fraud or not on GLA adjustment

[Fred]

per sq ft is the most important variable. That is how people assess each and every unit they walk into.

But residential appraisers employ very few of the tools available from analytical palette, and pretty much assume the rest of the world had gone mad, and not them.

Right from the first response, someone told you:
“Dollar per square foot is not a valid measure of value. “

PSF is a valid unit of measure. It’s just that per-unit prices behave differently than whole prices. Sometimes when this discussion pops up, I post a little two-page report that uses both price and price/sf to appraise the same set of sales and they produce the same number (within about one percent).

I think if you hadn’t referred to judging value on PSF, you wouldn’t have had so many hostile responses. I thought you made a good case that the first appraisal didn’t evaluate construction quality well, and thus came in too low by using the wrong comps.

 

[Marcia Langley]

Spry,

Just to reinforce what the others have said ...

If one sale had an additional 100 square feet but it also had an additional full bathroom (or any other value item), then part of the value adjustment would be due to additional size and part of it would be due to the additional amenity.

Appraisers segregate value affecting items in this way.

Granted, in a project with tightly similar properties that for example, were virtually identical except for variations in GLA, and if the market reaction was extremely sensitive to size (bring their measuring tapes, etc) then the appropriate GLA/unit adjustment might be higher than usual. But one still would not expect it to equal cost. That additional GLA is simly not as valuable as the "part" of the value that is associated with the other value items that are identical.

Also, it is true that the newer a building is, the more cost and value will tend toward convergence (not equal, but tend toward convergence.)

Please notice that no one here has argued that the first appraiser was right. We could never determine whether he was right or not without doing our own appraisal.

Maybe his GLA adjustment was spot on and maybe it was way off. We simply can't tell from here.

What we have tried to do is give you sime insight as to how appraisers work.

 

[Webbed Feet]

oh. btw guys... BOA sent another appraiser in today. The new appraiser looked at the place and said the comps in the area do justify the price. He couldn't say what the appraised value would come back at until he did his work. He was shocked that the previous appraiser didn't include the other unit in the building which SOLD for $325k. I'll know more tomorrow when the new appraisal comes back.

Spry,

You have my respect for hanging in here trying to follow all this. And you have my private messages to you. So again, so other members of the public can read this, the most important element in real estate to a buyer is location, location, location, not total square footage or square footage differences between different units or houses.

I doubt BofA sent that appraiser, I strongly suspect a BofA used a AMC that sent that appraiser. Which would explain what sounds like his ignorance of the Ethics Rule of USPAP. I have yet to have any AMC inquire as to my skills, abilities, knowledge, or ethical behavior as any factor in offering to place an assignment with me in the last couple of years. There have only been two requirements, how cheap am I and how fast can I get a report done. In fact, it is my opinion it is those very same skills, abilities, knowledge, and ethical behavior that prevents most AMCs from being willing to hire any appraiser with some spine left more than once or twice..... can't have any trouble makers don't you know?

Webbed.

 

[sprydle6]

a resolution, finally

So the appraiser came back wtih a value of $295k. I am not happy with it, but it is closer. The buyers have agreed to pay the difference in appraisal / sale price. Net, the buyers got a little hurt and inconvenienced since their lease was up and had to move out last night. We are going to closing tomorrow.

I have to say that all posts were fantastic! I may not like what some people say or understand the rational behind it but I respect the opinions.

I started out really upset with what I perceived to be a fraudulent measure of value... the GLA = $55 sf when the unit was selling for $300 / sf. Then using comps which were smaller by a wide margin to have an effect of lowering my value by a very wide margin.

I do know this... on every project I do from now on I will consult an appraiser to determine value in a project before starting construction. Agents aren't worth anything, then they expect to get 5% of sales price for a few showings and open house... but in the end the appraiser can make or break any project I put together.

Think I will start a new thread to cover the idea of marketing appraiser services to developers and find out how much it is done and what size developers are doing that.

Great forum... look forward to sparking other conversations!