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.

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.

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.

How do you know if you’re overbuilding? Here are ten signs for your mental checklist if you’re considering a significant addition to the size of your home.

You are overbuilding…

1. If your house is going to be twice as large as all others in the neighborhood.
2. If you no longer need Neighborhood Watch because your house towers over all others and is a watchtower in and of itself.
3. If you have double the bedrooms of other homes in the neighborhood.
4. If your house is mistaken for a motel or residential care facility.
5. If you can see in every backyard on the street.
6. If what you are building will yield little value in the resale market.
7. If the larger size removes the rear yard and thus creates a negative for buyers.
8. If prospective buyers think “Yikes, what were they thinking?” or “I would not want to live next to THAT house.”
9. If shade from your house lowers energy bills for neighbors on every side.
10. If buyers don’t have the expectation for such a large house in the neighborhood.

Obviously some of the points are only for fun, but you get the gist. If what you are doing is not consistent with the look and feel of the neighborhood as well as the expectations of the marketplace, then you’re probably overimproving your property. Watch a fun 30-second clip below of an overbuilt house I saw in Sacramento (and here is another in Woodland).

Anything you’d add to the list?

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 seems like most of us in the real estate community are on the same page that a property built before 1978 with a defective paint surface will require repairs for an FHA loan. We know lead-base paint was used in the United States before 1978, so there is a health and safety risk present when the paint surface is defective. This makes sense and it’s pretty much common knowledge.

What about after 1978? But what about a property built after 1978 that has a defective paint surface (chipping, peeling or flaking paint)? There is much confusion in the market on this point among lenders, real estate agents, home owners and even appraisers. Does FHA require repairs for a defective paint surface for a house built in 1979, 1993, 2005 or anytime after 1978? The answer is YES, but not because there a “health and safety” issue due to the potential for lead-base paint. The issue here is promoting economic longevity for the property since bare wood can lead to decay, which does not promote the longterm health of the property.

FHA’s latest Valuation FAQ on 2-28-12 (click here for PDF link):

Noted lead based paint still seems to be an issue that is unclear in the minds of some appraisers and lenders. Should the lender automatically call for painting only if the home is pre-1978, or should further measures be taken in all cases?

Page 6 of Appendix D in Handbook 4150.2 states, “For any home built prior to 1978, check for evidence of defective paint surfaces, including: peeling, scaling or chipping paint. For all FHA insured properties, correction is required to all defective paint surfaces in or on structures and/or property improvements built before January 1, 1978 in accordance with 24 CFR Part 35.” The appraiser is further instructed to provide a detailed description and identify the exact location of any deficiency under “physical deficiencies” affecting livability. The appraiser is required to condition the appraisal on the “repair” of any noted lead based paint deficiencies.

As noted in mortgagee letter 2005-48, defective exterior paint surfaces in homes constructed post-1978 where the finish is otherwise unprotected will require automatic repair.

Here is a video I did in 2010 on this very issue of pre-1978 vs post-1978. Watch below or here.

I hope this was helpful to answer some of your questions. You can check out other FHA appraisal articles I’ve written including not leaving paint chips on the ground when curing the defective paint surface and even potential options for handling the cost of the defective paint surface.

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.

Everyone and their mom has a solution to deal with the housing crisis, but ultimately programs and bailouts that only scrape the surface of the issue are not going to bring us back to “normal” until distressed inventory runs its course and employment in the Sacramento area begins to see significant improvement.

Short-term Market Boost: When I look at graphs like the one below, I’m reminded of what it looks like for a short-term program to enter the marketplace to help boost the economy. Ultimately, the tax credit from 11/07/2009 to 09/30/2010 had a positive impact on the market and surely saved some homes from foreclosure too. Yet the boost it gave to the housing market for a matter of months could not hold back the inevitable decline in property value though either. My point? Every day we seem to hear of new solutions to fix the housing market, but as painful as it is, the market may just need to bleed for a number of years ahead. As much as we’d like a quick fix or program, that’s probably not going to happen because we need time for the market to work itself out of the mess.

The graph below is based on research in the Churchill Downs neighborhood in Sacramento. I could plot out many areas of Sacramento and a very similar trend would be seen: stability during the tax credit and a decline afterward.

What do you think it looks like for recovery to unfold? Do you think we’ve hit bottom? Why are we not seeing a surge in property value right now in light of such low inventory levels?

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.

Would you support a bill in congress that outlawed appraisers from using distressed sales as comps? On paper this might sound appealing because there is often a difference between market value and distressed sales, and if the wrong comps are used there could be a negative impact to value. But in reality, sometimes there are nothing but distressed sales for the appraiser to use.

There have been quite a few bills over the past few years proposing appraisers not be allowed to use distressed sales in their apprisal reports. As an example, H.R. 1755 was introduced in the House of Representatives on May 5, 2011 and says:

ARMS LENGTH TRANSACTIONS: The appropriate Federal banking agency shall require that entities used by financial institutions to assess or review underwriting standards and collateral values for real estate loans made by such institutions after the date of the enactment of this Act use comparable sales involving arms length transactions to make such an assessment or review.

(A) IN GENERAL- The term `arms length transaction’ means a negotiated real estate transaction between a buyer and seller in which such buyer and seller act independently of each other.

(B) TRANSACTIONS EXCLUDED- Such term shall not include any transaction involving a short sale or foreclosed property or any other distressed real property.

Can Congress Provide me Comps? I’m finishing up an appraisal on my desk right now in the Wild Wings neighborhood in Woodland. This neighborhood is unique and there are literally no other subdivisions in Woodland that compare to this secluded golf course community. Therefore the most adequate and competitive sales come from within the neighborhood (that makes sense, right?). The only problem is that 75% of all sales over the past 12 months were distressed (only 32 sales by the way). Moreover, I’m doing an appraisal of a 2,500 square foot house and 8 of 8 sales between 2300-2800 squafe feet over the past year were either REOs or Short Sales.

If a law was passed that stated appraisers could not use distressed sales, I would have a big problem in this neighborhood and many others like it. Thankfully I know how to do my job though and I can use sales like this and sift through which ones may or may not represent market value (and make adjustments if appropriate).

Would you support this bill? Why or why not? What is the motivating factor behind a bill like this?

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.

Have you ever felt like you need to do a blog post, but you just don’t know what to write? I’ve been there many times, so I wanted to share a resource I created that helps me avoid this feeling by keeping 10-20 post ideas in front of me at any given time. The document below hangs in my office, and I use it to jot down post ideas whenever I have them. This system is simple and it’s  worked extremely well for me to be more organized, save time and stay focused on my target audience.

Download “How to develop blog content” and start writing down some ideas. I hope this is helpful, whether you have a real estate blog or write about something else.

By the way, if you’re in the real estate industry and looking for some general blogging tips, check out Quick Tips for Real Estate Blogging.

How do you plan posts? Could you see yourself using a resource like this?

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.

Do you think this roof might need replacement? I’ve been asked multiple times in my appraisal career to “ignore the tarp” on the roof, but when a tarp is present that means the roof is probably failing or getting too close for comfort, right? Well, maybe there really is no damage. Maybe it’s just an owner who prefers the look of a plastic tarp to comp shingles, tile or wood shake. 

In a situation like this the appraiser has to disclose all he knows about the roof and cannot simply ignore the situation – whether the appraisal is for a private party or a loan. A property like this would not quality for conventional or FHA financing unless the roof was repaired or replaced. On top of the cost to replace the roof, I would be most curious about any other damage on the interior from water intrusion.

Do you have any real estate roof stories?

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.

There is no escaping property taxes, right?

According to the Sacramento County Assessor, “An “escape assessment” is a correction to a property’s assessed value on the local property tax roll. The correction is made because the Assessor’s Office discovered a property or a taxable event that should have been assessed but was not. Current and/or prior year tax rolls may be affected. The most common reasons for an escape assessment are overlooked or unreported new construction, a missed change of ownership… or the removal of an exemption.”

Why am I talking about escape assessments? I just finished up some property tax consulting work for an East Sacramento home owner who needed research for his property’s value over the past four years. I love this type of work because it’s exciting to analyze the market for a number of years to establish a value over time. In this situation the owner inherited the property in 2008 from a friend, but the Assessor’s Office was not informed at the time of the death of the original owner, which should have triggered a reassessment. When the Assessor discovered the death and change of ownership, they sent the new owner a “Notice of Proposed Escape Assessment”, which basically means the Assessor’s Office enrolled new assessments for the property for the past four years. The home owner can appeal the values within 60 days of the issuance of the notice. Since the owner disagreed with the value put on the tax roll by the Assessor for 2008-2011, he hired me to show what market value was during each of these respective years.

NOTE: In situations like this the owner can appeal property taxes for multiple years in the past, but that’s not the case in typical “decline in value” situations. If you have been overtaxed for the past several years, for example, but you did not formally dispute your property taxes at the time, then there is nothing you can do once the appeals deadline passes on November 30 of the given year. All you can do is wait until the next year to appeal your property taxes.

Does that make sense? Let me know if you have 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, Facebook, Twitter or subscribe to posts by email.

To give comps or not give comps? That is the question. I met up with Realtor Steve Ostrom last week and we talked about whether a real estate agent should give an appraiser “comps” or not when meeting the appraiser at the inspection. Steve talked about why he always meets the appraiser at the property and I gave some tips for interacting with appraisers around this issue. Due to HVCC, there is still some confusion over whether agents can even talk to appraisers, but they definitely can (just don’t try to pressure for a certain value). Check out the video below (or here). Let me know what you think. I’d love to hear from other agents and appraisers especially. Any questions?

NOTE: In quite a few cases the “comps” provided by real estate agents are really not all that “comparable” to the subject property. It can be valuable when agents share their market insight with appraisers, but my advice to agents is to make sure the sales really are comparable and located in the same market area. This comes back to the difference between a property that is truly competitive / comparable (“comp”) to the subject and a sale that meets a certain price level.

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.