No man’s land & the aggressive real estate market

It’s easy to explain what the market did, but what is it doing now? Everyone and their Mom can sound like an expert with the benefit of hindsight, but how do we see the current market? Do we give more weight to recent sales or listings? Do we have to wait for sales to close to know how the market is unfolding? Let’s consider a few thoughts below. I also have my big monthly market update at the bottom of this post for those interested. Any thoughts?

aggressive market in sacramento - sacramento appraisal blog

Four points to consider:

  1. Sales show us the past: A sale might close escrow today, but does it really tell us about the market today? Not necessarily. A closed sale on April 12, 2016 probably got into contract in early March, so it likely tells us more about the market 30-45 days ago rather than today. The current market in April could actually be higher or lower, so it’s important to ask how value has changed if at all.
  2. Pendings help us see the current market: The current market is often better seen in the pendings and listings rather than the sales. This assumes we have enough solid data of course. One of the most practical questions we can ask is whether properties are getting into contract at higher levels or not. Simply put, if pendings are higher than the most recent sales (and they’re not padded with concessions), they helps us see the current market has probably increased in value. Other questions to consider: Are properties getting into contract more quickly? Is inventory going up or down? Is the sales-to-list price ratio increasing or declining in the neighborhood? Are sellers offering incentives to buyers or not? It’s easy to be so fixated on sales that we don’t ask these questions, but the answers help us gauge current trends. Remember though, sales might tell us about the past, but we still give them strong weight because they actually closed at that level. After all, pendings might not end up selling. In that sense we have to “appraise” the pendings too. Are they reasonable? Do they reflect the market? Or are they outliers?
  3. Getting bid up to “no man’s land”: Sometimes in a frenzied market, properties can easily get into contract for more than they are worth. Yes, the market has been aggressive and values have been increasing (see trends below), but sometimes properties are simply getting bid up to “no man’s land” so to speak. In other words, there just isn’t any support for a value that high based on all market data. Remember, even when housing inventory is incredibly sparse like it is right now, there still has to be support for the value. We can’t just list at an astronomical level or let offers get bid up way beyond what is reasonable and expect a magical appraisal to meet the contract price.
  4. Making or not making market adjustments: If the market has changed since the sales went into contract, appraisers may need to account for that with a market conditions adjustment. If you didn’t know, appraisers can give an up or down adjustment to the comps if the market has changed since the comps went into contract. In fact, if an adjustment is not given when it should be given, the appraised value could easily reflect the market in the past rather than today. Appraisers need to consider what a real market adjustment for time might look like. For instance, last week I used a comp that was nearly one year old since recent sales were sparse, and I gave an 8% adjustment up since the neighborhood market has increased in value by that much. I could have given a small token adjustment that I just made up, but 8% was very reasonable based on more recent sales and current pendings.

Any thoughts? I’d love to hear your take below.

—————– For those interested, here is my big market update  —————–

Big monthly market update post - sacramento appraisal blog - image purchased from 123rfTwo ways to read the BIG POST:

  1. Scan the talking points and graphs quickly.
  2. Grab a cup of coffee and spend a few minutes digesting what is here.

DOWNLOAD 87 graphs HERE: Please download all graphs in this post (and more) here as a zip file (or send me an email). Use them for study, for your newsletter, or some on your blog. See my sharing policy for 5 ways to share (please don’t copy verbatim). Thanks.

Quick Sacramento Market Summary: It’s been aggressive out there. This is why many real estate professionals are comparing the current market with the beginning of 2013. There are certainly similarities, though the market three years ago had very rapid appreciation and all the metrics show it was hands-down more aggressive than it is today. We can talk about the differences in the comments if you’d like. Values overall saw a healthy uptick last month, it took 12 less days to sell a house compared to the same time last year, and housing inventory is currently over 25% lower than it was last March. Sales volume was up about 4% last month compared with the same time last year, and interest rates declining has certainly helped draw more buyers out (which doesn’t help with the low inventory problem). FHA had been increasing in the Sacramento market, but in light of how aggressive the market is out there, FHA buyers have begun to get squeezed out. FHA buyers were still 23% of all sales last month, but that’s down from 25-28% for multiple months in a row. It’s worth noting bank-owned sales are up very slightly. Some REO brokers have said they are starting to see more action in their REO pipelines, though so far there really isn’t any big change as REOs were only 5% of all sales the past quarter.


  1. It took an average of 37 days to sell a home last month.
  2. It took 9 less days to sell last month that the previous month.
  3. It took 10 less days to sell this March compared to last March.
  4. Sales volume was up nearly 4% this March compared to March 2015.
  5. There is only 1.2 months of housing supply in Sacramento County.
  6. Housing inventory is 26% lower than it was last year at the same time.
  7. The median price increased by 2% last month.
  8. The median price is 8.7% higher than the same time last year.
  9. The avg price per sq ft increased by 2.3% last month.
  10. The avg price per sq ft is 8.3% higher than the same time last year.

Some of my Favorite Graphs this Month:

inventory in sacramento county Since 2013 - part 2 - by sacramento appraisal blog

inventory - March 2016 - by home appraiser blog

fha and cash in sac county - sacramento appraisal blog

sales volume and cash in sacramento - by home appraiser blog

CDOM in Sacramento County - by Sacramento Appraisal Blog

REO and short sale trends - sac appraisal blog 3

median price and inventory since jan 2013 - by sacramento appraisal blog

price metrics since 2015 in sacramento county - look at all 2


  1. It took 9 less days to sell last month compared to the previous month.
  2. It took 9 less days to sell this March compared to last March.
  3. Sales volume was 2.5% higher in March 2016 compared to last March.
  4. Short sales were 3.5% and REOs were 5.2% of sales last month.
  5. There is 1.5 months of housing supply in the region right now.
  6. Housing inventory is 19% lower than it was last year at the same time.
  7. The median price increased 3% last month from the previous month.
  8. The median price is 7.2% higher than the same time last year.
  9. The avg price per sq ft increased 1.6% last month.
  10. The avg price per sq ft is 7.6% higher than the same time last year.

Some of my Favorite Regional Graphs:

median price and inventory in sacramento regional market 2013

months of housing inventory in region by sacramento appraisal blog

days on market in placer sac el dorado yolo county by sacramento appraisal blog

sales volume 2015 vs 2016 in sacramento placer yolo el dorado county

sacramento region volume - FHA and conventional - by appraiser blog

Regional market median price - by home appraiser blog


  1. It took 14 less days to sell a house last month than February.
  2. It took 9 less days to sell this March compared to last March.
  3. Sales volume was 11% lower in March 2016 compared to last March.
  4. FHA sales were 18% of all sales last month.
  5. Cash sales were 20% of all sales last month.
  6. There is 1.8 months of housing supply in Placer County right now.
  7. Housing inventory is 3% lower than it was last year at the same time.
  8. The median price declined 2% last month (take with a grain of salt).
  9. The median price is up 6.5% from March 2015.
  10. Short sales were 3.2% and REOs were 2.4% of sales last month.

Some of my Favorite Placer County Graphs:

Placer County housing inventory - by home appraiser blog

Placer County price and inventory - by sacramento appraisal blog

number of listings in PLACER county - 2016

months of housing inventory in placer county by sacramento appraisal blog

interest rates inventory median price in placer county by sacramento appraisal blog

Placer County sales volume - by sacramento appraisal blog

I hope this was helpful and interesting.

DOWNLOAD 87 graphs HERE: Please download all graphs in this post (and more) here as a zip file (or send me an email). Use them for study, for your newsletter, or some on your blog. See my sharing policy for 5 ways to share (please don’t copy verbatim). Thanks.

Questions: Any other points to add about sales vs. listings? How else would you describe the market right now? I’d love to hear your take and what you are seeing in the trenches.

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4 reasons why appraisers take interior photos

Why do appraisers take interior photos? What do they do with the photos? Are they required? An upset home owner recently grilled me on this issue after talking with his spouse about me taking photos at the property. Of course I asked to snap images of each room during the inspection, I was given permission, and I was nothing but professional, but it still ended up being an issue that had to be smoothed out with some explanation. Thus I figured it would be helpful to explain why appraisers take photos, and include some tips for agents, owners, and appraisers too. I hope this is helpful. Anything you’d add?

appraisers take interior photos - by sacramento appraisal blog - image purchased and used with permission from 123rf dot com

Four Reasons Why Appraisers Take Photos:

  1. Client Requirement: The truth is some clients require interior photos. In fact, lender clients usually require at least one photo of EVERY single room. It’s not uncommon for some lender clients to even require photos of smoke detectors, water heaters, and carbon monoxide detectors. I once had a lender client that wanted photos of all ceilings (I’m guessing they wanted to be sure there were no stains or spots because they probably had some bad experiences in the past). On the other side of the coin, interior photos might not be required at all by a client for a private appraisal (though the appraiser might need them. See #2, #3, and #4).
  2. Remember the House: When an appraiser takes photos, it’s helpful to have these photos when going back to the office. The photos can of course help the appraiser when choosing comps and making adjustments, but they can also help the appraiser remember what the house was like. For instance, there have been times when I labeled the bathroom floor as vinyl during my inspection, but the photos clearly showed the floor was tile. Or maybe my sketch showed only four bedrooms, but there were actually five based on my photos. Everyone makes mistakes, and that includes appraisers. Thus at times the photos can serve as a back-up to the appraiser’s memory.
  3. Documentation: If an appraiser is called into court to take the stand to talk about the condition of a property at the time of the inspection, photos can be a tremendous tool to assist the appraiser’s description. In fact, a few months ago some of my photos were shared in court while I talked through the house with the judge and jury.
  4. Reporting: Appraisers use photos in appraisal reports to help tell the story of the house to the client. Photos can highlight condition, layout, quality, recent updates, etc…, so they are an important part of the appraisal process. As they say, a picture can be worth a thousand words, so an appraiser can help a client see the house by including a dozen or so photos of the house in the report.

Realtor Tips:

  1. Let your client know the appraiser will be taking photos.
  2. Be sure the appraiser is going to have access to each room (including the garage), and that your client knows each room will be photographed.

Owner Tips:

  1. Image purchased at 123rf dot com and used with permission - 14688774_s - smallerIf you are doing a refinance, expect the appraiser to take photos. If you do not want interior photos because you feel it is an invasion of privacy, be sure to tell the lender before the appraiser comes so you are sure the lender will do the loan without interior photos. In today’s strict lending environment, I’m guessing the lender is going to require interior photos no matter what. If you’ve hired an appraiser for a private assignment, and you feel uncomfortable about interior photos, the appraiser might be okay with not taking photos (just ask).
  2. If you feel concerned about photos, talk with the appraiser before the inspection begins. The appraiser will likely let you know why photos are taken and how they will be used. While I don’t advocate hovering over the appraiser during the inspection, if you do feel really concerned, you can walk behind the appraiser to keep an eye on how photos are taken. It’s your house.
  3. Appraisers are bound to client confidentiality, so appraisal reports with photos are not made public or posted online by the appraiser.
  4. If you have personal property you do not want photographed, you may want to conceal or remove whatever that is before the inspection (if possible).
  5. Expect the appraiser is going to want to see every room, and if an appraiser is not allowed to inspect and photograph certain rooms, a lender client may want the appraiser to do a second inspection at some point to take photos (this will cost you more money unfortunately).
  6. If you are concerned about sensitive clothing articles being photographed, just make sure there are no sensitive items within view. Appraisers should not be opening dresser drawers.

Appraiser Tips:

  1. Ask before you take photos. I tend to say, “I’ll need to take at least one photo of each room. Is that okay?” This way I have permission. I know this is basic, but after a concerned owner questioned me recently about photos, I am definitely in tune with how important it is to ask this question.
  2. Be careful to not have any people or photos of people in the photos where possible. This is often what owners and tenants are most concerned about. Obviously lenders want photos, but if something looks too personal for a non-lender assignment, I simply take good notes and don’t photograph that room. I once inspected a house where the owners had poster-sized risqué photos of themselves. That’s fine if that’s what works for them, but I definitely made sure my camera didn’t snap any of those poses.
  3. Be cautious about including guns, art work, or safes in photos as owners can be sensitive about those items.
  4. Be careful about photos in a home office as it can be easy to include private information.

I hope this was helpful. Thank you for reading.

Investor Interview: By the way, I had an hour-long conversation recently with an investor named Janice Bell. She does a weekly interview, and I was her target a few weeks back. You can listen in the background below (or watch here).

Questions: Any thoughts? Did I miss anything? I’d love to hear your take as an owner, agent, appraiser, or tenant.

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5 reasons why an appraiser CAN appraise a property above the highest sale

Can a property be appraised above the highest sale in the neighborhood? A real estate agent friend was told recently by an appraiser that the house could not be appraised above the highest sale because that is what Fannie Mae says. Is that true or not? Let’s consider some of the following points.

Curtis Park neighborhood in Sacramento - Sacramento Appraisal Blog

5 reasons why a house CAN be appraised above the highest sale:

  1. The Horse’s Mouth: Fannie Mae does not say appraisers cannot appraise a property above the highest sale. I’m not sure if the appraised value in this case was on point or not, but the appraiser was simply not correct regarding the supposed rule by Fannie Mae. Whenever someone states, “Fannie Mae says….”, I recommend asking the person what page of the Seller’s Guide he/she is referring to.  🙂
  2. Increasing Market: If a market is increasing in value, there is going to be a legitimate time where buyers are simply willing to pay more than most recent sales or even the highest sale. This is especially true when inventory is sparse and interest rates are low. This reminds us too that appraisers don’t make values increase, but rather measure when the market changes.
  3. Lower Sales: Recent sales may have closed at lower levels, but there is no rule that says appraisers have to use the newest sales. In fact, even Fannie Mae states the appraiser may need to use older sales rather than newer ones. Sometimes lenders tell appraisers to use sales within the past 90 days, but that type of rule is not consistent with Fannie Mae, and it might stand in the way of a good appraisal too. For instance, if two distressed short sale models closed last month, but there are ample model match sales from prior months (and current model match listings at higher levels too), it’s probably best to ignore the two recent lowball sales since they don’t represent the market. Remember also that one or two sales do not make or break a market.
  4. Zero Sales: The appraiser in this case said Fannie Mae prohibited the appraised value from being above the highest sale. But what if there were zero sales over the past year? Would that mean current value is bound to where sales were at last year? Nope. It can be tricky to see the market when there are no recent sales, but it can be done with time and skill.
  5. The Best: The house being appraised might be the best on the block or have a feature that pushes it over the top of recent prices. Thus it can make reasonable sense to see a home appraise for more than the others. Of course just because someone thinks a home is the best thing ever does not mean the market is willing to pay the highest price ever. Also, keep in mind every neighborhood has a price ceiling, which means buyers will inevitably only pay so much in that neighborhood before moving on to a different area.

BRACKETING: Please know I’m not trying to give the appraiser a hard time or throw any appraiser under the bus (I love my fellow appraisers), but I did want to offer the above points because there is space for some conversation. While the appraiser was incorrect about Fannie Mae’s rule, I do appreciate the appraiser being aware of the concept of bracketing. Bracketing is basically when appraisers will use some superior sales and some inferior sales to help establish value for a property. This can be a good practice when choosing potential comps because it helps us see the higher and lower ends of a competitive market. Bracketing is not always possible (see points 2-5), but it can help support a value or adjustments. For instance, if valuing a fixer property, we would want to use at least one fixer comp so we know what the market was actually willing to pay for a fixer. Otherwise if we only use remodeled homes for comparison, we are left sort of guessing what the downward adjustment should be for condition. Is it $20,000, $30,000, $50,000, $100,000, etc….? The best way to know what the adjustment should be is to find actual fixers in the market. How much of a discount for condition is there between remodeled homes and fixers? The same holds true for figuring out the value of a built-in pool. Rather than guessing at the value (say $10,000), if we look at competitive home sales with and without pools, we can begin to extract a price buyers have been willing to pay. In other words, if we bracket sales with and without pools, it helps us begin to see the market.

how to think like an appraiser biggerHOW TO THINK LIKE AN APPRAISER (class I’m teaching): Locals, if you are around on July 16th, I’d love to have you come by the Sacramento Association of Realtors for a class I’m teaching called “How to Think Like an Appraiser”. This will be three hours of relevant conversation (and we’re going to have some fun). This is perfect for new agents as well as veterans. My goal is to leave you with insights to apply to your listings and tips for working with appraisers. Register here.

Question: Any thoughts, stories, or points to share? I’d love to hear your take.

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How do you value an attached unit when there are no recent sales?

I get quite a few calls from the real estate community about pricing attached units. The conversation tends to go like this:

Agent: Ryan, I’m working on pricing a halfplex, and it’s not easy.
Me: I feel your pain.
Agent: There aren’t any recent halfplex sales in the neighborhood, and my unit is larger than others too. What should I do?
Me: You should probably just guess and hope you’re okay on value.
Agent: What??
Me: I’m kidding. Let’s talk about it.

What is a halfplex? If you are located in another part of the country, you might call an attached home something else, but in the Sacramento area we say “halfplex” (sort of like half a duplex). The home below is a halfplex because it is connected to the house next door by the garage and a wall inside. Moreover, the parcel line runs through the center of the connecting wall in the garage, so each unit is individually owned and has its own lot.

tips for valuing a halfplex

It’s not always easy to value certain properties – especially when sales are sparse. This is why it’s important to have a solid valuation methodology clipped to your real estate utility belt so you can apply it as needed.

Tips for Valuing a Halfplex (Attached Home):

1) Apples to Apples: An attached home should be compared to other attached homes because a buyer looking for a detached unit is usually NOT simultaneously in the market for an attached one. It’s just a different type of house. Moreover, there can be a huge value difference between attached vs. detached.

2) Start in the Immediate Neighborhood: You’ll want to find halfplex (attached) sales in the immediate neighborhood so you are sure what buyers have been willing to pay in the area. If you go out too far looking for “comps”, it’s easy to miss the immediate market by assuming that values are similar in other tracts. I recommend using the Polygon tool in Sacramento MLS so you can actually draw exact neighborhood boundaries in the immediate subdivision to be sure you are only getting data from those boundaries. You might want to start looking at sales over the past 6 months and then go back to one year. In an ideal world you will have a ton of sales, but we all know that doesn’t always happen.

TIP: In addition to sales, be sure to look at both listings and withdrawn listings in the immediate neighborhood to get a fuller picture of neighborhood values.

start small before searching further away for comps - sacramento appraisal blog

3) Look at Older Sales in Immediate Neighborhood: Be sure to look back over the past few years or so in the immediate neighborhood so you can see gain a better context for the halfplex market. You probably won’t use these oldies as comps in a listing presentation (or appraisal), but they still might provide a fantastic context because you can either add or subtract value to older sales based on what the market has done over time.

4) Previous Subject Property Sale: Has the subject property sold previously? If so, look up sales at the time to see what it was comparable to in the neighborhood? Moreover, how has the market changed since it sold previously? Be sure to give more value weight to recent sales and current reasonable listings, but be aware of any previous sale to help create context. Remember the condition of the subject property might have changed over time, and pay attention to the nature of the previous sale (maybe it sold for too little or too much).

5) Competitive Sales in Other Tracts: In some areas of town there are simply few attached homes, so you may need to go out several miles to find comps. The problem of course is that if you travel too far, some neighborhoods might have higher or lower prices, so be aware of value adjustments that might need to be made. As a rule of thumb, try to look in areas where you think a buyer might realistically considering hunting for a home if the subject property was not available. You can double check how comparable other neighborhoods are by comparing older sales in the immediate neighborhood with older sales in neighborhoods that are further away. For instance, if you have an older sale that closed at $250,000 in the immediate neighborhood, how much did similar-sized halfplex sales in further places sell for at the time? If the neighborhood that is further away ends up being very similar in price when comparing historical sales, there is a good chance current sales in the further neighborhood could help tell you what the current market is willing to pay for your neighborhood.  Be careful to not just look at one sale though because one sale does not make or break the market. Having a few data points is best so you know you’re not just looking at an outlier.

what is a comp - sacramento appraisal blog

6) Detached Units in Immediate Neighborhood: Be aware of what other detached units are selling for in the neighborhood. If there are very few recent sales, I recommend going back in time to find out what the price difference was between halfplex (attached) sales and similar-sized detached sales in the immediate neighborhood. Then once you understand the price difference in the past neighborhood market, come back to today’s market. What are similar-sized detached sales currently selling for? This may help you see what attached units should theoretically be selling for. Remember, this is definitely a back-burner approach to value, and it’s not the first step, but it can still provide context.

7) Bottom of the Market: Where is the bottom of the market in the immediate neighborhood? There is a good chance that halfplex (attached) units tend to sell toward the bottom of the price range compared to similar-sized detached units. I’m not saying all halfplex units are going to sell for dirt cheap, but only that they tend to be marketed toward the lower end of the price ladder in many neighborhoods.

I hope that was helpful. If you’re interested in more details, see How to choose comps like an appraiser.

Photo Credit: The first photo is from Roseville & Rocklin Realtors Steve & Heather Ostrom (thanks).

Question: Anything else you’d add? I’d love to hear your take in the comments.

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