Image Courtesy of Intelligent Community

WHAT’S NEW IN THE APPRAISAL INDUSTRY THIS WEEK

by David Lister | July 16, 2019

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.

Read More

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.

Read More

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.

Read More

Appraisal Reform Act of 2019 Would Impact TRID

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).

Read More

Learn More About Home Appraisal and our other Appraisal Services.

Image Courtesy of Intelligent Community

RESIDENTIAL REAL ESTATE APPRAISAL in Westchester County, NY

Westchester County is one of the primary counties I appraise residential real estate. It sits just north of the Bronx, a borough of New York City, and is primarily comprised of suburban areas.

Westchester has approximately 980,000 people over 450 square miles with dozens of villages, towns, and cities. Each has its own unique vibe, home style, attractions, and school district. The school districts are a primary driver for home value in Westchester. When appraising here, finding and using comparables within the same school district is important; using homes across school districts can lead to inaccurate results.

There are a wide variety of homes in Westchester – from the small and quaint to the large estates. Appraising the entire spectrum is both fun and challenging. One of the primary challenges is lack of similar comparables. Almost every home has a custom floorplan because Westchester is not a “cookie cutter” suburbia. I am forced to pick from a wide range of homes to find what appears to be the most similar sales. From there, I make adjustments to account for their differences. In other parts of the country finding comparables is not as challenging. My brother appraises in Colorado, where many of the suburban areas have model matches. He has appraisals where every comparable is the same style and square footage. This helps narrow down what a home is really worth. However, this is not the case in Westchester which causes the range of value to be wider.

Another characteristic for potential buyers in Westchester is proximity to a train station. Many of the towns and villages have train stations that go into Manhattan and other Boroughs. This is critical for the many people who have a daily commute into Manhattan. There is the Hudson Metro North line that runs along the Hudson River, Harlem Line that runs up the middle, and the New Haven Line running on the East side of Westchester. The train lines run up through Westchester and into the counties above.

The largest cities in Westchester are Yonkers, White Plains, and New Rochelle. These cities all have their respective Downtown areas, with multi-family residential buildings and commercial interests, as well as suburban areas with single family homes. These three cities are in lower Westchester, below Interstate-287.

The Rivertowns are on the West side of Westchester along the Hudson River. The Rivertowns are: Hastings-on-Hudson, Dobbs Ferry, Irvington, Tarrytown, Sleepy Hollow, Croton-on-Hudson, Buchanan, Cortlandt, Mount Pleasant, Ossining, and Peekskill. Each has its unique feel and desirability. Each town has a train station and small commercial/restaurant areas by the river.

Upper Westchester is the area above Interstate-287. In general, the farther north you go, the larger the lot sizes. These areas are more spread out and many of the homes sit on an acre or more of land. Many homes have beautiful wooded views as the trees are dense in upper Westchester. Upper Westchester still has access to commercial interests, but it takes more time to get around.

In future blog posts I will be diving into the cities, towns and villages to discuss the primary drivers of value, types of homes, and unique factors.

Learn More About Home Appraisal and our other Appraisal Services.

To Pool or Not to Pool

I told my wife when we were first married, “I am never buying a house with a pool.” That pretty much sealed the deal. I was going to end up with a house with a pool and ten years later, we bought a house with a pool. We loved the house and the pool happened to come with it.

I have people ask me all the time, “Do pools add value to a home?” or “Should I put in a pool?” Answer is: “depends”, as it does many times in the appraisal world.

What type of pool is it? Is it an above ground pool or an in-ground pool? Is it heated or not heated? What area of the country do you live in and what neighborhood? I appraise in New York, so a pool is only usable 4 or 5 months out of the year unless it is indoors. From the many analyses I have done, an in-ground heated pool in New adds some value to the home. How much depends on what neighborhood you are in. The lower end neighborhoods will see little to no value for a pool as they are expensive to maintain and repair. The higher-end neighborhoods will see a much bigger value add because those owners can usually afford the constant maintenance and repairs that a pool requires. In a place like Florida or Arizona, pools are more the norm than the exception. Pools add much more value in warm climates.

Typically, above-ground pools add little to no value even if they are heated. There are, of course,  exceptions when they are well designed and blend in with the landscape, decks, etc. However, I typically see above-ground pools that are not well kept and are more of an eyesore than anything. Also, some of them could be considered personal property rather than improvements if they are not attached and can easily be moved. In-ground pools are much more appealing in New York and add more value than an above-ground pool.

So, yes, some pools do add value when it fits the neighborhood. However, the costs to maintain and repair the pool will typically be more than the added value to the home in the long run.

For me it is a love/hate relationship. I love to watch my kids and friends enjoy it, but there is constantly something to fix or update.

Learn More About Home Appraisal and our other Appraisal Services.

What is an Appraisal?

An appraisal is an opinion of value from a licensed or certified appraiser. The Appraisal Institute states on their website:

An appraisal is a professional appraiser’s opinion of value. The preparation of an appraisal involves research into appropriate market areas; the assembly and analysis of information pertinent to a property; and the knowledge, experience, and professional judgment of the appraiser. Appraisals may be required for any type of property, including single-family homes, apartment buildings and condominiums, office buildings, shopping centers, industrial sites, and farms. The reasons for performing a real property appraisal are just as varied. They are usually required whenever real property is sold, mortgaged, taxed, insured, or developed. For example, appraisals are prepared for:

• Mortgage lending purposes
• Tax assessments and appeals of assessments
• Negotiation between buyers and sellers
• Government acquisition of private property for public use
• Business mergers or dissolutions
• Lease negotiations

The opinion of value is typically based on the sales comparison approach, which is where the appraiser analyzes sold properties that are geographically and physically similar to the property they are appraising. The appraiser can also value the property based on cost approach and income approach, but these are used much less used for single family homes.

The process makes sense because typically buyers are looking in a certain area and analyzing several homes on the market. They are seeing which home they like the best and what price they want to offer. The appraiser is essentially doing the same thing, but analyzing every aspect and adjusting for it. Most of the time the process if accurate. However, it is based on the quality of the sales data and the information available. If the information is not great, then the appraisal will be less credible.

I get asked all the time, “Is Zillow accurate”. Or “Zillow says my property is worth $XXX,XXX.” The truth is Zillow has a great product, but it many times cannot account for information that is now known. Zillow most likely doesn’t know the level of quality or upgrades on the interior. The interior is one of the major components of a home. Completely renovated homes can sell for hundreds of thousands more than unrenovated homes. Hence, why there are so many fix and flippers out there today. So, my experience has been that Zillow is a great starting point, but appraisers dig into the details more. That being said, I am sure there will come a day where technology will replace a large majority of appraisers.

Learn More About Home Appraisal and our other Appraisal Services.

“Should I get an appraisal before I make an offer to purchase a home?”

The majority of buyers in the US market get a mortgage when they are purchasing the home and in most of these cases a home appraisal is ordered by the bank to ensure the home’s value is at least as much as the buyer is offering to pay. The bank wants to make sure their investment is secure. The appraiser is hired by the bank and the buyer is provided a copy. However, some appraisers appraise a home at the contract price or it greatly influences the appraisal. Usually, the home is listed in the MLS and exposed to the open market. Many people look at the home and it goes under contract at a price that is both agreeable to the buyer and seller. This provides a data point, but it does not mean that is what the subject’s value is. A buyer may be willing to pay more than it is worth if they really love the home or if they are not educated about the market. The seller may be willing to sell for less than the market value because they really need to move, they have another house waiting for them, or they need to get rid of the financial obligation. So, the contract is a data point, but it the subject should not be appraised at the contract price for that reason alone.

So, back to the question – Should you get an independent appraisal?

My advice would be that 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 the agent is not able to do this, then yes, it would 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 and an experience appraiser may be able to do this for you.

Final thoughts

For most, a home is one of the largest purchases, so it would make sense to determine what a fair market value is. It is for the particular buyer to determine whether they are satisfied with the knowledge they have or were provided with.

Learn More About Residential Property Appraisals and our other Appraisal Services.

 “What do I need to do before I have an appraisal done?”

The truth is, you don’t need to do anything, BUT it helps to do a few things so that the process is smooth and you maximize the value of your home.

Banks do not want any safety or health hazards in the home. This throws up a red flag and typically will have the appraiser come back to inspect the problem area. It is best to address these items before. Some of the common items I see that could be considered a safety hazard:

• Exposed wiring
• Missing handrails on staircases
• Peeling paint – If the home is built before 1978 – possibly lead based
• Damp areas and/or leaks
• Illegal stoves in basements or attics
• Bars on bedroom windows without quick release mechanisms
• Smoke and carbon monoxide detectors

There are many others, but these are some that I see the most in the New York area. In addition, if it is an FHA loan, they requiring testing of many of the items in the home including faucets, stoves, dishwashers, light switches, electrical outlets, toilets, heating system, AC system. A conventional loan that is not FHA, does not typically require testing of these items.

The next area of concern to address before an appraisal is appearance. I try to imagine every house is clean when I am appraising it. That is not so say I imagine the paint, flooring, and other items are in good condition, but that clothes are picked up and the home has been cleaned recently. Typically, when it is up for sale in the MLS, the homes are clean and this is why I do this. It is best not to rely on the appraiser to do this, but for the homeowner to make the home clean.

In order to make the appraiser’s job easier, it is nice to have a list of improvements done over the years and when they occurred. The appraiser should ask these questions, but this makes if very easy for them to know exactly what was done and verify it as they walk through the home.

Each appraiser does the inspection differently. I typically measure and inspect the exterior first so that I have all the main floor measurements going into the home. This makes measuring the 2nd, 3rd floor, and/or basement much easier. After the exterior, it is time to go in. I walk each level taking notes and photos along the way. The photos are required for most banks and they help appraisers remember exactly what was in each room. A picture is worth a thousand words… Once the interior inspection is done, I drive around the neighborhood looking as recent sales and then it is back to the office to do the report.

Learn More About Residential Property Appraisals and our other Appraisal Services.