How do you value age of comparable property?

[slyefox]

I had an apprasial done recently that was a disaster. The appraiser miscalculated my square footage by more than 12% (nearly 200 sq ft). She also used bad comparables - my home is 4 years old and the two comparables she used were 38 years old and 26 years old (and falling apart). She attempted to perform some calculation that gave partial credit for the age of the buildings but only credited 11 years for the 38 year old property (A38/E11) and 7 years for the 26 year old property (A26/E7). Can anyone tell me why the full age difference was not accounted for or why she used less than a third of the actual age of these properties to adjust them in the comparison?

 

[Joyce Potts]

I had an apprasial done recently that was a disaster. The appraiser miscalculated my square footage by more than 12% (nearly 200 sq ft). She also used bad comparables - my home is 4 years old and the two comparables she used were 38 years old and 26 years old (and falling apart). She attempted to perform some calculation that gave partial credit for the age of the buildings but only credited 11 years for the 38 year old property (A38/E11) and 7 years for the 26 year old property (A26/E7). Can anyone tell me why the full age difference was not accounted for or why she used less than a third of the actual age of these properties to adjust them in the comparison?

She probably estimated and relied on the property's 'effective age' vs. its actual age. Why these comps were selected and not comps having similar actual ages is not know. That said, the market in Central Florida is horrific and in the appraiser's defense, she may have encountered a situation where comps were extremely limited.

My suggestion would be to ask the lender if it would be possible for them to grant permission to that appraiser to discuss the details of the appraisal with you. And if you have access to any sales (hopefully that closed within the last 90) days that you feel are more supportive, ask the appraiser about them. --And with that statement I'm now going to incur the wrath of many of these Forum participants over the 'appraiser independence' issues.

All that said, I can't think of too many borrowers out there these days who are not experiencing the same shock as you when they learn of a recent appraisal or when they actually try and sell their property. While people read and hear about what's going on in the Florida real estate market, FEW have an actual understanding of just how bad it is in most areas.

 

[slyefox]

Thanks for the info! I guess I am just so frustrated because this bad appraisal is keeping me from refinancing my house. The lender for my refinance dropped the ball (person processing my refi went on vacation for 5 weeks, then the application was passed between a half a dozen piles, and then lost for a month) and by the time they got ready to move forward on it, the underwriters claimed the first appraisal was too old (90 days old) and wanted the second one done. The second appraisal was so badly done that it ended up saying my house was suddenly worth 22% less than it was 90 days earlier, so I am trying to get the lender to re-evaluate it.
Is there any set basis for how an appraiser determines what a property's "effective age" is? Or is it entirely arbitrary?

 

[Joyce Potts]

Thanks for the info! I guess I am just so frustrated because this bad appraisal is keeping me from refinancing my house. The lender for my refinance dropped the ball (person processing my refi went on vacation for 5 weeks, then the application was passed between a half a dozen piles, and then lost for a month) and by the time they got ready to move forward on it, the underwriters claimed the first appraisal was too old (90 days old) and wanted the second one done. The second appraisal was so badly done that it ended up saying my house was suddenly worth 22% less than it was 90 days earlier, so I am trying to get the lender to re-evaluate it.
Is there any set basis for how an appraiser determines what a property's "effective age" is? Or is it entirely arbitrary?

Unfortunately, the reality is it's 'arbitrary' and highly subject with various appraisers not alway agreeing on how these 'effective age' estimates are determined.

While this may be painful and offensive, let me suggest to you that the more recent appraisal may not be 'bad'. There's a possibility that the first appraisal was too high. I can't really say because I'm not privy to the details. The lending industry and the general public are quick to label the ''lower' appraiser as 'bad', when in fact it may very well be the better support or more accurate one.

 

[Paul Isolda]

Homeowners lingo: Bad appraisal = low value, good appraisal = high value

Appraisers lingo: Bad appraisal = unsupported opinion of value, good appraisal = well supported opinion of value

 

[Webbed Feet]

Thanks for the info! I guess I am just so frustrated because this bad appraisal is keeping me from refinancing my house. The lender for my refinance dropped the ball (person processing my refi went on vacation for 5 weeks, then the application was passed between a half a dozen piles, and then lost for a month) and by the time they got ready to move forward on it, the underwriters claimed the first appraisal was too old (90 days old) and wanted the second one done. The second appraisal was so badly done that it ended up saying my house was suddenly worth 22% less than it was 90 days earlier, so I am trying to get the lender to re-evaluate it.
Is there any set basis for how an appraiser determines what a property's "effective age" is? Or is it entirely arbitrary?

I need to tease you just a little, ok? Alrighty, here it is

Bad Appraisal! Bad! Bad! (spank, spank, spank)

Ok, now that I've got that over with. Some questions. What makes your idea of the size of your house correct, and the appraiser's measured size of your house incorrect? While you claiim the second appraiser's measured size is incorrect, that appraiser is not here to defend themselves. Maybe they should not have to, maybe you are the incorrect person in this regard.

It kinda sounds like you were already pizzed at your lender LONG before the second appraiser was ever involved here. You sure that doesn't have a bit to do with the angst? Next, something is very, very, suspect here. WHY is not your lender simply getting the same first appraiser to update that appraisal or to do a new one if underwriting has it's panties in a bunch over 90 days? I am telling you, somebody is not telling you the truth about everything that is going on. YOU need a different lender! I'd lay a fairly good bet this one is jerking you around and people are lying about what is really going on.

The second appraisal is NOT saying your house is worth 22% less than 90 days before. They are two separate opinions of value performed at two separate points in time, and using completely different data for comparable sales I am sure. This is not science, it is an opinion! Given such circumstances it is not surprising there would be two different opinions of value. As posted prior, the first could have been way too high, completely unsupported, and underwriting demanded a new appraiser.

To this A38/E11 thing... the first number is the actual age, the second the appraiser's estimate of the effective age.... and if there were also "condition" adjustments used with those effective age adjustments I personally believe that "style" of appraisal analyses is a load of horse patooty. It is a stupid trick many appraisers have been taught to keep what are called the "Net" and "Gross" adjustment percentages low. They do this by taking what in reality should only be a condition adjustment and splitting it up on two rows of the computer grid to manipulate the outcome of the computer calculated percentages of Net and Gross. This is done because underwriters look at the net and gross percentages of adjustment to determine if additional information about the appraisal is required. It is an underwriter dodge. Demand a 100% complete "Self-Contained" (appraiser lingo, you don't need to follow it) section in the appraisal report explaining in detail how that effective age adjustment was arrived at, versus the condition adjustment also used...., and watch 95% of the appraisers using that method turn into whimpering babies that can't explain what they did, how they came up with it, or how it is market derived in anyway, whatsoever.

The above said, and I don't give a rats behind HOW terrible the Florida market currently is, trying to get me to believe that there were no 6 month to two year old sales of 0-10 year old houses to use would be a tough thing to do. And yes, ya use one of them and bring it forward with a well documented time adjustment, if ya gotta, to have at least something in that damn report that is of a similar age! An Active, a Pending Sale, a darn Expired listing if you have to!!!! You see, what I am saying to you is, lenders lie, appraisers are lazy, appraisers are pushed into unbelievably idiotically fast turn times, appraisers are grossly underpaid, and many appraisers are grossly undertrained. But currently what most lenders seem to want are mostly undertrained, underpaid, and overworked appraisers that are working for what amounts to less than minimum wage after expenses for YOUR appraisal service provider. They really don't want adequately compensated, knowledgable, people that demand to be allowed enough time to do the job properly.

So maybe when borrowers decide they want real pros hired, instead of something less while being charged "Pro" prices by the lenders who are sticking half the appraisal fees in their own pockets though the "Appraisal Management Company" the lender really owns on the side.... let us know!

Till then, we wish you the best!

 

[Mr Rex]

Thanks for the info! I guess I am just so frustrated because this bad appraisal is keeping me from refinancing my house. The lender for my refinance dropped the ball (person processing my refi went on vacation for 5 weeks, then the application was passed between a half a dozen piles, and then lost for a month) and by the time they got ready to move forward on it, the underwriters claimed the first appraisal was too old (90 days old) and wanted the second one done. The second appraisal was so badly done that it ended up saying my house was suddenly worth 22% less than it was 90 days earlier, so I am trying to get the lender to re-evaluate it.
Is there any set basis for how an appraiser determines what a property's "effective age" is? Or is it entirely arbitrary?

Yeah, its the appraisals/appraisers that are screwing the pooch here.You obviously have the A-team as your mortgage representatives that are ready to put you in a 30 year straight jacket....If they try to sell you girl scout cookies, I would check the boxes for authneiticy.

 

[SutnNC]

While you claiim the second appraiser's measured size is incorrect,

You spelled claim wrong, possibly steeped in AMC anger.

 

[CANative]

A38/E11... That's not crediting 11 years. That's saying the 38 year old house is like an 11 year old house. The "credit" is 31 years.

Your house could be 4 years old but pretend the carpets were shot, the kitchen appliances had never been cleaned after 4 years of industrial cooking for a homeless shelter, and the toilet leaked from day one and has caved in. The age grid that you were looking at might be A4/E40. Effective age of a 40 year old house versus a 4 year old house.

This could also be true if your house was only 4 years old but was only 900 square feet, had a 6 x 10 galley kitchen, one bedroom and one small bath. All the other new houses were 3 times the size and had very good designs. Your house would be dozer bait because the highest and best use might be to tear it down and built a new one with a more up to date design similar to the rest in the neighborhood.

Assuming your place is good and similar to most others the appraiser compared your 4 year old house to 11 year old houses and made an adjustment (probably upward, yes?)

 

[SutnNC]

Kind of a vague answer however, any adjustment is pulled from the comparable data, the greater market data. We will form an opinion (for the sales grid) based around the typical buyer/seller activity in the area for a property like or mostly similar to the subject house. "Similar" all depends on the pool of available data which currently, is often limited. This is where the majority of appraisers are having the most trouble right now. Often, trying to fit a square peg into a round hole, trying desperately to please underwriters/AMC's (which probably hired your appraiser, not your mtg broker) with 30 day comps that may not be the most similar and/or comparable to form a credible opinion (among others), quick turnover, weak data.

Gone are the days (for now) when they would leave the office with six or seven comps that are nearly identical to the subject with each selling for more, only months apart. The more I see, the more evident it becomes. There is no formula for valuing age or any feature that may or may not contribute to value (not cost). It all falls on the appraiser to pull the most applicable data (among other stuff) and apply a credible opinion (which may fall into a range of a credible calculation) as to why and how; not to provide arbitrary adjustments. A different property down the street may be adjusted slightly to moderately different for sq/ft, site and other features based on the data for a property like that property. Should be a reflection of the buyer/seller activity for a property within that realm of similar data.

It does look like you may have an appraisal with comps older in age. As mentioned, there should be some measure in there to support the opinion/adjustment in the form of comparable similar in age. This does not help you now, but would partially answer your question.

The effective age is how much use is showing on a house; a ten year old house can have a 3 (or other) year effective age if it has been well maintained, it's showing 3 years but is actually 10 years. How this is calculated by some appraisers for a comparable property still kind of escapes me as a house that appears to be 5 years on the outside could be 15 on the inside, an overall would be very difficult to calculate (for the majority based on other data), in my opinion. I think this falls into the "how you were trained" category kind of thing.

If an age adjustment has been made, there should be some sort of support for that adjustment IF it has been applied, especially in one direction. "No comps" typically translates to a lot more work and explanation, a method not employed by many in the field.

We don't know and can't know which was a more credible report so that answer you can't find here. As mentioned, typically the lowest is the less credible while the "upside down" dance is gold. Don't rush to judgement on that.

(.........bad advise, bad, bad, bad advise was here in this very spot).

I am going to offer you some real insight for one of your concerns as this just happened to me. Keep in mind that 10 different people in any field will come up with a difference for a sq/ft calculation. It's the same for appraisers but all should be within a reasonable range. I recently had a complaint filed against me about GLA to a lender, that the first appraiser was right and I was wrong. My calculation was less 200 square feet. The second floor had many in's and out's with low pitched ceilings down to 3' (look up measuring square footage if interested). Turns out I was right, the original appraiser measured the second floor incorrectly, probably didn't want to go back and sent it out. Additionally, they were a licensed appraiser, a peg below my credentials. Lack of experience is, in fact, being hired to do a significant portion of the most recent appraisals. It's unfortunate but do not jump to conclusions just because it's not bigger or higher. Get a tape measure out and measure your house.

In the kindest of words, please keep in mind that your experience as an appraiser is most likely limited. It's more than cranking value and balancing a homeowners oversized debt. There actually is some skill, experience and know how attached to the paper we are given to do our jobs (for a good bunch of us). I applaud you for seeking advise. Often, the least knowledgeable claim to know it all. Good luck.