is not junk mail. Watch your mail carefully because you need to respond.

Letter from Assessors Office in Sacramento County

2.  Withdraw or not Withdraw? That is the Question: The letter the Appeals Board sends will either: a) Agree with your opinion of value and ask you to therefore withdraw your appeal; b) Ask you to agree with a new value they pick (not your value, but maybe close to it) and therefore withdraw your appeal; or c) Set up an appeals hearing to further discuss your situation. Don’t worry about filling out the following “Tax Change Withdrawal” form. It’s a legitimate form. All you are doing is agreeing with the new value and withdrawing your right to further appeal. If you don’t agree with the value, call the Appeals Board appraiser and discuss the market (the phone number should be listed on the letterhead in the same envelope as the withdrawal form).

Sacramento County tax appeal withdrawal form

The Sometimes Tricky Part: It’s always ideal when the Appeals Board agrees with the value you came up with, but that doesn’t always happen. Sometimes the Appeals Board appraiser offers a slightly higher value. When this happens, I typically coach my clients to accept the value so long as it is fairly close to the value I came up with. Unless the value is really too high, it’s not worth it to spend extra time and money to argue for an additional $100 savings.

Situation #1: This happened to a client last week. The withdrawal form offered $250,000, but the value I came up with was $230,000 (this was a very solid value too). I called up the appraiser and had a discussion about the market. I got the sense that he was not going to budge, so I asked him to meet me in the middle at $240,000. He agreed. While $230,000 would have been ideal, the extra $10,000 in property taxes is only worth about $125, so my client chose to rejoice that his taxes were lowered from $280,000, and simply accept the $240,000. Had we gone through the appeals hearing, I’m confident that $230,000 would have prevailed, but sometimes it’s just not worth the effort in light of minimal savings to be had. The property owner makes this decision though and I’ll move forward with either direction.

Situation #2: The Appeals Board initially rejected the value I proposed at $160,000 and instead persisted to advocate for $200,000. Honestly, I’m not sure the appraiser even read through my report, but that’s another story. My research was extremely detailed with graphs and a clear picture of value at $160,000. It’s a good thing I knew the market because when the Assessor’s appraiser called me back (while I was out and about) to discuss the situation, he took into consideration my points and agreed with the $160,000 value.

Most of the time if you put together a solid report, the Appeals Board will agree with your value or offer you something very close. It’s nothing to be worried about. On the other hand, if you lowball a value and offer nearby sales that really aren’t comps, then don’t be surprised if your value is rejected altogether. If the Appeals Board does not agree with your value, and you wish to move forward still, then be ready to plan for an appeals hearing.

refund3.  When will you get your tax refund? After you withdraw your application and agree to a new value, your refund should come within 95 business days. Please note 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. Most clients get back anywhere from several hundred dollars to sometimes $2,000. I had one client that was owed over $10,000 back.

Is it worth it to appeal your property taxes? If you are overassessed, it is absolutely worth it. It might sound like a pain to a certain extent, but in my opinion it’s more of a pain to pay too much in property taxes. If the details stress you out, then give me a call. If you need help, I’m very good at what I do, and I’m glad to take a look at your situation to see if there might be a potential savings for you.

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.

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Filed Under: Property Taxes, Resources Tagged With: advice on property taxes, appraiser hire for property taxes, Contest Property Taxes, Dispute Property Taxes, home appraiser Sacramento, how to reduce property taxes, property tax appeal articles, property tax consultant, property taxes in Sacramento County, sacramento county home appraiser, Sacramento Tax Appeals, tax appeal withdrawal form

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