New Rochelle is located in lower Westchester County. It is a city of roughly 80,000 people. It was started in 1688, over 300 years ago.
There is a large variety of housing in New Rochelle including single family homes, 2-4 family homes, multi-family apartments and condos/coops, and a variety of commercial interests mixed throughout the city. It is mostly suburban. The single-family homes were mostly built in the early to mid-1900s with varying architectural style. The northern portion of New Rochelle above Hutchinson River Parkway has more split-level homes built in the mid-1900s.
There are portions of New Rochelle that front the Long Island Sound, which is the body of water to the eat of Westchester County. Some of these homes are large with fantastic water views. Water views make appraising challenging as there are very few homes to compare too. Sometimes, there are no recent sales and historical appraisal data is used to determine water view adjustments.
New Rochelle also has a small Downtown area with some high-rise buildings that are mostly residential in nature. Downtown New Rochelle is near the train station and Highway 95, which runs north and south on the East Coast of the United States.
I love appraising in New Rochelle. Every home I see is different.
When
you finally found your dream home after months of searching and almost giving
up. It is indeed an exciting and happy time, but finding the perfect house
isn’t a “home run” just yet. It’s more like the first base really. After all,
buying a home is a huge step in most people’s lives! It is a process with
certain steps that must be taken carefully. It may seem daunting at first, but
if you as a home buyer ask the right questions and get the necessary the help,
then you can make the process smoother.
Examining Mortgages and Appraisals
Unless
you have the cash stashed somewhere, the next logical step for you to take is
to get a mortgage. Don’t worry… you are not alone. The
majority of buyers in the US market apply for a mortgage when they are
purchasing a home. In most cases, before a
bank or lending company grants your request for a loan, they require an
appraisal to be made on the said property.
But what is an
appraisal? Who does it? And why is it necessary?
To answer these relevant questions, here are the 5 basic facts
every home buyer must know about home appraisals:
1. Banks and lending companies almost always
NEED an appraisal before granting a loan to a home buyer.
But
why?
An appraisal is an opinion of market
value of the home or real estate property. The bank want to assure that the
home is at least as valuable as the contract price.
But why do banks need this assurance?
Unfortunately, it is a known fact that
not all buyers can fulfill their mortgage obligation. Borrowers, for whatever
reason, may stop paying the bank the promised amount at the set time. When this
happens, the banks may try to salvage their considerable investment by trying
to sell the property. But if the property value turns out to be way less than
the amount that the bank lent to the borrower, then the bank loses! Lending
thousands or millions of dollars comes with this risk, so banks need a way to
secure their investment. This is why an appraisal is so important to them.
Remember that banks want to make sure their investment is secure, and the
appraisal is key to that security.
2. Certified
independent appraisers do the appraising NOT the bank.
Because an appraisal essentially
protects the bank’s investment; they normally would order the appraisal. However, despite making the order, they cannot execute it. The appraising is done
by a third party to ensure appraisal remain objective, neutral, and accurate.
This leads us to the next fact.
3. Appraisals may
protect home buyers.
Even though the appraisal is ordered by
the bank, the buyer can get a copy of the appraisal and review it. Many
contracts have a mortgage contingency or appraisal clause, stating the buyer
can get their earnest money back if the home does not appraise for a certain
amount. This helps buyers if they offered to pay too much. They can move on or
try to renegotiate if the appraisal value is lower than the contract price.
4. An appraiser is not
some random Joe.
You cannot just get your uncle to verify
the market value of a home just because he is a contractor, a flipper or in the
real estate business. In fact, real estate agents, even those who are at the
top of their game, cannot take over the appraising process. Appraisers are highly-trained professionals
who are certified or licensed by the state. We have gained a specific set of
skills, knowledge and experience that enable us to value a home in a fair and
objective manner. Appraisers are
regulated and are required to get continuing education. Misleading and biased reports
do not go unnoticed or unpunished. So, trust that most appraisers are doing
their best to perform their job because you are not the only one looking after
them.
5. You don’t have to conduct your own
independent appraisal
Based on our experience, you probably do
not need a separate appraisal in most cases.If a buyer has a real estate agent, the agent should be able to
educate the buyer regarding sales in the neighborhood.If for some reason, the agent is not able to do this, then yes –
it might be a good idea to get an independent appraisal.
Another scenario where an independent
appraisal may be helpful is when the subject property is unique and/or there
are very few similar homes that have sold recently. This would take in depth
analysis that goes beyond what is typical. In this case, an experienced
appraiser may be able to do this for you. It is also important to note that if
you wish to have an independent appraisal, this report will not be accepted by
the bank. The bank has to order the appraisal by someone on their approved
list.
Final Thoughts:
The appraisal process is not a hurdle for home buyers. Just as
it is useful to the bank or lending companies, it is also incredibly beneficial
to home buyers.
A home is one of the largest purchases, so it would make sense to determine what a fair market value is.
Scarsdale is village in lower Westchester County. The population is approximately 18,000. It was founded in 1788. There is a large variety of homes throughout Scarsdale. Most of the homes are completely custom built in the early 1900s and in the last 15 years. Many of the older homes have been scraped to make way for larger, newer homes.
The average and median sales price is around $2M at the time of writing- 09/2022. The average days on market is well under 60 days with a low number of listings. Appraising in Scarsdales can be challenging because every homes is different and many of them are very large. In addition, they range widely in value depending on the size, site, location, quality, and condition.
The village has its own train station and access to nearby highways to access Manhattan and other nearby towns.
When appraising homes, I am asked all the time about hypothetical improvements to the home. For instance, “is it worth it for me to add a remodeled kitchen or should I add a bedroom?” Most of the time, I am not there in a consulting roll, so I cannot offer advice on what to do with their home to add the most value. I am there to appraise the home for a different reason. Still, I think they are all great questions. What does add the most value to a home versus the cost to do the project? There have been numerous studies and articles written on the topic. Here is one article that addresses some of the best and worst investments:
First off, it depends what market you are in and what the market expects. Adding a fifth bedroom in a market where all the homes are two bedrooms is not a good use of funds. I like to look at it from a typical buyer’s perspective. Most buyers like what they can see – kitchen, paint, baths, curb appeal, landscape, etc. There are other buyers that are focused on the mechanicals, roof, windows, electrical, and foundation at the beginning, but they are the minority. These items are typically addressed in the inspection. A new furnace is nice to have, but does it add more value than a 5 year old furnace that is functioning well and has been taken care of–NO? Most of the time, items like a furnace or a roof need to be in average or better condition and the buyer will consider them the same. They can’t see the cost down the road. It is interesting because these are the things are needs, while things like a remodeled kitchen are wants.
From appraising thousands of homes, I can say that the “wants” are the items that bring the highest ROI. Buyers love new kitchens, newbathrooms, updated flooring, clean landscape, and updated paint if they are done in a neutral style. However, they must be upgraded to the standard of the market. A completely custom kitchen with high end appliances in a 600 sf ranch home has a lower ROI than the same kitchen in a neighborhood of custom homes. In addition, the updates have to be done in an appealing manner. I have walked into homes with brand new kitchens and baths, but they are not appealing to the masses. Most buyers either won’t buy the home because of it or will want to redo the entire kitchen and baths. If you are going to do something that is not common and has a unique color pallet, make sure it can easily be changed or that you are going to enjoy it for a long time. Otherwise, it will have a very low return on investment if any return.
So, focus on the items that are highly visible in the home that will immediately attract the most viewers and buyers. We live in the internet age and if the photos are of a beautiful kitchen and baths, it is going to attract more people and most likely, a higher price. I know I take them into account when appraising homes and the prices reflect the upgrades. I almost never see photos of the brand new furnace or the new roof. They are necessary concerns, but as long as they work and have a reasonable usable life, most buyers care far less about these items.
Is Basement Square footage Counted During Appraisal?
As an appraiser, I am constantly asked, “is basement square footage counted” or “is part of the total square footage”. When doing a residential appraisal on a single-family home, basements are excluded from GLA or Gross Living Area in most markets. This is the total square footage that is completely above grade on all four sides. However, the basements do add value and are “counted” and adjusted for separately. You just won’t see them in the GLA. There is a separate section. There are several exceptions. Bi-level, raised ranches, and split levels have lower levels that are garden style sometimes. In order for a good comparison, the lower level is typically included in the GLA even though it may not be completely above grade on all four sides.
The major reason for separating the two is that basements and finished basements add far less value than above grade square footage. Above grade square footage has more light and typically has easier access to most parts of the house. People tend to want to spend their time above grade in these areas more than in basement. However, some basements add tremendous value depending on the quality of the finish. In many areas, walk-out basements almost feel like they should be counted in the GLA. There are elaborate wine cellars, spas, game rooms, bars, and bedroom suites.
Most of the time, a buyer is willing to pay more for an extra square foot above grade than in an extra square foot in the basement. The adjustments to each area reflect this. If basements are worth a lot in certain markets, the numbers should and will reflect that. I appraise in New York. The majority of the basements are in older homes with lower ceilings and dated finishes. These do not add near the value that a brand-new finished basement would.
So, in short, they are counted, but differently than one might think.
Valuing Timeshares Requires Special Care: The Appraisal Journal
Special care must be taken to understand the timeshare interest and the competitive market in which that interest would sell, according to an article published this week in The Appraisal Journal that explores key issues facing appraisers when valuing timeshares.
The Appraisal Journal is the quarterly technical and academic publication of the Appraisal Institute, the nation’s largest professional association of real estate appraisers. The materials presented in the publication represent the opinions and views of the authors and not necessarily those of the Appraisal Institute.
Appraisal Institute Urges Congress to Address Valuation Issues
The president of the Appraisal Institute, the nation’s largest professional association of real estate appraisers, encouraged Congress to act on valuation topics during today’s hearing on Capitol Hill.
Stephen S. Wagner, MAI, SRA, AI-GRS, told the House Financial Services Committee’s Housing, Community Development and Insurance Subcommittee that the Appraisal Institute supports passage of H.R. 2852, which would allow licensed appraisers to perform appraisals for Federal Housing Administration loans.
FHA Delays Rule Requiring Digital Signatures On Appraisals
The Federal Housing Administration (FHA) is delaying a rule that would require appraisals uploaded to its electronic platform to be digitally signed.
The FHA had previously announced that XML Digital Signatures will be required on all appraisals uploaded to its Electronic Appraisal Delivery (EAD) System. XML is a method of digital authentication that is secure, flexible and fairly ubiquitous; it is already in use on many digital appraisals submitted to the FHA.
A&B Abstract: If enacted, the recently introduced Appraisal Reform Act of 2019 would amend RESPA to require the disclosure of the appraisal management fee separate from the appraisal fee on the loan estimate (LE) and closing disclosure (CD). This could impose an additional burden on lenders and appraisal management companies (AMCs).
