I see descriptions in listings all the time to the effect of, “no value given for the pool”, “barn not included in sale” or “zero value given to the detached garage.” But is it really legitimate in the eyes of an appraiser to exclude a portion of the property because an agent, buyer or seller is not considering it in the purchase price? In short, no. Let’s consider FHA and conventional loans.

The “whole enchilada” of FHA: There is no such thing in the eyes of HUD or the FHA appraiser for giving “zero value” to any portion of the property – even if the contract says so. According to FHA guidelines, everything in the parcel lines must meet FHA minimum property standards. This means if you have a dilapidated barn, it might need some repairs or even removal. If you have an old pool, it should be in working order. If there is an unfinished addition, the appraiser cannot simply ignore it. Or if a covered patio poses a safety issue, it’s a red flag. FHA is really concerned with the “whole enchilada” so to speak and not just a portion of the property (the house). In short, if it’s located within the parcel lines, the FHA appraiser will consider it within the valuation and it MUST meet FHA minimum property requirements. Bottom line.

But it’s a conventional loan and the buyer and seller have agreed: It’s important to realize appraisers cannot ignore features of a property no matter what an agent, buyer or seller might agree upon. This is not evidence of anal appraisal standards or mean-spirited appraisers, but rather something normative and necessary for valuations. The appraiser’s job is to analyze all facets of a property and any impact it might have on value. Appraisers are not bound by the agreements of a buyer and seller – even if those agreements are understandable. For instance, to take it to an extreme, imagine if a buyer and seller said, “the house is excluded from value”. Would the appraiser then only give value for the lot? Even if the house was a complete tear-down, the cost to demo might have to be considered and applied to the valuation.

Maybe the appraiser will conclude little to no real value is given for the feature excluded by the buyer and seller. But the appraiser definitely still has to at least consider the issues at hand and make that call after analyzing the market.

I hope this was helpful.

Any questions, scenarios or stories to share?

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