Help on my 2 Million dollar property

[DanWaechter]

Okay, this is my first in excess of 1 million, and boy did I get a doozie! It is a 6 year old Colonial, 5200 SF, with another 2700 in the basement. Comps are impossible within the immediate community and within the last year. I have been able to locate comps about 10 miles away with similar square footage, and design, although they are much more suburban, than my subject home which is located in the heart of Alexandria (just outside of Washington DC). The real problem I am having is with all the upgrades within my subject home. An elevator which goes to all three floors, crystal chandeliers that I am told cost about $125000, 2 temperature and humidity controlled Fort Knox safes, custom everything, gold fixtures in the bathrooms, etc., etc.

My dilemma is that just the upgrades listed above could factor in another $250000 into the price, but the listing information from the comps is obviously nowhere near as specific as to the upgrades in the comps. What is the best way to appraise this home with these upgrades, and without knowing what upgrades the comps have. As indicated, this could change the value of the house a couple hundred thousand dollars.

Any suggestions, advice, recommendations. Can I give a value "range"?

Thanks in advance, yet again, for everyones help!

Dan Waechter

 

[John Hassler]

Dan

The key is to determine what are the truely competitive areas if you have no comparables in your town. They may be 10 or more miles away but thats OK - just explain why (ie "X is the most similar nearby competitive coastal town to Y and homes in this area are similar in appeal and ..."). If this is a sale, ask the agent what other areas they showed to the buyer.

Call the listing AND selling agent of every comparable. AND don't wait to do this until the last minute! If they go out of their way to help you, give them a bottle of wine - they WILL remember you next time. They are your best friend when doing this type of work. If there are any listings or pendings try to get inside (I have a brokers license which helps!).

Functional issues are are like every other appraisal. If everybody in this area has an elevator it's probably a market expectation. If yours is the only one in the neighborhood then it's probably a superadequacy.

Expect large adjustments. Don't worry about FNMA guidelines - this (likely)isn't a conforming loan. Your adjusted range can be much more than usual - I think this is because the buyers/sellers/agents have as much trouble as you figuring out the value of these properties. Let the chips fall where they may. Remeber, no one else can do any better than you if you've done your homework.

And, be sure to charge appropriately for your time. It will be a lot of work to put together a logical, reasonable, and defendable report. Good luck.

John Hassler

 

[Frank Bertrand]

This one of Jack Welch's places he got from GE when he retired?

 

[Lisa Alleva]

Hello,

I've done a couple of these in similar situations. One of them even had a damn racquetball court in the basement!!! As far as the area goes, a detailed explanation in your addendum about similar and competing area should suffice. I had to take a comp that was over 5 miles away in one instance.

As far as amenities, this is where your addendum comes in. Something like: "The subject property is a large, single-family dwelling located in the high-priced residential area of "x". It is constructed primarily of upgraded, high-quality materials. Attention to detail is evident throughout the dwelling. Upgrades include: blah blah blah. Amenities include: blah blah blah"

Get in contact with high-end brokers in the area and try and find out how much people are willing to pay for extras like elevators. As far as upgrades go, most of the time, it is typical in high-end properties to contain upgrades. My main focus would be on the amenities of the subject property. Group them all together in an "extras" category with a "see addendum" comment. Try and figure out the dollar amount from the information that is given to you by the realtors. In my situation, I believe I adjusted $100,000 for the racquetball court and the elevator. The house was valued at 2.7 million. There is no right or wrong answer. Adjustments are typically higher and DO exceed FNMA guidelines. 10000 for a half bath is not uncommon in high-end properties (depending on the number of baths). Go with your gut, and as my boss always tells me, "it's just a big house!" LOL

Good luck

Lisa A.

 

[Anonymous]

Dan,
Don't get hung up on the cost of components of the house. Houses of a certain size and class have features which might be extreme in a normal house, but are expected in high cost houses ie elevators, fancy bath fixtures, spas, etc. You must expand your market area to any competing location where similar size and style houses are avaliable.

 

[Anonymous]

I had a similar situatuin with a home in my area. I sought comparables from another area of town about 8 miles away. The subject was by far the most valuable home in the area so I had no choice. I did make location adjustments due to the other neighborhood consisting of several homes over 1 million and justified the adjustment by comparing similar homes from the two areas to find out how much extra someon is willing to pay to live in the other area. As far as your amenities are concerned I can only say this. It doesn't matter how much the owner payed to have an elevator, or custom chandeliers etc. What matters is how much extra a TYPICAL buyer is willing to pay for this amenity.

 

[Mike Garrett RAA]

Never ceases to amaze me how someone who says they are new to the business does million dollar properties. In my state you must be certified to do properties over $1,000,000 and you can't be certified without a minimum of four (4) years experience.

For what it is worth, I have been appraising for nearly 23 years, have been a real estate broker for 35+ years, and teach appraisal at a local real estate school. I still don't do $1,000,000+ houses. Why? Too much liability.

Ever heard my famous....."Run, run like the wind" comment?

 

[Ramona]

Most listing realtors on high end properties compile a detailed brochure of the home's features and amenities. Call the listing realtors of all of your potential comparables, and discuss the details of the sale (anything weird, anything excluded, any antiques added into the price, why did it sell over/under list price, etc), and ask to have the brochure faxed to you. Ask if he/she put a digital tour of the property on a website, and if so, view that and take notes.

Check out the assessor's sketch of these potential comps, sometimes they include garages, porticos, etc in the public record square footage.

The big thing is to budget enough time to do the assignment properly. Take a couple of hours for the inspection, and plenty of time in the week to do your research and interview realtors. Charge appropriately, these suck time like a sponge to complete properly.

 

[Anonymous]

Mike,

I beg to differ with you. I am from your state and the requirements to be certified are not a minimum of four years experience. They are 2500 hours of appraisal experience spanning at least two years including complex properties (multi-family, properties over 1Mil, properties with no comparables etc.), completion of required education, passing grade on the state exam. And a registered or licensed appraiser CAN do homes over 1Mil with a supervisory appraiser who is certified. Don't bust someones hump for challenging themselves. I have had experience with several appraiser who have been appraising much longer than me and have met with many MORONS. Common sense has a lot to do with appraising residential properties. Think of this, if I had only participated in one appraisal twenty years ago, I could claim a 20+ year appraisal career. I did my first 1Mil home as a registered appraiser with the assistance of a very experienced supervisor and now have the upmost confidence in my ability to appraise homes of this nature. Someone has to!

 

[Mike Garrett RAA]

Jason, Jason, Jason.....

I am so glad to know you, as a registered appraiser can do $1,000,000+ properties!

Let me call your attention to a Letter, dtd 09/22/1992 from the Colorado Board of Real Estate Appraisers

Registered Appraisers - $100,000 or less Loan under the supervision of co-signing licensed or certified appraiser. (Firrea & Banking Regulations).

Licensed Appraiser - All property types where the loan is $250,000 or less, non complex residential where the loan is $1,000,000 or less. (Same rules)

Certified Residential Appraiser - All property types where the loan is $250,000 or less and NO LIMITATION on residential loans. (same rules)

Certified General Appraiser - All types of properties with no limits to loan amounts.

Guess that was covered in one of the many classes you missed! I would cover my butt if I was you on that million dollar property. To set your mind at ease about the four years....

2 years as a registered appraiser (2,000 hours of creditable experience) once you have become licensed then you are required to complete more education and work experience to become certified. The state no longer allows a registered appraiser to go directly to certified. (rule change 2001). The average time from beginning to end is typically four years!

Your contention that someone who does one appraisal in 20 years can claim 20 years experience is, at best, rediculous. At last check I have completed more than 9,000 appraisals over my career. I still choose not to do $1,000,000+ residential properties because of the lack of suitable comparables in this market and the increased liability one might incur.

You have every right to appraise what the state says you are permitted to appraise. By the same token...one appraisal does not make you an expert! I just hope you have good errors and omissions insurance!

Did you happen to see the recently released information on the crash that killed the Senator right before the election. Seems the pilot had no experience in the type of aircraft he was flying. Sure he was licensed..but he was lacking very important skills and it resulted in the deaths of several people. While no one is going to die from using an in-experienced appraiser, there may be severe liability and penalties. I choose not to put myself in that box.

Send me a copy of your appraisal and let me forward it to the Board of Real Estate Appraisers and lets see what they say about it. As I said in my class....if I ever find any of you doing things illegally or fraudently..I will not hesitate to turn you in!