High Quality, New Construction Appraisal

[Noreen]

hate getting those. i recall one many, many moons ago where the owner added on something like 1,800sq to an 800sf slab ranch in a neighborhood where the largest house was around 1,100sf. of course he knew his house was going to go up in value $4$...

How much can we look to the DYI shows that throw out these incredible opinions and "value" figures, present it to the "uneducated" and then they look at those of us that do our jobs and think we are the "incompetents"?? Or a "shoot from the hip Zillow" or a "Zestimate"??? At what point is this stuff misleading? We know it is but we still have to fight off these unrealistic 'resources".

 

[TRESinc]

How much can we look to the DYI shows that throw out these incredible opinions and "value" figures, present it to the "uneducated" and then they look at those of us that do our jobs and think we are the "incompetents"?? Or a "shoot from the hip Zillow" or a "Zestimate"??? At what point is this stuff misleading? We know it is but we still have to fight off these unrealistic 'resources".

i love and hate those shows. i like watching them as a member of the viewing audience, however i cringe as an appraiser. the worst was one that was called "flip this house" where no matter what improvement they did, right down to exterior painting, had a 150-500% return on value. i distinctly recall the exterior paint one. they said it cost $2,000 to have the outside of the house painted but it had increased the value of the property by $6,000. that is some damn magical paint!

the other thing that gets me is the cut to commercial segments. they put up 5 or 8 tiles on a backsplash, come back from commercial and the entire thing is done, including grout and cleanup. joe homeowner thinks it really is that easy and attempts to do it himself and you know the rest of the story...

the best of these shows is renovation realities. you get to see 2 people who usually have no real idea what they are doing attempt to renovate a room. it's amazing how many people on the show just start cutting electrical wires without shutting off the power.

 

[smorabito]

As for your situation, my advice is to seek out a list of ALL sales in your market area and sift through them for properties with homes in the similar size ranges for both the home and the site. You will not be ending up with a 2017yb home that has the 2017 design and features and floorplan and the like, so I wouldn't pay much attention to the new homes even though some components of your home will be new. You are working on what amounts to a hybrid, so a competent appraiser probably won't be making direct comparisons to anything newer than, say, a remodeled 2000yb home.

George, thank you for your many responses and suggestion to look at older homes as well. You've helped me understand cost approach - specifically that its irrelevant in my case.

we're trying to figure out what the value is to the "typical buyer" for that property in that area. Meaning, the reactions of the herd, not the reaction of any of the outliers to that herd.

In thinking about this more, I believe my dilemma is trying to be able to prove there is at least some market for a Class 2 house of similar size. My gut tells its there but I'm really not sure how to pluck out Class 2 homes from an ocean of Class 3's. I can tell the difference from a beautify home, but I'm not sure how you all can tell from 10-15 pictures- or if you have access to some details the public doesn't have. Are there some photo reference materials that illustrate these differences including interior and exterior. Certainly there's more to it than an exterior with stone and granite countertops.

 

[smorabito]

Just make sure the specifications are as detailed as possible and maybe you can provide a sale or two for consideration that are similar quality construction as examples. Then you wait for the result. Not much can be done other than that.

Lets say I there are 10 compatibles that vary $300k between them. I think appraisers like to have 4 comparisons. Is it fair to just pick the top 4? Would appraiser in this situation pick the most expensive 4, the middle 4, or simply just the first 4 they find. If its the latter, am I helping my situation by providing the most expensive ones for consideration.

 

[smorabito]

your post reads as you are looking for a way to make the appraiser view things the way you do, and that you are concerned that isn't going to happen. that should set off alarms in your head that your project may not be financially responsible. the things that are important to YOU are not necessarily the same things that are to the typical buyer, and that is what we look at.

In fact, there are alarm bells in my head - that is why I searched out an obscure forum on the internet and posted a question to learn more about my options. If I end up needing to build a less expensive, less desirable, but more marketable house I will, I'm simply trying to learn about the process so I understand why an appraiser may go one way or another. My outside believe is that appraising is a mix of science and art. As with all professional jobs, sometimes we nail it and sometimes we don't. I imagine most home appraisals are done in less than a day and some facts can dispute other facts in a complex analysis. I want to feel confident in my house project by understanding how far I can deviate my project from the most commonly sold home. I want to build a house for the minority, not the majority. The minority still buy lots of houses, but I'm sure those comparisons can be easily missed by a busy, overworked appraiser.

 

[George Hatch]

All we do is research, analyze, qualify and quantify property attributes and the corresponding pricing. All day, every day. I daresay the average residential appraiser looks at more sales and listing transactions for their value in a week than the average local broker is looking at in a year. I am almost ALWAYS aware of more of the relevant data than the local broker is who is selling the property, even though I don't live in the neighborhood or send my kids to that school. I may only include 5 or 6 comparables in a report, but I will usually have researched and considered on at least some level 30+ other datapoints in my process. Not counting what I also do in my neighborhood analysis, which is to recap the high-low-medians each year for the prior 5-10 years. Because I'm watching the macro trends that provide the context to better understand what that last 5 or 6 sales data that I think are the MOST relevant mean to me. Depending on the property type I almost always also go through the recent expired and withdrawn listings to see what DIDN'T sell, and as an indication of what the values of those properties was probably not.

If some appraiser is averaging 6 residential appraisal assignments a week they just about can't complete that many assignments without researching and analyzing (sometimes on the superficial level and other times in detail) a bare minimum of 100 listings. That's if they don't actually care about what they're doing and are just going through the motions. The real number for many appraisers may be way closer to 200 listings. They'll reject far more data than they use, but before they reject it they will still have seen and weighed that transaction in comparison to their subject as well as to their final pick of comparables.

We deal in relatively large amounts of data, and we're only doing the one thing. After a while it adds up. So having been inside a lot of properties and also seeing their pics in their listings we can get a pretty good eye for what we're seeing.

 

[George Hatch]

Lets say I there are 10 compatibles that vary $300k between them. I think appraisers like to have 4 comparisons. Is it fair to just pick the top 4? Would appraiser in this situation pick the most expensive 4, the middle 4, or simply just the first 4 they find. If its the latter, am I helping my situation by providing the most expensive ones for consideration.

I won't lie - we have our fair share of slackers and donkeys who will take the path of least resistance. And some of these lenders will hassle appraisers for not hitting some target value, and reward the ones who do hit the target with more work.

But in general, a conscientious appraiser won't be using price as a primary filter. They're trying to solve for value, so that makes it unsound to use value as a search parameter .

Moreover, you shouldn't be all that anxious to overencumber your property for more than it's worth; either. If you have a heart attack tomorrow and have to retire and sell your place you don't want to get trapped in a mortgage you can't resolve.

 

[Joe Flacco]

George, don't you have neighborhoods in SoCal with mostly good quality homes but also some high quality homes?

 

[George Hatch]

Of course. I've made plenty of 6-figure quality adjustments. When that's what that market is doing.

That pesky principle of progression/regression sometimes throws a wrench into things, though.

 

[Joe Flacco]

I think the OP's main concern is that the appraiser might be inexperienced and not understand what is being built.