Any Luck Getting Realtors To "show Their Work" When Computing GLA?

[J Grant]

OP, as to RE agents and SF and "showing their work" ....for pricing...they often in a single family house, take the total purchase price (house and lot/ amenities), and divide the sales price by sf of the dwelling. In this method they come out with very high $ per sf. I've had agents tell me "house X is worth $300 per sf" while it might only cost $150 per sf to build...

They also can combine disparate condo units, such as units with a view and divide the sale prices by SF to show buyers what a subject is "worth" per SF, while subject unit is worth less per SF since it has no view.

Buyers who rely solely or mainly on agent representation about worth per SF or accuracy of SF of properties can be misled aka not well informed.

Which is why the MV definition references a well informed/well advised buyer. The well informed theoretical buyer we use to vet for market value might make different decisions than a real world, not well informed buyer.. Which can account for a difference between an appraiser's opinion of market value (based on decisions of the theoretical buyer in the MV definition), vs the actual decision (CS price or sale price) of a less well informed or well advised buyer .

 

[Eli]

Where's Fannie adjustments? Oh they just don't like ours and don't have any provable stats to back up their inane comments.

Fannie also said.

GLA is the only physical characteristic that has enough data points to correlate a meaningful market relevant search.

Your post before had me rolling. I was in no way insinuating you were one of those Fannie was talking about. It just reminded me those appraisers Fannie was talking about. When you "cut to the chase" sometimes, it makes me laugh out loud.

Actually, I am saying how nice it is to have GLA or GBA from appraisers when I can get it, which makes me wish I had CU data.

 

[Mike Garrett RAA]

I find it ironic that Fannie Mae would say $25 a square foot is quite common in appraisals. Over the years I have found that is a highly supportable adjustment in median priced single family residences.

As an example, if there is a 300 sf size difference that could easily represent an additional bedroom in a typical house. $25 x 300 = $7,500 and that is quite typical for the price difference between, say, a 3 bedroom and a 4 bedroom residence IN MY MARKET.

I have also found as the price range of the residences goes up so does the adjustment necessary. Most of the adjustments I use range from, say, $25 to $50 a square foot and that correlates well to the price ranges of the homes. The proof is in doing paired sales analysis, adjusting for everything else, and using the residual to determine the adjustment for size or sf.

Site adjustments are another matter. In residential properties there is really no single dollar value that I can determine. Sometimes I can look at site or lot premiums paid in new construction neighborhoods. Other times I can extract an adjustment by paired analysis and, quite often, it's a guess on my part based on market reaction. I do know buyers will often pay a little more for a larger lot but then there are those buyers who might want a smaller lot so that they have less yard work to do.

It's an art based on some scientific principles and when it all boils down...it's an opinion. I base my opinion on more than 40 years of experience in real estate IN MY MARKET. Additionally, my mother and father started in real estate in 1951 so that is a lot of years of market knowledge. I can proudly say in all those years I have never had to defend my opinion in a court of law.

 

[J Grant]

I hope what Fannie is objecting to is $25 a sf as a rote adjustment instead of a market derived one, or used where it makes no sense (such as high cost to build/price sale properties)

When $25 a sf is market derived it's appropriate to use.

 

[Eli]

I find it ironic that Fannie Mae would say $25 a square foot is quite common in appraisals. Over the years I have found that is a highly supportable adjustment in median priced single family residences.

As an example, if there is a 300 sf size difference that could easily represent an additional bedroom in a typical house. $25 x 300 = $7,500 and that is quite typical for the price difference between, say, a 3 bedroom and a 4 bedroom residence IN MY MARKET.

I have also found as the price range of the residences goes up so does the adjustment necessary. Most of the adjustments I use range from, say, $25 to $50 a square foot and that correlates well to the price ranges of the homes. The proof is in doing paired sales analysis, adjusting for everything else, and using the residual to determine the adjustment for size or sf.

Site adjustments are another matter. In residential properties there is really no single dollar value that I can determine. Sometimes I can look at site or lot premiums paid in new construction neighborhoods. Other times I can extract an adjustment by paired analysis and, quite often, it's a guess on my part based on market reaction. I do know buyers will often pay a little more for a larger lot but then there are those buyers who might want a smaller lot so that they have less yard work to do.

It's an art based on some scientific principles and when it all boils down...it's an opinion. I base my opinion on more than 40 years of experience in real estate IN MY MARKET. Additionally, my mother and father started in real estate in 1951 so that is a lot of years of market knowledge. I can proudly say in all those years I have never had to defend my opinion in a court of law.

I never will forget when I did subdivision development appraisals years ago. The first one I did, my mentor schooled me that in a plain Jane subdivision where say the typical lot size is 15,000 sf, a 17,000 sf lot don't bring much of a premium if any at all with all other factors being equal. Even honest developers will tell you that. That's single family residential subdivision relative. Commercial is different.

Back then, say they were selling the typical 15,000 sq ft vacant lot for $30,000, an atypical 18,000 square ft lot might bring $2,000 more with all other factors being equal or similar. Principle of regression at play. It is very important to realize that when you are doing a discounted cash flow analysis and absorption rate on a 100 lot subdivision. Even more so on a 200 lot subdivision.

 

[J Grant]

Back to the OP initial post.... RE agents "show their work" to buyers and sellers all the time! They proudly show a buyer or seller how they lumped land and SF of house to get a $ per sf of the dwelling. Or their condo per sf $ based on superior condos in the building. The buyer/seller are typically not aware whether or not these methods deliver credible in terms of MV results, most of them take them as truth..

The problem is that "their " (RE agent ) methods is often not the same as appraisal methodology. Their methodology does not need to serve the same interests as "our " (appraiser) methods. Keep in mind if their methods serve them well in getting listings/getting them sold, they will continue to have no incentive to use, appraiser methodology.

In fact, being too concerned with the kind of accuracy or truth appraisers are concerned with can put agents at a competitive disadvantage against their peers. Thus, while some may enjoy learning about and appreciate appraisal methodology, they still may not use it in their pricing and marketing strategies. .

 

[Eli]

Back to the OP initial post.... RE agents "show their work" to buyers and sellers all the time! They proudly show a buyer or seller how they lumped land and SF of house to get a $ per sf of the dwelling. Or their condo per sf $ based on superior condos in the building. The buyer/seller are typically not aware whether or not these methods deliver credible in terms of MV results, most of them take them as truth..

The problem is that "their " (RE agent ) methods is often not the same as appraisal methodology. Their methodology does not need to serve the same interests as "our " (appraiser) methods. Keep in mind if their methods serve them well in getting listings/getting them sold, they will continue to have no incentive to use, appraiser methodology.

In fact, being too concerned with the kind of accuracy or truth appraisers are concerned with can put agents at a competitive disadvantage against their peers. Thus, while some may enjoy learning about and appreciate appraisal methodology, they still may not use it in their pricing and marketing strategies. .

I just finished my 4 year update NAR realtor code of ethics CE yesterday.

The code is divided into three major categories which rank as follows in importance:

1) duties to clients and customers,
2) duties to the public
3) duties to realtors.

They even touch on appraisals although those standards relative to appraisals don't apply in TN because realtors can't do appraisals in TN although they can in some states. The only way a realtor can do an appraisal in TN is if they are a licensed appraiser in addition to being a realtor. And then USPAP applies in addition to any NAR realtor standards.

 

[Mike Garrett RAA]

Should be a fourth category...duties to appraisers!

 

[TRESinc]

agents never measure in my market either. they cite realist, owner or public records for every one, from an 800sf condo to a 7138 -OR- 9600 sf house. what's 2500sf among friends?