Finance guy looking to learn

[DTB]

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.

I'll say it, as a former appraiser I can get away with it, your appraiser did a lousy job.

 

[ramrcdk]

I'll say it, as a former appraiser I can get away with it, your appraiser did a lousy job.

Agree : via the Post descriptions.
Who knows the Lender's SOW, perhaps not GSE. Whether the appraiser had "access" to those provided in the ROV via source information.
In the described scenario, appraiser has a considerable amount of FREE "explainin' to do".

 

[Norakered]

Most lenders who order direct use Appraisal Port or Mercury or a similar portal It is baffling why Anow is being used I personally have no experience with it but from appraiser feedback seems like a nightmare most of the time.

I’m not versed in appraisal ordering. My boss is on the council for United Wholesale Mortgage. They’re the biggest wholesale lender in the US. They just launched their Appraisal Direct service a month and a half or so ago. If there are any issues with it, Mat Ishbia will have it addressed in no time. There should be a link in my earlier post to sign up. They don’t keep a penny from the appraisal transaction. He said during the announcement that his plan to improve the appraisal space was to pay the appraiser directly, pay them well, and pay them right away. If UWM helps your space 1/10 of the way it helped my space, you all will be very happy.

 

[Norakered]

Agree : via the Post descriptions.
Who knows the Lender's SOW, perhaps not GSE. Whether the appraiser had "access" to those provided in the ROV via source information.
In the described scenario, appraiser has a considerable amount of FREE "explainin' to do".

This was either Fannie or Freddie as all we do is QM/GSE

 

[Norakered]

If you came here to learn there is a chance we subtract from the sum total of your knowledge...

I would speculate that the 4 bedroom plus office is far easier to 'comp' with other 4 bedroom houses rather than try to find a house with 5 bedrooms... The AMC "fact checker" - a computer or some bloke in India - might ding you if you have a 5 bed and only 4 bed homes. Outside of luxury homes, few ordinary homes have 5 bedrooms. But sounds like in your case, he merely missed a room, or perhaps one bedroom is low ceiling/slanted wall and not counted in the GLA???

surplus SF is normally merely space (no appliances, plumbing etc) therefore adjusts at a lower dollar amount that the overall $/SF .... and the gross bucks per SF need to be applied only to the SF of the house, not the land value thrown in on top of the house value.

When you say surplus space, the 3,200 square feet, in this scenario, would have a similar number of rooms but each room is bigger. Then we have the additional bedroom that started this whole thread. Would that scenario result in the $40/sf calculation or would there be a different method since all rooms are functional and either bedrooms, bathrooms, living/family/dining rooms or the office.

 

[The Warrior Monk]

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.

Appraisers are just like everyone else; everyone has a different level of expertise, and some are better than others.

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.

If the "office" has the same setup as the other bedrooms, then it is likely a matter of personal opinion.

There may be circumstances where the number of bedrooms in a home is limited, due to zoning or health department requirements (sanitary flow of the property). In that type of circumstance, there would be a specific number, or maximum number, of bedrooms; the other rooms would therefore be a den, family room, office, etc.

The number of bedrooms often increases proportionately with the size of the home, so simply having a greater number of bedrooms might not have an impact on value. However, it there are a high number of rentals in the area, there could be an impact on value due to additional bedrooms (all other factors being equal).

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?

Comp selection ultimately is a function of available comparables. Obviously proximate and similar are the best ones. If those type of sales are lacking, my personal preference is to use several sales in the immediate neighborhood for high/low value parameters, and if necessary ones in reasonably competing communities and make the necessary location adjustments if required.

 

[shrubberyvaluation]

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.

Your sales sound like good comps based on the information given if everything else is similar. I don't know the area. I don't know if any of the appraiser's comps or the sales you think are more comparable are within the same community.

 

[shrubberyvaluation]

When you say surplus space, the 3,200 square feet, in this scenario, would have a similar number of rooms but each room is bigger. Then we have the additional bedroom that started this whole thread. Would that scenario result in the $40/sf calculation or would there be a different method since all rooms are functional and either bedrooms, bathrooms, living/family/dining rooms or the office.

The room count probably plays no role unless there is some functional utility issue with the layout. The $40/sf I assume is based on GLA differences.

 

[Fernando]

I come across this bedroom issues few times this year.
I look at the public records and MLS and they have their stated number of bedrooms.
I seen a bedroom with a closet and sources would call it a Den.
I seen a Den and I thought it was a Bedroom.
The common feature is these rooms had a sliding door access to rear yard. It's the only access to rear yard.
Thus, an appraiser can argue it's not a bedroom so he/she doesn't need to deal with functional inadequacy.

 

[Jayjay25]

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.

The subject is on a pond and the comps have frontage on a lake? Big difference in these here parts.