High priced residential appraisal

[MarkRichmond]

Hello,
I am still wet behind the ears as far as appraising goes (I have only done about 250 appraisals to date). I usually turn down orders that I don't feel comfortable/competent to do. I just received a request to do a large, high end house that they estimate at around $700,000.

My questions are:
Do you use a 1004 to do these types of properties?
Anything different than doing a smaller sized/priced house?
Do you charge more for these assignments because of the added size of the properties?

Just asking these questions makes me think I should turn it down but i am interested in doing them at some point in the future.

Thanks,
Mark

 

[Travis McGee]

hello.

In Flordia this priced house is not unusual. Same form, (1004), everything is the same- usually use 4 or 5 comps and a longer addendum on improvements. And include more interior photos. Most appraisers charge more due to increased comeplexity (measuring time, photos, etc.) we are not allowed to base appraisal fees on price of house. Good luck! These appraisals are not any more difficult, if you know the area and the comps are there. But these apraisals do tent to get reviewed more and or the lender sometimes orders a second appraisal on jumbo loans.

 

[KD247]

Hi Mark,

With high-value properties, it's easy to lose sight of the goal.

1) Identify the most significant determinants of value in that area (could be location, lot size, improvement size, architectural style, quality of construction, view, etc. or any combination of these).

2) Define the market area that contains the most directly competing properties (might be wider or more dissected than the market area for more conventional properties).

3) From as large a selection as possible, select the comparables that compete most directly with the subject, while trying to bracket the subject's most important value determinants as closely as possible.

4) Don't let unsupportable "factors", (like price per linear foot of lake frontage, or total price per square foot of improvements) lead you into an absurd value. If the market recognizes and commonly uses specific factors, they may be appropriate, but don't just "invent" them without adequate substantiation.

5) Try to interview owners, buyers, sellers, and agents as extensively as possible. You may learn some things that you would have never thought of on your own. Don't be shy about asking "dumb" questions. Try to get unpublished information from other appraisers in the area. You might even get lucky and get a copy of a previous appraisal of the subject or a recent appraisal of a similar property.

6) Create your own grid for inspection of the comparable sales. For high value properties, I usually include Site Utility, Appeal of the Setting, Privacy, Condition, Quality, etc.

Good Luck,

Koert

 

[Verne Hebert]

My first thought is: if you have a license, and if you were properly trained, you should be capable of completing this assignment. After all the government deemed you were ready for a "license".

Now don't get me wrong, this is a concerned and caring post, and I am going to positively comment. But this relates to a thread a month ago where Pamela Crowley headed out on the fringe discussing the poor criteria of qualitative training that is being done by the states prior to licensing appraisers.


I would look to your mentor for further guidance. Begin to establish your network. You will rely on your professional network your entire professional career; less after 5 to 8 years or so--but there will always be new challenges, and new opportunities, and you will need to bounce these things off of someone.

This forum is a wonderful new vehicle for professional networking.


Free advice--

Dollar amount of market value does not necessarily have anything to do with complexity or appraisal fee. The fee is based on the amount of time and associated costs involved to complete your assignment. In terms of complexity--I have completed smaller market value assignments that I have created case studies from; technical nightmares.

The more appraisal work you do, you will realize how amazing the appraisal process is. It is both revealing and forgiving. The process is the same for SFR's of any value---it just might be more involved.

Good Luck on the new challenges you embark on.

 

[Tim The Enchanter]

Do you use a 1004 to do these types of properties?
Anything different than doing a smaller sized/priced house?
Do you charge more for these assignments because of the added size of the properties?

Yes, Yes, and Yes.

1004 works fine.

And extra charge for the difficulty. Are there reasonably decent comps or not? Not = more $$$. I'm not sure how high end $700k is to your market. What range are the highest sales in? In some areas around here $700k might get you a 1200 or 1400SF house on a 7000 SF lot. Or down payment on a lot in others. I would call high end from $1M up, and really high maybe over $10M. In many places a 10,000 to 15,000 SF house is probably not an overimprovement (around here).

Things to do aren't so much different, but more detail. More interior and exterior pics, and description. It probably has things like crown moldings, recessed lights, marble and granite, fancy this and that... I give a description and pics of any extra amenities, pool, tennis ct, horse facilities, etc. and a room by room account. Just a few paragraphs. And then explain your adjustments noting anything high or unusual. Use 4-6 comps, and support it the best you can.

And charge a double or triple fee at least, depending how hard it looks to be, and how time consuming. Just measuring a big house can take a couple hours or more.

I say take it on, and get whatever help you need to complete it. Those high end things can be interesting, even fun. Well, at least the inspection part. :wink:

 

[wyecoyote]

Mark,

Depends on your area like others posted here. In this area $700K could get you into some condo's. In several markets here this is the mid range of houses. In others this would be the high end. So it all depends on where your talking. I do know of some counties that have not had any sales near that amount (including commercial sales). If $700K is the extreme high end ++++++ (mansion quality) for your area you may want to look into a narrative report. In other areas the $700 range fits real easy on a 1004. Bottom line is that you as the appraiser must decide what is the appropriate reporting content for this house not the client.

Ryan

 

[John Hassler]

Hey Mark

Congrats on landing your first big fish. Don't be afraid to contact another appraiser who has more experience and offer to split the fee for their help on the assignment.

Really no differences doing high end vs low end. An observation I have noted over the years ise that what applies to one end of the market may not apply to the other. For example, pools are often a superadequacy at the low end but may be an expectation at the upper end. Upper end properties do tend to be hypersensitive to negative locations (busy streets, etc). Also, they tend to pay a premium for good condition. These are only a few examples which may or may not be applicable in your market. I am only suggesting that the views you hold for homes at the lower my not apply at the other end. Good luck!

John Hassler

 

[Wally Jones]

Mark,

Good advice from all. A couple of other items (some may be a repeat). Take more pictures than you might be used to. Try to get each side of the house, any amenities present (pool, tennis court, unusual landscaping,etc.), view, interior. Even though your client may not need all of the extra photos, they may come in handy in the future when you get that next high-end assignment.

If you have trouble finding suitable comps, look back beyond one year. (Maybe touch base with your client first.) In our area there is not a large inventory of luxury homes but the market is quite stable with relatively low turnover. Therefore, fewer recent sales are available and the use of resales up to two years has been acceptable to our clients. Don't overlook current listings as 5th or 6th comp.

Good luck and have fun!

8)

 

[Ross (CO)]

Mark, .... You'll do just fine, I'm sure of it. It's facts, comparison, analysis and some extra thought.....same as the $150K place but just a larger scale. Time becomes money and I would bet that many of us expend more un-paid-for time on some reports than our fee reflects. It is not necessarily fair to yourself to rationalize that you should not charge more for the "big' assignment.....because it may offset the three "easy" ones you just completed (That comes from the Theory of the Minimal Fee). Look it up ! As a matter of fact I am getting a strong sense that we all could begin to "sell" our turn-time better to satisfy the demands that many are calling for. Hopefully the market area of the subject has sufficient comps to aid your efforts. One other point, on properties of this $$ amount, I have on occasion not hesitated to show my driver's license and my state-issued wallet-sized appraiser's I.D. (which I laminated). The front door opens and I extends my greetings and my I.D.'s and feel that leaves a good impression and raises your professionalism by a notch...... (homeowner's estimate of value be damned).

 

[Lee SW IL]

Mark, it depends on your market. Is the property over built? I just received a request to appraise $700,000 house, but within the entire county not one house sold over $300,000. My cousin's house was on the market for $280,000 for over a year in this market, but it never sold in a year, its overbuilt (in my opinion). Only one house in the entire county is assessed for over $400,000

This order came from an AMC. No comps, there low fee, (I would have requested alot more) I would have like the experience, but I just could not afford to take that amount of time right now. I turned it down.

If you have possible comps that sold in the range, sure go for it.

But the one I had, the property was way over built for this farming community, which I felt anyone with that amount of money for a house, would not but a house already built, they would build it themselves.