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  #1  
Old 04-22-2003, 03:16 PM
Kevin Laska Kevin Laska is offline
 
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I just recieved a copy of the appraisal being used for my refi and want to get opinions on the following situation. I have a 2 story home of 1350 sqft which was converted from a 3 bedroom to a 2 (large master suite). The appraiser choose only 2 bdrm homes for comps, but each comp was a 1 or 1.5 story with sqft ranging from 970 to 1100. The appraiser gave my home a positive value adjustment of roughly $15 per sqft to adjust for the square footage differences between subject and comps. My opinion is that $15 per sqft is very low and I'm looking for your opinions. Appraiser used $88 per sqft (Marshall Swift) for cost approach with 38% depreciation. This causes me to think $55 would be an appropriate square footage adjustment basis. My other thought is that appraiser should have considered 3 bdrm's as comps instead of limiting search to 2 bdrms.

Home is in very high demand older (75 yrs) neighborhood with prices ranging from 190 to 250. My appraisal came in at 200 and I was hoping for 210-215.

Thanks for any input.
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  #2  
Old 04-22-2003, 04:14 PM
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Jeff Horton Jeff Horton is offline
 
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Kevin, first let me stress that it is very hard to judges another Appraisers work without seeing it and especially if you don't know his area.

With that said, in my area 2 bedroom house is not really comparable to a 3 bedroom in most neighborhoods. When I appraise a 2 bedroom I try to find 2 bedrooms. Then I am comparing apples to apples and it one less thing to have to adjust for. The thinking being that I want to find homes AS SIMILAR as possible to the house I am appraising. So without knowing you area, I would say he did the right thing.

As for square footage adjustments the dollar per sq. ft. should come from the market, not a formula like you implied. The idea is to find two homes that for practical purposes are identical (from a buyers stand point) and that have sold. The only difference in the two being the square footage. Then you can see how much more someone paid for the larger house than the smaller and calculate the dollars per square foot. What the appraiser is looking for is what the average buyer(s) are actually paying for the extra space. It has nothing to do with the cost.

Without being in your market I can not say if $15 is right or wrong. In my market depending on the price range I can see them range from $10-$35 per sq. ft.

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My appraisal came in at 200 and I was hoping for 210-215.
Not trying to be ugly or mean but there not an appraiser on this board that has ever had a home owner that didn't think his house was worth more than what they appraised it for. B)
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  #3  
Old 04-22-2003, 07:35 PM
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Mike Garrett, RAA Mike Garrett, RAA is offline
 
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Call the appraiser and discuss it with him. The market decides how much to adjust for in the case of square footage differences. In my market an adjustment of $15 per square foot would seem low, but that is my market. The cost approach has no bearing on the adjustments used in the grid. It's sorta like comparing a new car to a used car. Also, what you had hoped for has little bearing on the market...what if you had hoped for $240,000 or $250,000? Also remember, one sale does not a market make. Pairs analysis should involve a broad base of sales. I wish you well.
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  #4  
Old 04-22-2003, 07:43 PM
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They really should bracket the size of the house. That is, use a comp that's as big or bigger, not all smaller comps. I would not have a problem using a 3 bedroom comp, and adjusting. Expecially since your house was originally 3 bedrooms. I'm assuming it's probably not too hard to turn it back into 3 bedrooms by installing a new wall. Even if that's a bad assumption, bracketing the size is the thing to do.
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Old 04-22-2003, 09:12 PM
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Pamela Crowley (Florida) Pamela Crowley (Florida) is offline
 
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Having one comp that was larger in SF or at least very close would have been better and if available, is what I would have done. It is quite a bit of additional work and time to locate a bedroom adjustment between 2 and 3 bedroom houses, but it is usually there. (3 bedrooms bringing more in value/sales price than 2 bedrooms).

Most often, I find the $ per SF adjustment gets smaller as the houses get older. The $ per SF adjustments are different for individual sub-markets and often different from subdivision to subdivision. Except for new construction, it has very little relation to the cost per SF.

The media puts out tidbits of 'market statistics' that are too often meaningless and skewed to make everything sound better than reality. If your appraiser didn't 'hit' the number 'wanted', s/he is likely a pretty good, honest and ethical appraiser that worked hard to find and use the best comps available. Loan officers, real estate agents,...... and homeowners, all want more and too often, are not realistic.

Other than these generalizations, without knowing your immediate market, looking at that particular appraisal and doing a full review of it, not much more can be said.

Thank you very much for coming here and posting about your appraisal and asking questions! We really appreciate having borrowers take a serious look at the appraisal and asking questions about it!!! If you have other areas that you want to know more about, please ask more. The members of this forum want very much to have more people outside of this business learn and understand more about what we do and why we do it. If you still don't understand the answers you've already received, please keep asking.
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  #6  
Old 04-23-2003, 09:22 AM
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The other thing to remember here, when you state $55 per foot, you are including many other items that are broken out seperately in the sales comparison grid.

The use of an adjustment per square foot is an allownace only for the markets reaction to the size of the home. When you state $88 per foot, you are including the whole house. The adjustment for size, is just that, just for size. All of those other lines on the grid account for the rest of the house.
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  #7  
Old 04-23-2003, 04:37 PM
Kevin Laska Kevin Laska is offline
 
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Thanks for the comments. One of the things I was hoping to get an opinion on was if it was appropriate to "bracket" the subject, and a couple of you seem to have confirmed this.
  #8  
Old 04-23-2003, 08:42 PM
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MARKETVALUE MARKETVALUE is offline
 
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Would push for a bracket comp.

Remeber, adjustments made on the sales grid are representative of contributory market value not cost.

MRM
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