This is going to be kind of long and probably to wordy, but here is my response, in its entirety, within the appraisal report. While critique of it is welcome, my concern is more that what I have stated (outside of market reactions which only local appraisers would know about) is clear and accurate. In addition, the last paragraph, while I really want to put it in there, may not be appropriate. Let me know what you think!
Additional client requested comments: The following request was received by the appraiser on September 22, 2010: Please reconsider the Subjects conformity within the market area. According to the report the home is very conforming in terms of size, age, bed/ bath count, style, locaiton, etc. the only non conforming feature is the basement. If the basement is not typical of the market area it should be considered a super adequacy, with minimal (if any at all) value given. The subject appears conforming in all other aspects. It also appears very conforming based on the comp photos. Stating it is non conforming because of a specific amenity will make the property Un lendable, and therefore it seems this should be reviewed further. Please reconsider the conformity, and state that basement is considered a super adequacy.
As mentioned within the original report, the subject has a basement, an amenity, which based on both current and historical market data, is an uncommon feature within the local market area. To further assist the reader, the appraiser has provided the following data based on 17+ years of data contained within the MLS database:
Total number of sales within the Sandia Heights market area: 1553 listed sales
Total number of sales with represented basements: 13 listed sales
Percentage of total sales with basements: 1% (rounded)
Total number of current listings: 66 total listings
Total number of listings with represented basements: 4 total listings
Percentage of total listings with basements: 6% (rounded)
As mentioned within the appraisal report, there is the possibility that some of the sales and/or listings have sections which are below grade which are not reported as such within the MLS database. While there have been recent attempts made to help realtors determine what should be considered a basement (possible explanation for the increased number of current listings with basements), in general terms based on both the provided data and the appraisers general knowledge of the local market area, properties with basements comprise a small percentage of the overall number of homes within the market area.
In response to the clients concerns regarding the subjecs conformity correlating to a super-adequacy issue, these 2 items are mutually exclusive to one another. A super adequacy is generally treated as an excess in the capacity or quality of a structure or structural component, which is determined by market standards, and is also a type of functional obsolescence. In addition, in general terms it is something which exceeds market requirements but does not contribute to value an amount equal to cost, however may still have contributory value. Conformity has more to do with a style of design, construction, use, condition, functional utility, etc. While possible that a conformity issue may be a functional obsolescence and/or super adequacy issue, it also may be beneficial to the subject property as well. In the case of the subject, the client is correct in that the subject is conforming in most regards to the neighborhood however, the presence of a basement/below grade section is a very unique feature within the subjects specific market, leading the appraiser to conclude that it does not conform in this regard to the rest of the neighborhood.
In determining contributory values of any given feature and/or amenity, the appraiser bases it on market data indicating how the market is currently and has historically reacted to said feature and/or amenity. As stated within the additional comparables page #7 through #9, "The greater Albuquerque metropolitan area market generally does not differentiate between above grade and below grade areas as long as the below grade areas are readily accessible, and are of similar or superior condition and quality of construction to the living areas which are above grade, which is the case with the subjects below grade sections." As a result, the appraiser cannot disregard the contributory value of this basement as that would be contrary to what the market indicates and an unacceptable assignment condition.
The appraiser is unable to determine what will or will not allow a property to be financed, with the appraisers purpose to provide the client a clear representation of the subject property, the subjects market trends, the subjects market reaction to various features and/or amenities and the final opinion of market value based on all the information collected. As a result, while the presence of a basement within the subject property and/or the lack of properties within the subjects market with represented basements may be a cause of concern for the lender and/or investor, this is not of concern to the appraiser.
