Sacramento Appraisal Blog

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Why do appraisers get so fussy about sharing the appraised value?

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Have you ever felt like appraisers are anal retentive because they won’t talk about the appraised value with you? What’s their problem? Why won’t they discuss value with real estate agents or even the Borrower? Let’s take a quick look below at a very common conversation and some brief commentary.

Agent: Is it going to “make value”?
Me: I really can’t talk about value with you.
Agent: Oh no, so that means we’re in trouble!
Me: Please don’t read anything into my response. I simply cannot discuss value with you since you’re not my client.

Fussy or ethical? Sometimes it seems appraisers are perceived as being difficult by refusing to discuss the appraised value, but it’s important to understand appraisers are obligated to uphold confidentiality for their client. In the case of an appraisal for a loan, the client is the party who ordered the appraisal. Since the real estate agent is not the one who hired the appraiser, it would betray confidentiality to share the appraised value with the agent. Think of it on the other hand. If an agent ordered a private appraisal to establish a list price, the appraiser should not share the value with anyone else besides the agent. Imagine how it could impact the transaction if the appraiser shared the appraisal or appraised value with prospective buyers or other agents. That could damage the agent’s marketing strategy or potentially hurt negotiations between a seller and buyer, right? Confidentiality is serious business – no matter who hires the appraiser (attorney, home owner, real estate agent, relative, lender, governmental agency…).

Some tips for talking with appraisers: If you’re looking for a bit of advice for talking with appraisers, check out Quick tips for agents for talking to appraisers and Five questions to ask yourself before giving comps to an appraiser.

Does this make sense? Agents, do appraisers still share this type of information with you? I’m curious to hear.

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

Does a low sale on your street kill your property value?

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It can be a huge concern when you go to sell a property and a home down the street just sold for way less than what you planned to list your home for. Does this one sale hurt you? Sometimes lower sales will indeed harm your property value, but there are also reasons why lower sales might not pose a threat to your value. Here are a few things to keep in mind from an appraiser’s point of view:

  1. One sale doesn’t make or break the market: Appraisers need to consider multiple sales throughout the neighborhood and competitive market area. For instance, if one sale on your street closed at $250,000, but everything else has sold at $350,000, the lower sale is probably more of an outlier than anything. This one “lone ranger” doesn’t establish the trend of values in the neighborhood or trump all other sales either because it’s not consistent with the rest of the data (even if it’s the most recent sale). This assumes of course there has been no big issue to cause a dramatic decline in property value. On the other end, just because one sale closed $50,000 higher than everything else does not mean the market is now willing to accept all other properties at that level either. Outliers can be on the low end and high end of the market.
  2. Not all sales are “comps”: It’s easy to think of all sales as comps (comparable sales), but just because a property sold does not mean an appraiser is going to use the sale as a comp. After all, a “comp” is a property that a buyer would theoretically consider purchasing instead of yours because it is similar. If the sale down the street is 800 square feet smaller, has two less bedrooms or a lot half the size of yours, it’s probably not anything to sweat about because it may not even be grouped into the same comp pool by the appraiser (hopefully not – keep your fingers crossed). If there are no truly competitive sales though, the appraiser may need to use less comparable properties and then make adjustments up or down based on the market’s reaction to those differences. Ultimately, it’s usually better in my opinion to use older more similar sales and then make appropriate adjustments based on how the market has changed over time.
  3. Distressed sales: It’s important to sift through distressed inventory because these sales tend to close at lower levels. Real estate markets are often segmented with traditional sales at the highest level, and then bank-owned sales and short sales at lower levels. Sometimes there is a hefty difference of 10% or so between traditional sales and distressed sales, while other times the difference is minor or non-existent. The large price gap in many cases is often due to things like inferior condition, quick marketing to dump the asset or a swift sale to avoid seizure by the bank (short sale). Distressed sales don’t always sell at lower levels, but that’s often the case. In short, before you stress out about a low sale, realize a competent appraiser is going to analyze the lower distressed sale and either not use the sale or give it less weight in the report if need be.

Do these sales kill property value? I wanted to share these scenarios above to help show that a lower sale in the neighborhood may not always be a “value killer” because it’s not always reflective of the market. Bottom line. However, there are definitely scenarios when a lower sale is going to impact your property value. If a truly competitive property was listed on the market for a reasonable time and had a reasonable number of offers all around the list price, it’s hard to discount data like that (especially if it is widespread through the tract, which means the “lower” level might actually reflect the market). Moreover, sometimes home owners are not in touch with just how far the real estate market has declined in the Sacramento area (and throughout the United States). Keep in mind too some owners rely on valuation websites like Zillow, but there can be a huge difference between appraisals and Zillow.

Anything you’d like to add? Feel free to comment below. I’d be curious to hear the perspective of Realtors especially.

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

What is a pool worth in the eyes of an appraiser?

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How does an appraiser value a pool? There’s really no standard dollar figure for a pool’s worth since pools come in all shapes and sizes, but pools are very commonly worth FAR LESS than the cost of installation. In the Sacramento area it’s not uncommon to see appraisers assign a mere $10,000 or so of value for a standard gunite built-in pool.

Why do appraisers give so little value to a pool? It seems silly to think a pool installation at $30,000+ would only yield $10,000 or so in an appraisal, right? Let me explain.

photo of pool1) Market Interpretation: First of all, the appraiser should not be making a subjective value judgment, but is rather interpreting what the market is saying about what a pool is worth. The appraiser analyzes similar homes with and without pools to see if there is a reaction (price difference) in the market for the pool. For example, if homes with pools in a neighborhood have sold for $290,000 and homes without pools have sold for $280,000, assuming everything else is similar, the pool is worth $10,000.

2) Buyer’s Perspective: If a buyer was looking at two identical homes, but one had a pool and one had no pool, how much extra would a typical buyer pay for the pool? If the pool cost $30,000 for installation, doesn’t it seem unrealistic that the buyer would pay that much extra for the pool? (especially if the house is only worth $150,000). The same principle could be seen with a $30,000 kitchen remodel. While the remodel is very nice, a buyer might only be willing to pay $20,000 extra for that remodel.

3) Overimprovement: Pools are a classic example of an overimprovement because they cost more than the market is willing to pay for them. By the way, for the sake of your Jeopardy knowledge, the fancy real estate word for “overimprovement” is “superadequacy”.

All things considered, keep in mind a pool may be worth more or less depending on the type of pool, quality of construction, climate, neighborhood, season and particular real estate market too. There is no constant dollar figure for appraisers to use from some sort of “Appraiser Pool Cost Manual” because each real estate market is unique and may have a different perspective on a pool. For example, a pool in an active-adult HOA community that already has three pools at the clubhouse might be worth very little or nothing to prospective buyers, while a pool in a first-time buyer neighborhood ripe with families could be worth more. Lastly, while there is a loss in value when considering market value, a pool obviously has a very subjective value in use to the owner that makes the cost worth it.

I hope this has been helpful and given you some insight into how appraisers view built-in pools. Let me know if you have any questions or insight.

Did you have a pool growing up? Do you have one now? What are the positives and negatives of pool ownership?

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