Comparable Adjustments Furnished Homes

[tagner keith bailey]

Does Fannie Mae/Freddie Mac have guidelines for appraising furnished homes? Can an appraiser make a furniture adjustment within guidelines? If so, how can an adjustment be made without viewing the furnishings or a inventory list? If so, this sounds very dangerous to me. One would think, if aloud, the appraiser would need to be a licensed personal property appraiser also and have very detailed info regading the comparable as well as the subject.

 

[Pittsburgh Pete]

Real estate appraisers appraise real estate and not personal property.

All those annoying calls you might get from appraisers are meant to determine if there is any personal property included in the sale, the presence of seller concessions, and data on the physical condition of the real estate.

Valuation of personal property is best left to machinery and equipment appraisers--different discipline.

Fannie deals with real estate.

Do you think a bank wants to tie a 30-year loan to furniture?

 

[Terrel L. Shields]

There is no special license to appraise personal property. It is not a FIRREA issue. Locally the state board may be able to regulate the actions of someone who professes to appraise personal property. I just appraised some personal property recently and frequently have to add to or adjust out of comps, personal property such as tractors and PTO generators that convey with a poultry farm. I use a Farm Equipment Cost Guide for those.

Condos are typically the only place I see furnishings and if you have furnished and unfurnished units, you may be able to detect a difference by paired sales. It is inexact but some people do list the personal property separately and state a value for those furnishings. It is a lot of research, some of it on-line, or you may be able to get an auctioneer to estimate the market value of personal property.

Typically, Fannie and Freddy only loan on REAL property, therefore, any contribution for furniture comes off the Real estate value. Presents a real PITA for an appraiser. Many appraisers (whether correct or not) therefore tend to lump common furniture as having little or no contributory value.

BTW, typically the stove, and any built in item (dishwasher, compactor, etc.) is considered to be "real" property attached to the property whereas a Refrigerator tends to be called Personal property and most appraisers simply caveat them away... that is, they don't include personal property in the valuation.

 

[Paul Isolda]

The real estate has to be valued separately from personal property and most real estate appraisers do not have experience valuing personal property. For a sale, the contract should list all personal property to be included. Mortgage lenders are not making long term real estate mortgage loans on personal property. When you talk about an adjustment, the only adjustment a real estate appraiser should be making is to take the furnishings out of the equation.

 

[OminousRun]

Furnishings are personal property and are not given value in a Real Estate Appraisal.

No Real Estate appraiser should ever include furnishings as value in an appraisal.

 

[tagner keith bailey]

Wonderful answers. I needed to confirm my belief. Now heres the deal. One of my listings went pending. The sales price was $485,000. The appraisal came back at $425,000. The appraiser made $30,000 furniture adjustments on 2 comparables and a $5,000 adjustment on one comparable. The subject is sold furnished. Those $30,000 adjustments killed the deal. Get this. The comparable that had a $5,000 was a 4th comp that is FOR SALE and was called (partial furnished). The home is not partial furnished. You want to know why i know? Because it is my listing. This appraiser has some questions to answer. Am i correct. What should I do? Help me make a correct decision.

 

[Peacemaker]

Wonderful answers. I needed to confirm my belief. Now heres the deal. One of my listings went pending. The sales price was $485,000. The appraisal came back at $425,000. The appraiser made $30,000 furniture adjustments on 2 comparables and a $5,000 adjustment on one comparable. The subject is sold furnished. Those $30,000 adjustments killed the deal. Get this. The comparable that had a $5,000 was a 4th comp that is FOR SALE and was called (partial furnished). The home is not partial furnished. You want to know why i know? Because it is my listing. This appraiser has some questions to answer. Am i correct. What should I do? Help me make a correct decision.

What kind of decision? If this was a Fannie deal you are not the client and the appraiser shouldn't be speaking to you about anything.

The lender or broker is the one that needs to inquire about the appropriate-ness of those adjustments. Being as you are referring to comparables, rather than the Subject, they may or may not be appropriate. Appraisers are required to deduct concessions on comparables. If I could confirm that a sale included $30,000 in personal property, I'd make an adjustment for it. That can be difficult, if not impossible, but I'm always amazed what realtors will tell you after the deal closes. That's when the truth seems to come out.

Now, if the appraiser just pulled those adjustments from where the sun don't shine, that's not appropriate either - but the lender should have policies in place to deal with this. They can get another appraisal, they can get a review etc. Ideally, I'd do everything possible not to use those comps at all - how can you truly know the value of the house vs personal property? I'd mention those sales in the comments in the report so the lender knows you didn't just overlook them, but note that they were not used as due to the inclusion of personal property they are not good indicators of value.

IMHO, selling a house furnished or including the flat screen tv etc, or the Mercedes in the garage, is just another form of inflating values.

 

[Pamela Crowley (Florida)]

The question that needs to be answered and it very difficult to answer is what those properties used as 'comps' would have sold for if totally unfurnished. ANYTHING included in the sale that is not part of REAL property must be extracted from the sale price. These furnishings should not even be included in the real estate contract as they cause nothing but trouble. Furniture and other items that are not real property should be contracted for on a separate contract, but that doesn't happen often enough. Including personal property in the real estate contracts and sale prices skews markets and artificially inflates prices.

We cannot know if the adjustments this appraiser used for the personal property included in the sales used as comps are justifiable, but any sale used as a comp that included personal property should probably be adjusted for that.