Sacramento Appraisal Blog | Real Estate Appraiser

Real estate appraisals for divorce, estate settlement, loans, property tax appeal, pre-listing and more. We cover Sacramento, Placer and Yolo County. We're professional, courteous and timely.

Ryan Lundquist

Seven things to watch in real estate during a pandemic

By 25 Comments

What’s the market doing? What can we watch right now to get a better sense of housing trends during the pandemic? Here are seven things I’m keeping my eyeballs on these days. Anything to add?

SEVEN THINGS I’M WATCHING DURING THE PANDEMIC

1) Listings: We often think about listings increasing as a way to see the market changing, but right now many markets across the country are seeing fewer new listings. So at times change is best seen with less of something rather than more. It’s not a surprise to see fewer new properties during a pandemic, right?

2) Pendings: When the number of pending contracts declines it’s likely a sign that buyers have begun to back off the market. Like many areas across the country, pendings are down 40% right now in the Sacramento region. There are simply fewer buyers willing to engage with the current market. Also, one of the things we want to watch is the gap between all listings and current pendings. If this gap widens it will soften prices and give buyers more power.

3) Sales volume: When fewer sales start to happen, it’s a sign the market has changed for some reason. This image below shows we are at the beginning stages of seeing sales volume dip due to the pandemic. In other words, the second week of April clearly saw FAR fewer sales compared to last year at the same time. From here on out it’s likely we’re going to see bigger changes in sales volume since many homes beginning to close got into contract over the past month during the pandemic.

4) Canceled / Hold: A market isn’t just about what is listed, but what used to be listed. There have been over 1,000 listings taken off the market in the Sacramento region over the past four weeks. The removal of these listings has helped the market feel much more balanced than had these listings still been active. Key questions: How many of these listings will come back? When will they hit the market? Will there be enough pent-up demand to meet the supply?

5) Word on the street: What are buyers, sellers, and real estate professionals saying? The stories of today become the stats of tomorrow, so paying attention to what people are saying is huge.

6) Other metrics: There isn’t one end-all metric to tell us everything we need to know about the market, so it’s important to pay attention to lots of little things such as days on market, changes in financing, the average list price, the sales to original list price ratio, price reductions, the number of multiple offers, changes in various price ranges, concessions offered by sellers, etc… Let’s remember the market isn’t going to be the same for every property type or in every price range or neighborhood.

7) Prices: In real estate we are so obsessed with prices, but that’s really the last place to look to see the market. What I mean is change happens first in the areas above before showing up in sales stats a couple months down the road. In short, for now the slower pandemic trend hasn’t infiltrated sales price figures as of yet in Sacramento. This doesn’t mean the market is stable in every price range and location. All I’m saying is regional and county stats don’t show price declines right now. Normally I pull monthly price data, but I’ve switched to weekly in order to see the trend sooner rather than later.

I hope that was helpful. And yeah, that was long. But hopefully it was worth digesting whether you’re local or not.

Okay, moving on.
 

A FEW RESOURCES:

New market video: Here is a fresh market update video. This is 30 minutes and perfect for the background while quarantining. Check it out below or here.

Q&A video: Here is a video I did recently with Doug Reynolds to talk about the market and appraisal stuff. I have many of these lined up and I’m glad to share them in the future. As a side note, I’m not an advocate for any brokerage and I’ll never take sides. I’ll do interviews with just about anyone as long as there is mutual respect and I have time to do so. I’ll share videos here only if the end-product is worth sharing.

Zoom with Grounded: I mentioned a Zoom meeting last week hosted by Grounded and some of you were able to join live (thank you). I have about four to five Zoom sessions per week these days, though most aren’t public. I look forward to doing these with many brokerages. Watch below or here.

BIG MARKET UPDATE (ON HOLD): I normally write a huge market update around this time of the month, but my entire life and social media feed has been one big market update lately. So I’m putting my typical format on pause so I can spend time on more pressing visuals.

I hope this was interesting or helpful. Thanks for being here.

Questions: What are you watching in today’s market? Did I miss anything?

If you liked this post, subscribe by email (or RSS). Thanks for being here.

Is it okay to share a previous appraisal with the appraiser?

By 18 Comments

I was asked a great question recently. Is it okay to share a previous appraisal with the appraiser? I would say YES and NO. Here are a few thoughts. Anything to add?

Sacramento Appraisal Blog- sharing a previous appraisal

1) Data: It can be valuable at times for an appraiser to see what a previous appraiser did, especially if the property is complex. After looking at a colleague’s work, an appraiser might pick up on some insight or glean ideas for how to approach valuing the property. This happened to me a few years ago as I found out about an important easement and an illegal structure after an attorney gave me a copy of a previous appraisal. I still had to make sure the appraiser was correct, but it was nice to get a heads-up by someone who did a great job a couple of years prior.

2) The only appraisal that matters: We have to realize the only appraisal that really matters is the one the current client is going to rely on. A previous appraisal might not cut the mustard so to speak, so sharing something that isn’t any good doesn’t mean much for the current appraiser. For example, I was asked to appraise something for a private loan and the owner shared a previous appraisal with me at $1.2M. Yet this appraisal done during a conventional refinance was definitely inflated by a good 20% unfortunately. Keep in mind a previous appraiser might have included a detached structure’s square footage within the square footage of the main house, but just because it played out that way before does not mean it should happen now (I have a blog post on that here). Also, just because it appraised at a certain level before does not mean a new appraiser is going to think that is anywhere near acceptable. 

3) Sharing a specific number: I was recently hired to appraise a property for a cash buyer and there was an appraisal done already from a prior buyer’s loan. The Listing Agent told me, “We had an appraisal done at $425,000 two weeks ago”, though I was not provided the appraisal. This to me seemed like more than anything the agent was trying to influence my value. I’m not saying the agent was slimy or unethical at all. I’m just saying had the agent said, “We had a previous appraisal done. You are welcome to see it if you want,” it would have felt much more like the agent was making data available rather than subtly suggesting the contract price was a reachable target for value. This might sound like I’m playing semantics or being anal about words, but the words we choose matter, and how we say things can be interpreted as influencing an appraiser or not.

4) Difference among appraisers: Some appraisers will not accept a previous appraisal because they feel like it might impact their objectivity, but others will. I don’t think there is a right or wrong answer here as everyone needs to walk out their own sense of morality. Personally I tend to accept previous appraisals in most cases because I like to see how a colleague handled a valuation and I like to double-check my sketch measurements. Moreover, sometimes it helps me prepare my report because the client might be expecting a wildly different value than what is able to be supported. Yet if an appraisal was presented to me in such a way as to influence my value or pressure me to “hit the number”, I would definitely decline and simply say “No thanks. I don’t want to see it.”

Recommendation: In short, in my opinion it’s okay to share a previous appraisal with an appraiser, but it really matters how it is done. If you have a previous appraisal, I might suggest you use my Appraiser Info Sheet to share information appraisers tend to ask about, and then say nothing more than, “I have a previous appraisal if you want to see it.” If the appraiser doesn’t want it, that’s fine. If the appraiser does, that’s fine too.

Questions: What is #5? Which point stands out to you most? Did I miss anything? I’d love to hear your take.

If you liked this post, subscribe by email (or RSS). Thanks for being here.

5 things to remember about the value of landscaping

By 14 Comments

How much value does landscaping really add? Nothing. A minor amount. A huge total. I’ve heard it all when it comes to what people think landscaping is worth. Today let’s kick around some ideas from an appraisal standpoint. Anything to add?

landscaping in appraisals - sacramento appraisal blog

5 things to remember about the value of landscaping

1) The myth of no value: I’ve heard the sentiment from some real estate professionals that landscaping does not count toward the value. My take? Landscaping is often very important to buyers – especially when it is extensive or highly expected in certain neighborhoods.

2) Front vs back: My sense is front yard landscaping does not sway buyers like the backyard does. I’m not saying it’s not important or curb appeal doesn’t matter (it does). I’m only saying the rear yard tends to make a much more significant impact on value since people spend more time there.

3) One size doesn’t fit all: The value of landscaping will vary significantly depending on the price range and neighborhood. For instance, a few years back during the height of home flipping activity, it was common to see flippers at the lower end of the market do very basic cosmetic landscaping in the front yard while doing almost nothing with the backyard (seriously, rear yards were at times just dirt or bordering on unkempt). In contrast, higher priced homes were getting full-service attention in both the front and backyard. Why? Because the market had different expectations by price range and the investors’ sense was spending the money was worth it in some neighborhoods and not others.

4) On par after huge money spent: Sometimes owners will spend good money to redo an unkempt yard only to expect a huge price premium. The problem is post-landscaping the owner is now basically on par with other homes in the neighborhood rather than in a position to command a premium. This is not easy to swallow, but it’s important to recognize in order to avoid overpricing. 

5) Dollar for dollar: While we like to get a “dollar for dollar” return on our improvement projects (at the least), that’s not always possible in real estate. So when an owner says, “I spent $125,000 in my backyard” and otherwise similar homes are selling for $700,000, can we really expect this property to be worth $825,000? That’s probably not realistic, right? Most of all though, let’s find comps with incredible landscaping and let those properties tell the story of value. That way we are letting actual market data speak to us to set the tone for what buyers have been willing to pay for similar landscaping. Isn’t that better than shooting from the hip about what landscaping may or may not be worth?

Case-in-point for an incredible backyard: While appraising in the Natomas area of Sacramento I came across a house with an incredible backyard. I ended up NOT using it as a “comp” because this property sold about 10% higher than others because of the built-in pool, custom covered patio, built-in BBQ, outdoor fireplace, and everything else in the yard. I’m not calling all of these things landscaping of course, but at the same time let’s be realistic to think buyers may lump some of these items in the same category. Anyway, at times it’s tempting to give a token $10,000 upward value adjustment when we see a nice rear yard because that’s what a mentor taught us to do, but sometimes the market is willing to pay more like 10%. In this case otherwise similar homes seemed to come in around $450,000 and the subject sold for $495,000 (there were 7 offers). There was one other sale at $485,000 and it also had a sweet backyard. As you can see on the graph, the incredible backyard seemed to really matter.

incredible landscaping - sacramento appraisal blog

Here is what the rear yard looked like. I could live with that. You?

house with amazing rear yard - sacramento appraiser

Remember, let’s find a few examples of extensive rear landscaping (or an amazing backyard) if possible so we don’t base our perception of value on only one sale. After all, what is that one sale sold too high or too low?

The Washington Post: Two weeks ago I wrote a post about the ugly side of appraisal fees, and as a result Ken Harney of The Washington Post interviewed a handful of appraisers (including me) for a piece that went live today. Ken is a nationally syndicated columnist, so the conversation that took place here is going to be moving to a much bigger level. Thank you everyone. Here is Ken’s article.

Questions: What stands out to you most about what I mentioned above? What is #6? Did I miss something?

If you liked this post, subscribe by email (or RSS). Thanks for being here.

Honored with the Affiliate of the Year award

By 15 Comments

I’m excited to announce I was honored with the Affiliate of the Year award a few weeks ago from the Sacramento Association of Realtors. This award is given to one non-Realtor each year, and this year it was given to me. This was not expected, and I’m really blown away. I’m very proud to hang this plaque in my office, and I hope you can join me in the excitement. Thanks everyone.

An award from SAR - this is me with Chris Clark

An award from SAR - what an honor

If you liked this post, subscribe by email (or RSS). Thanks for being here.