Last week I gave some tips on how to challenge a low appraisal, and today I’d like to point out something very obvious you ought to pay attention to in an appraisal report. If there is a big difference in square footage between the appraisal and official records (tax, assessor, county, city), it’s important to know why there is a difference, because it could hurt your wallet.

In the example below, an investor client hired me to review an appraisal on one of their recent flipped properties in Sacramento. One of the very first things I noticed was the appraiser measured 1087 square feet, but Tax Records said 1207. Since the appraiser adjusted by about $50 per square foot, it looked like this could possibly make a $5,000 difference in the report. Who was right in this case? After my client hired me to accurately measure the house, the actual GLA (gross living area) was 1207. You can see the appraiser measured the western wall at 38 feet, but it was actually 45 feet. The original appraiser ended up fixing the error and then adjusted the value up by $5,000.

There was obviously an error in the example above, but in other cases, why is there a difference between actual living area and what official records say?

1. Builder was wrong: Official records could have been wrong from the beginning if the builder reported an inaccurate GLA for that model.
2. Change of building plans: Sometimes building plans change, but the adapted square footage is not reported to the county, so the local authorities only have on file what was originally planned.
3. No permits: The house may have been added on to without permits.
4. Permit not recorded: The addition was done with permits, but for whatever reason the additional square footage was not recorded.
5. Appraiser error: The appraiser made an error.
6. Including the wrong stuff: Maybe official records mistakenly includes an enclosed patio, sun room, garage or something else that really shouldn’t be GLA.
7. The 5 foot rule: There is a difference between the footprint of the house and actual square footage in cases with slanted ceilings with short walls (especially an A-frame house). It’s always important to take into consideration the “5 foot rule” for calculating square footage.
8. Shoddy workmanship: Maybe there is a legal addition, but the workmanship is really not up to par for consideration as GLA because it doesn’t meet standards for GLA.

What other reasons might there be a difference in square footage between official records and reality?

If you have any questions, or real estate appraisal or property tax appeal needs in the Greater Sacramento Region, contact Lundquist Appraisal by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

I cannot tell you how often I get phone calls from local real estate agents about bad appraisals on properties they are trying to sell. Usually the complaint is the appraisal has come in lower than the sales price. Of course we all know market value and contract price are not always the same, right? But very often in these situations there is a legitimate complaint because the appraisal just doesn’t seem to be well-supported. In cases like this I recommend the following points for preparing a solid appraisal rebuttal or reconsideration of value:

1. Put it in writing: Don’t just say things like, “this appraisal is bad”. That does nothing to provide support for why you think the appraisal is not adequate, and it does nothing to propel the conversation forward. Don’t just make a phone call either. It’s better to put your thoughts on paper in a logical manner so the lender and appraiser can digest your well-reasoned argument.
2. Be specific: Provide specific support for why the value opinion is different in your mind. It does nothing to only say “value should be higher”. Pick apart the comps in the report and any other properties you think are truly comparable too. Maybe you know the neighborhood really well, so you could point out something the appraiser really missed that impacts value. For example, you might say, “Comp 1 has zero upgrades and backs to a commercial property, yet the appraiser considered this property equal to the subject and did not make an adjustment. Why was no adjustment made?” Or maybe you’d say, “Comps 1-3 were all short sales and sold within 10 days of being listed. These sales appear to have sold quickly and below market value. Why was no adjustment given in the report for the distressed nature of the sales?” You might consider mentioning important information about neighborhood boundaries if inappropriate comparables were selected. Make sure to include marketing information on the subject property too (how many offers did you have?) as well as a list of all upgrades and costs too. Lastly, are there any big differences between the reported square footage or bed/bath count in the appraisal report in comparison to what you know to be accurate about the subject property?
3. No pressure: Remember not to pressure for a higher value. Just stick with the facts in the marketplace as they relate to the value of the subject property. As much as possible, try to illuminate the market so it can speak for itself. You are asking the appraiser to reconsider the value, not meet your sales price.
4. Be humble: You might be right, but you could also be wrong. There may be a very good reason why the appraiser made a certain adjustment. If the appraiser got it right too, then let the appraisal stick. There is no sense in trying to fight something if you don’t really have a case.
5. The big picture: Focus on big picture items that impact value like proper comp selection and proper adjustments in the report. It probably doesn’t alter value if the appraiser made a spelling error, right? Put your energy into things that really matter.
6. Bullet points: Be systematic in your presentation. Don’t write a novel, but organize your thoughts into 5-10 specific bullet points so the appraiser and lender can easily digest your reasoning. Avoid lengthy paragraphs and emotional points void of logic and specific data.
7. Be professional: Be nice even if you don’t feel like it. The way you ommunicate reflects upon you and your company.
8. Ask pointed questions: This goes back to being specific. Ask the appraiser to explain why certain adjustments were made or not made. Try to understand the report and ask the appraiser to explain himself.
9. Opening Paragraph: Include something like the following at the beginning of your letterhead: “After reviewing the appraisal for [address] by [appraiser], we would like to request further clarification and investigation by the appraiser. We would like to ask for a reconsideration of value based on the following points:”
10. Closing Paragraph: ”All things considered, we would humbly ask the appraiser to take a second look at the information above as it relates to data and adjustments in the appraisal report. The information above may impact the overall value of the subject property. We appreciate your time and consideration, and we can be reached with any further questions at 916-xxx-xxxx. Respectfully,”

Let me know if you have any questions or need my assistance for a property you are working on. I cannot be an advocate for you, but I can provide you with market insight or a second opinion of value.

Have you experienced any success with appraisal rebuttals? Any tips to share?

If you have any questions, or real estate appraisal or property tax appeal needs in the Greater Sacramento Region, contact Lundquist Appraisal by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

This graph illustrates perfectly why it’s important for some home owners to dispute their property taxes. Can you see how the Assessor’s value is truly a “lone ranger” among similar sales? A Sacramento area investor contacted me to prepare an appeal report for him to demonstrate market value on January 1 (date of assessment). As you can see, there is an enormous difference between assessed value at $167,154 and market value at $95,000 in the case of this halfplex in Citrus Heights. The savings in taxes per year equals $901, which works out to $75 per month. What would you do with an extra $75 each month in your pocket? (money that should be there in the first place)

If you have any questions, or real estate appraisal or property tax appeal needs in the Greater Sacramento Region, contact Lundquist Appraisal by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

Where would you say the real estate market is “doing pretty good” in the Sacramento area? What does that even mean in a post-bubble-bursting context? Take a look at the image below to get a hint of what the real estate market has been like in places like Elk Grove, Rancho Cordova, Davis, Fair Oaks, Carmichael, Citrus Heights, Folsom and El Dorado Hills among others.

Citywide stats are only so useful because sub-markets within a particular city might have drastically different figures. For example, Land Park and Pocket / Greenhaven will not show the same trends as the entire City of Sacramento mentioned above. Without making this post exhaustive though, let’s take this one indicator for what it’s worth. Overall any neighborhood under 30% in REOs and Short Sales would really be classified as “doing pretty good” for the current market. Despite 30% still representing 1 in 3 sales being distressed, it’s a fairly low percentage for a city or neighborhood. Even 50% seems to be a fairly common stat for areas that locals often think of as more “move up” kind of places. Many cities and neighborhoods have a foreclosure/short sale rate between 60-70%. It’s amazing to think that is normative, but it is definitely the case – particularly in cities where there was ample new construction during the boom years.

What do you think the information says about the health of the market? How does it impact real estate to have such a high percentage of distressed sales? What opportunities and threats exist in the current real estate market?

If you have any questions, or real estate appraisal or property tax appeal needs in the Greater Sacramento Region, contact Lundquist Appraisal by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

It’s Halloween next week, so let me give you a tour of a spooky house. There are no goblins or spirits or werewolves here, but be assured it definitely ranks on the creepy scale to inspect boarded-up dark houses in certain neighborhoods in Sacramento (alone). Enjoy a brief video tour below (or here) of a pitch-black bank-owned fixer. What do you think?

If you have any questions, or real estate appraisal or property tax appeal needs in the Greater Sacramento Region, contact Lundquist Appraisal by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

We can find almost anything online, right? But what about property value? How do Zillow values compare with actual appraised values? Let’s compare some recent appraisals with values from Zillow (“zEstimates”).

1. North Sacramento home: Appraisal: $60,000;  Zillow: $87,000 (+45.0%)
2. Del Paso Area home: Appraisal: $110,000;  Zillow: $70,000 (-36.0%)
3. College Greens home: Appraisal: $270,000;  Zillow: $290,000 (+7.5%)
4. Serrano home: Appraisal: $550,000;  Zillow $466,000 (-15.0%)
5. Rancho Cordova home: Appraisal: $125,000; Zillow: $128,000 (+2.4%)
6. Elk Grove home: Appraisal: $185,000; Zillow: $185,100 (0%)
7. Elk Grove home: Appraisal: $280,000; Zillow: $255,000 (-8.9%)
8. Sun City Lincoln Hills: Appraisal: $415,000; Zillow: $403,000 (-3.0%)
9. Orangevale home: Appraisal: $145,000; Zillow: $165,000 (+14.0%)
10. Land Park area home: Appraisal: $305,000; Zillow: $270,000 (-11.0%)

In my experience Zillow is very much hit and miss. It can seem more accurate in newer cookie-cutter neighborhoods, but wildly off in other cases when neighborhood boundaries are very tight, data is scarce or condition varies greatly in the local market. Additionally, it seems to me that the listing price in MLS is given strong weight because Zillow can pull that data over to use in its algorithm.

I know you’re expecting me to say all this, but it’s true. Online valuation sites can be a nice tool to tinker around with for real estate and rental values, but nothing replaces the human element. This is really a classic “Terminator principle” example where “humans vs machines“ go to battle and humans win (sorry to give away the end of the movie). While algorithms can be very powerful, they cannot see important neighborhood boundaries, quality of construction, high-level craftsmanship, the motivation of buyers and sellers, condition, positive or negative location factors, any sense of charm or appeal, and so many other elements. On top of all of this, the real estate market in the Sacramento area has been a wild ride and it’s not easy to interpret. So many neighborhoods in Sacramento have close to 70% of all sales being either foreclosures or short sales, which complicates sifting through data to establish true market value. Distressed sales tend to sell for less, but not always, so it makes for a very interesting process to properly value a house.

My advice? Enjoy Zillow for what it is and take it with a grain of salt, but trust an experienced and local human appraiser for the final say.

Go check your Zillow value. Does it seem realistic to you? I’m curious.

If you have any questions, or real estate appraisal or property tax appeal needs in the Greater Sacramento Region, contact Lundquist Appraisal by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

What’s wrong with this picture? Yes, that’s a telephone pole blocking access to a driveway. I did not take this photo at a funky angle or play around in photoshop. I’m not sure which came first, the house or the pole, but I have seen more efficient neighborhood planning. I snapped this photo in the Strawberry Manor neighborhood in North Sacramento. What do you think?

NOTE: In my excitement to get this post up, I mislabeled the pole as a “telephone” pole. It’s actually a street light with a sign attached to the light. I don’t want to change the title though because it’s already out there on Facebook and Twitter. That’s how it goes. No big deal. My bad.

If you have any questions, or real estate appraisal or property tax appeal needs in the Greater Sacramento Region, contact Lundquist Appraisal by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

I found these graphs astounding. It’s amazing to look back and see how the market has shifted in recent years. I know very personally it’s less than encouraging for home owners to see graphs like this, but it is what it is, right? Here are two graphs from recent research I did during an appraisal in the City of Fairfield. What do you think?

Now let’s look at all sales in the City of Fairfield over the past five years to see if the neighborhood trend above echoes the overall trend in Fairfield. Do you see any similarities or differences?

If you have any questions, or real estate appraisal or property tax appeal needs in the Greater Sacramento Region, contact Lundquist Appraisal by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

It’s free to appeal your taxes, right? Well, not necessarily in Sacramento County and many other surrounding counties. Technically speaking, if you fill out the Proposition 8 Decline in Value form, it is a free process to ask the Assessor to reconsider your property value. You can drop off this form to the Assessor off Power Inn Road in Sacramento, but realize the Prop 8 form is NOT an appeal. In short, if you fill out this form only and the deadline to appeal (November 30) passes, then there is no recourse to dispute your property taxes for the year. The only way to formally appeal your property taxes is to fill out the “Application for Changed Assessment” and drop this form off to the Assessment Appeals Board in Downtown Sacramento.

My advice from experience? You can try to turn in the Decline in Value form to the Assessor, but if you have not heard back as of October or early November, proceed to file a formal appeal. In truth, I rarely recommend the Prop 8 form at any time because most people are busy or November 30 is approaching too quickly. However, since the Application for Changed Assessment will cost you $30, some owners prefer the Prop 8 route first. The Application for Changed Assessment used to be free, but two years ago a fee was instituted, which means appealing your property taxes in Sacramento is not really free of charge. Along with the application you MUST submit evidence for a lowered opinion of value for January 1, 2011. Be realistic and support your value conclusion. If you know what you are doing, great, but if you need help, contact my tax appeal company and we’ll take care of you for only $99.00 (fee goes up in November). Our valuation report consists of a description of your property, the best comps, the worst comps (if needed), graphs of all sales in the market, a graph of competitive sales and a description of the real estate market as it pertains to your property.

Know the Difference: Whatever you do, please know the difference between these two forms. Every year I talk with home owners who thought they appealed their property taxes, but they only filled out the Prop 8 form. Remember, once the Assessor looks at the Prop 8 form, they may or may not get back to you and they do not have to bring your case to an appeals hearing either. In contrast, the Application for Changed Assessment will ensure your right to hear back from the appeals board and to eventually take things to an appeals hearing if need be.

Does this make sense?

If you have any questions, or real estate appraisal or property tax appeal needs in the Greater Sacramento Region, contact Lundquist Appraisal by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

My business tech arsenal increased by one today when a brand new HP Touchpad arrived at my doorstep. I’ve been wanting a tablet for work for the longest time, but I truthfully didn’t want to spend $500 on an iPad when my intended use was going to be limited. But since the Touchpad was priced under half the cost of an iPad, it was an easy decision for me. I’ll be using this new device for meetings, seminars, out-of-town traveling, taking notes at SAR and REAA, and basic communication and networking throughout the day. Will it end up being useful to me as a real estate appraiser? Only time will tell.

In all seriousness, when it comes to technology, I am constantly amazed how the internet, social networking platforms and blogosphere can really provide tremendous avenues to connect with people, build good relationships and earn people’s trust in life and business. How has the way you use the internet changed in recent years? What technology have you purchased recently? Is there anything on your wish list?

If you have any questions, or real estate appraisal or property tax appeal needs in the Greater Sacramento Region, contact Lundquist Appraisal by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

Many home owners wonder what they need to do to appeal their property taxes. Sacramento Realtor Doug Reynolds interviewed me the other day on this very topic, and I touched on some foundational issues such as the date of assessment, filing the correct form, comparable sales and when it makes sense for a home owner to appeal. Thank you so much Doug for the interview. Catch up with Doug at 916-494-8441 and www.buywithdoug.com. Keep me posted if you have any questions.

If you have any questions, or real estate appraisal or property tax appeal needs in the Greater Sacramento Region, contact Lundquist Appraisal by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

It’s a good idea for home owners, real estate agents and loan officers to be familiar with FHA appraisal standards so a house can be “FHA-ready” before the appraiser gets there. We all know FHA-required repairs are very common, but if you at least know some of the most frequent condition issues out there, you may be better prepared to avoid reinspections (and fees). Here is my “Top 10″ list of FHA repair items I see in the field in the Sacramento area:

1. Defective Paint: FHA requires any defective paint surface to be properly cured. This means there shouldn’t be any chipping, flaking or peeling paint. This goes for houses built before 1978 because of lead-base paint, and even after 1978 because FHA is not okay with bare wood that could foster wood decay and not support the longevity of the property. Read more and watch video.
2. No Carbon Monoxide Detector: It seems maybe only about 50% of homes I inspect for FHA loans have a carbon monoxide detector installed. FHA requires carbon monoxide detectors since it became California State law on July 1, 2011. Read more and watch video.
3. Missing Smoke Alarms: If the local county mandates smoke alarms, then they should be present for FHA loans. Many times there is a smoke alarm in the hallway, but they are frequently missing in each bedroom (or they are present, but not operable).
4. Missing Appliances: If there is a space for an appliance in the kitchen, then it should be there and work properly - bottom line. This means if there is a space for a dishwasher, but no dishwasher, then there should be a _________ (answer: dishwasher). Regarding stoves, FHA only requires drop-in stoves, while slide-in stoves are not required (but the lender might require one). Read more and watch video.
5. Garage Door is not Self-Closing: If the door from the garage to the house does not close automatically when you open it, then it’s a safety issue because the firewall door should automatically close. This is an easy fix because you’ll probably only need to replace the middle hinge on the door. Read more and watch video.
6. Utilities Not Turned On: The appraiser needs to test all utilities and systems, so if something is not turned on, the appraiser will have to come back for a re-inspection.
7. Water Heater Pilot Not Lit: If the hot water heater pilot is not lit, the appraiser is not able to test to ensure the water heater is working or not.
8. Doggy Door: If there is a pet door installed in the firewall door from the garage to the house, it is a breach of the firewall door. While it’s convenient for Fido, it’s an FHA safety issue. Read more and watch video.
9. Exposed Wires: If there are any exposed wires from missing fixtures or anything else, that’s a safety issue. If you see anything that might seem like an electrical issue, it probably is.
10. Broken Windows: Small cracks in windows are not an issue requiring correction for FHA, but large cracks or shards that may cause a potential for harm are definitely an issue.

I hope this was helpful. Let me know if you have any questions or insight. If you are in real estate, I’d be curious to hear what FHA issues you commonly see. If you are a local home owner or agent, feel free to email me or give me a call.

If you have any questions, or real estate appraisal or property tax appeal needs in the Greater Sacramento Region, contact Lundquist Appraisal by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.