Finance guy looking to learn

[Norakered]

Hello appraisal professionals. I work on the finance side in the tampa metro area and have been trying to improve my understanding of appraisals. I’ll start by saying let me know if I posted in the wrong place. I had an appraisal done last week. I’m sure you hear on a daily basis how appraisals were wrong just because a value came in lower than expected. That is not the case here. The house in question is my brother’s which I’m in weekly. It is a legitimate 5 bedroom (all five rooms are greater than 10x10 with air conditioning, an egress window, a closet and a bedroom door) plus an office. I reached out to the AMC when we got it back, letting them know there was a bedroom missing from the sketch and photos. The appraiser keeps saying it’s a four bedroom and an office. He then stated there is no difference in value from a 4 bedroom and 5 bedroom. Obviously, this is his area of expertise. My goal here is not to argue with the guy, but to better understand so I can explain to clients in the future since this will inevitably happen again.

My questions - How do comps work and how do you decide which comps to use? I ran an AVM (I know they’re not accurate or reliable) to try to educate myself a bit after the fact and found houses very close in proximity with GLA within 3%. The appraiser used comps that were outside of 25% of GLA, with the comps being on the much smaller side. Subject property was a 5br with 3,200 sf GLA on a pond with a pool, pavers and a screen on the back. The comps were around 2,500 sf with woods behind, no pool, screen room or pond. What makes those comps better to use than houses that are almost identical in age, size, material, and upgrades?

Thanks in advance for any information. Again, I’m not looking for arguments to use against the guy. I’m looking to improve my understanding to make myself better professionally.

 

[shrubberyvaluation]

Hello appraisal professionals. I work on the finance side in the tampa metro area and have been trying to improve my understanding of appraisals. I’ll start by saying let me know if I posted in the wrong place. I had an appraisal done last week. I’m sure you hear on a daily basis how appraisals were wrong just because a value came in lower than expected. That is not the case here. The house in question is my brother’s which I’m in weekly. It is a legitimate 5 bedroom (all five rooms are greater than 10x10 with air conditioning, an egress window, a closet and a bedroom door) plus an office. I reached out to the AMC when we got it back, letting them know there was a bedroom missing from the sketch and photos. The appraiser keeps saying it’s a four bedroom and an office. He then stated there is no difference in value from a 4 bedroom and 5 bedroom. Obviously, this is his area of expertise. My goal here is not to argue with the guy, but to better understand so I can explain to clients in the future since this will inevitably happen again.

My questions - How do comps work and how do you decide which comps to use? I ran an AVM (I know they’re not accurate or reliable) to try to educate myself a bit after the fact and found houses very close in proximity with GLA within 3%. The appraiser used comps that were outside of 25% of GLA, with the comps being on the much smaller side. Subject property was a 5br with 3,200 sf GLA on a pond with a pool, pavers and a screen on the back. The comps were around 2,500 sf with woods behind, no pool, screen room or pond. What makes those comps better to use than houses that are almost identical in age, size, material, and upgrades?

Thanks in advance for any information. Again, I’m not looking for arguments to use against the guy. I’m looking to improve my understanding to make myself better professionally.

I am not from tampa but I do not see a value difference typically between a 4 and 5 bedroom house. What the appraiser calls it shouldn't matter unless there is some market reaction to a 5th bedroom, which I would doubt. Typically when I see reactions to bedroom counts is when there is 1 or 2 bedrooms (although it is not always the case). I probably would not argue over this, buyers don't care what an appraiser calls something.

It is hard to say without knowing the other possible comps. We are supposed to be selecting based on what a typical buyer would most likely consider as an alternative. Sometimes comps are added to bracket features that might not be as comparable. Very close in promixity can be a good place to start, but you also have to look at if they cross lines of markets (sometimes you can tell by major roads or school lines). I had one recently where I used comps over 1 mile away that were located in the same community on the other side of it rather than sales that were very close in proximity that were located in a community with less market appeal. Did the appraiser give a rationale in his comments for why he selected the comps. I like to give the inteded user(s) an understanding of how I selected the comps.

Typically the process is a ROV request. You are supposed to give sales to consider. Make sure they are within the defined neighborhood boundaries in the report and you give a rationale of why you believe they are better indicators of market value/more comparable ( not that this house sold higher). I would consider GLA more compelling than the bedroom count ceteris paribus.

 

[ramrcdk]

The appraiser used comps that were outside of 25% of GLA, with the comps being on the much smaller side. Subject property was a 5br with 3,200 sf GLA on a pond with a pool, pavers and a screen on the back. The comps were around 2,500 sf with woods behind, no pool, screen room or pond. What makes those comps better to use than houses that are almost identical in age, size, material, and upgrades?


I see you are quite familiar with USE % differences & knowledge of the Appraisal Skeleton.
Around here: that size of a home having 4 or 5 bedrooms + an office would have little to no market difference in the total # of bedrooms. In saying, it may be extractable IF it were a Rental in an area where extracting bedroom numbers-to-value was evident.
Also, it can be found the more bedrooms : the smaller their individual size.
Therefore, I would attempt to find a useable sale having 5 bedrooms & if not... also 4 bedroom uses. Office can be a Flex Space typically & where same could be similar-in-use to a bonus room or Den. Total room count is typically not LENDER important. However, when the bedroom count is below 3 bedrooms, it IS important to use a similar grid example.

So, where the report did not have a bracketing grid of similar to offsetting: pond, pool, screen room, utility-use of the lot, there should be very detailed commentary for the reasons "why" there were NO grid examples used. And for market extracted value provided IN the report.
Fair-to-say: IF there are NO sales...there are NO bracketing sales available for report use.

So, IF you know of Sales that should have been considered: you can request a Reconsideration of Value & provide up to 3 sales, (typically) for the Lender to provide the appraiser. Google Fannie Mae web site & search for Reconsideration of Value for aid in understanding. IF you are requesting a Value Challenge- ROV your lender should have the appropriate Form. The Borrower would fill out the Form with the sales information, reasons WHY for consideration, & ASAP back to the lender.

EDIT: my only ROV turned out to be : the lender rep' for the borrower were very longtime friends. The lender chose for the borrower the 4 sales. Made my JOB a headache for "Free Time" to respond to the Form questions, etc. Turns OUT: actually I had an initial Thorough Report that received a pat-on-the-back by the Head Chief, no reason FOR the ROV except the Rep' wanted to squeeze every drop of $$ for their friend's loan. **So, after-the-situation was over, I didn't mind & feel that Friend was in fact DOING his JOB with best of effort. Just wish Lenders would be that detailed all the time.

Good for YOU in that you care to ASK...just DO that everyday.

Good Luck

 

[Norakered]

I appreciate the information. He said the reason for the comps he selected was proximity. The client requested that I submit a rebuttal on the valuation. I tried to speak to facts alone since opinion wouldn’t help anyone in this scenario. I tried to keep it as professional as possible to avoid inadvertently insulting the guy. We live in an area where most houses are $500k+. After reading through the report, I found I didn’t understand the GLA adjustment on a standard dollar amount. In this case, the value used for the almost 600 sf was $40/sf. I feel like an idiot not understanding the intricacies of the appraisal process.

My statement is pasted below.

The house that was appraised is a five-bedroom, three-bathroom house. The appraiser listed it as a four-bedroom, three-bathroom house. That is the main reason a rebuttal was submitted. I’ve included the MLS listing for reference. I’ve also included reasoning for the questioning of the comparable houses that were used.

While the property that was used as comparable sale 1 was close in proximity, it was a house with four bedrooms and three bathrooms, with a GLA of 2,503. The subject property is 3,116. That is a 24.49% variance in GLA.

The first two comps that were used on the appraisal were four-bedroom, three-bath houses. The third comp that was used on the appraisal sold back on April 2, 2021.

The first property I provided sold on July 8, 2021, with a lake in the back of the property, similar to the subject property, along with a pool, screened backyard and pavers. This GLA was 3,210 which is a 2.92% variance from the subject property.

The second property I provided sold on May 24, 2021, with a lake in the back of the property, similar to the subject property, along with a pool, screened backyard and pavers. This GLA was 3,210 which is a 2.92% variance from the subject property.

 

[shrubberyvaluation]

I appreciate the information. He said the reason for the comps he selected was proximity. The client requested that I submit a rebuttal on the valuation. I tried to speak to facts alone since opinion wouldn’t help anyone in this scenario. I tried to keep it as professional as possible to avoid inadvertently insulting the guy. We live in an area where most houses are $500k+. After reading through the report, I found I didn’t understand the GLA adjustment on a standard dollar amount. In this case, the value used for the almost 600 sf was $40/sf. I feel like an idiot not understanding the intricacies of the appraisal process.

My statement is pasted below.

The house that was appraised is a five-bedroom, three-bathroom house. The appraiser listed it as a four-bedroom, three-bathroom house. That is the main reason a rebuttal was submitted. I’ve included the MLS listing for reference. I’ve also included reasoning for the questioning of the comparable houses that were used.

While the property that was used as comparable sale 1 was close in proximity, it was a house with four bedrooms and three bathrooms, with a GLA of 2,503. The subject property is 3,116. That is a 24.49% variance in GLA.

The first two comps that were used on the appraisal were four-bedroom, three-bath houses. The third comp that was used on the appraisal sold back on April 2, 2021.

The first property I provided sold on July 8, 2021, with a lake in the back of the property, similar to the subject property, along with a pool, screened backyard and pavers. This GLA was 3,210 which is a 2.92% variance from the subject property.

The second property I provided sold on May 24, 2021, with a lake in the back of the property, similar to the subject property, along with a pool, screened backyard and pavers. This GLA was 3,210 which is a 2.92% variance from the subject property.

Last time I was insulted was when a lender sent me a request to review 8 sales all outside of the neighborhood boundaries. Was an investor renovation, all of the comps I used were investor renovations with 2 being from the same investor. It was clearly just to get me to bump my appraised value up.

It seems you are on the right track. Like I mentioned before I would make sure they are in the defined neighborhood boundaries in the report and they are not on the other sides of major roads or different school districts. Also check the condition and updates as these could be major factors.

Disclaimer: I do not know the Tampa market area, this is generic.

Edit: Also above ground pools we do not include in valuations due to being personal property, I didn't see you specify if they were in ground.

 

[DTB]

Maybe your brother's house is an overimprovement for his neighborhood?

How far away are your 2 comps that your furnished?

 

[J Grant]

Hello appraisal professionals. I work on the finance side in the tampa metro area and have been trying to improve my understanding of appraisals. I’ll start by saying let me know if I posted in the wrong place. I had an appraisal done last week. I’m sure you hear on a daily basis how appraisals were wrong just because a value came in lower than expected. That is not the case here. The house in question is my brother’s which I’m in weekly. It is a legitimate 5 bedroom (all five rooms are greater than 10x10 with air conditioning, an egress window, a closet and a bedroom door) plus an office. I reached out to the AMC when we got it back, letting them know there was a bedroom missing from the sketch and photos. The appraiser keeps saying it’s a four bedroom and an office. He then stated there is no difference in value from a 4 bedroom and 5 bedroom. Obviously, this is his area of expertise. My goal here is not to argue with the guy, but to better understand so I can explain to clients in the future since this will inevitably happen again.

My questions - How do comps work and how do you decide which comps to use? I ran an AVM (I know they’re not accurate or reliable) to try to educate myself a bit after the fact and found houses very close in proximity with GLA within 3%. The appraiser used comps that were outside of 25% of GLA, with the comps being on the much smaller side. Subject property was a 5br with 3,200 sf GLA on a pond with a pool, pavers and a screen on the back. The comps were around 2,500 sf with woods behind, no pool, screen room or pond. What makes those comps better to use than houses that are almost identical in age, size, material, and upgrades?

Thanks in advance for any information. Again, I’m not looking for arguments to use against the guy. I’m looking to improve my understanding to make myself better professionally.

I am fine with his calling it a 4 bedroom plus office because that is likely reflects the design and typically there is no or only a marginal value difference between a 5 bedroom and a 4 bedroom house. But what does look wrong is the appraiser using all smaller sales and not having used similar sf or larger sales.

Which might be a result of a company decision to use an AMC - you are aware most AMC's squeeze appraisers on fees ? If banks or mortgage lenders want to use an AMC, the lender should be paying the AMC for their service with appraiser getting the appraisal C and R fee amount that the borrower paid. (or a very small discount off it ) While some AMC work is good quality, other of it is lacking as a result of man AMC's paying low fees and /or imposing very tight turn times.
Thanks for coming here and asking ! We need more on lender side participation.

 

[Norakered]

Maybe your brother's house is an overimprovement for his neighborhood?

How far away are your 2 comps that your furnished?

 

[Norakered]

I am fine with his calling it a 4 bedroom plus office because that is likely reflects the design and typically there is no or only a marginal value difference between a 5 bedroom and a 4 bedroom house. But what does look wrong is the appraiser using all smaller sales and not having used similar sf or larger sales.

Which might be a result of a company decision to use an AMC - you are aware most AMC's squeeze appraisers on fees ? If banks or mortgage lenders want to use an AMC, the lender should be paying the AMC for their service with appraiser getting the appraisal C and R fee amount that the borrower paid. (or a very small discount off it ) While some AMC work is good quality, other of it is lacking as a result of man AMC's paying low fees and /or imposing very tight turn times.
Thanks for coming here and asking ! We need more on lender side participation.

We’re all in this together. I think the only way the industry gets better is if we all work toward a common goal of fair and always working to improve. I really appreciate your input here. As a note, it is five bedrooms plus an office. I’m not claiming the office to actually be a bedroom. The appraisal sketch is legitimately missing an entire room on it. On the top floor (the office is on the first floor), there are four bedrooms, all of which have closets, condition air, and an egress window. I know he’s human and we all make mistakes.

 

[Norakered]

All three comps I furnished were within .61 miles. Same school districts, HOA amenities, same shopping malls, same building materials and finishes. The ones I provided are much closer “products” as they all have a pond in the back, a pool, a birdcage (screen enclosure that surrounds the pool) and finished pavers that transition from the house to the backyard and around the pool. I’m certainly no expert and I know I don’t hold a candle to any of you guys. I’m just trying to understand the why so I can have an intelligent, informed conversation about it and be better at my job moving forward.