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Multimillion dollar appraisal tips

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vargasteve

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Jan 21, 2002
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Certified Residential Appraiser
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California
SF Bay Area appraisers are often exposed to 1 - 3 million dollar estate homes due to the fabric of the SF Bay Area. However, currently appraising purchase ( 2+ acre - 12,000+- sq/ft - $6+ Million estate built in the 20's ) of which I've been exposed to fewer assignments in this price / salient feature range. I'm looking for suggestions of area's to avoid, red flags, and or areas where you've recieved feedback from underwriter / reviewers. Ofcourse, as you might guess - 'similar' comparables are limited requiring appraisal to exceed net / gross desired guidelines in salient features / lot size / time.
 

aprazer

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Feb 27, 2002
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It has been my experience that when appraising properties of this type, you will be lucky to find one truly comparable property. These properties are usually very diverse, with regard to site, GLA and location. You can have a 7,000 SF house that will sell as much if not more than a 12,000 SF house due to condition or location alone.

All parameters are extended in the comp search, and I have found that the majority of lenders recognize this with properties in this price range. In my market, buyers of this type of home expect certain features like Granite/limestone kitchens, hi end appliances, updated/renovated kitchens/baths, radiant heat, good quality millwork, finished basements with gyms, entertainment rooms and maids quarters. If a house like this has not been updated, the costs can be very high to bring it up to standards for the area-$300,000 to $1,000,000.

I usually try to have some comps with a similar GLA, some similar in location, and some in a similar condition. 5-6 comps should be used. Don't worry too much about time/distance, as it is rare to find comps that fall under the guidelines for typical homes. As long as you can establish that there are other homes in this price range in the area, most lenders are ok with the high value. After all, this is probably a nice big jumbo loan that they would love to close on. Buyers in this range are typically a very good risk, and have sizeable assets and a good downpayment.

I hope you are charging a decent fee, as these can be very time consuming. This is also one of the few instances when I utilize brokers for information. A lot of these sales are private, with very little information available.

Hope this helps-good luck.
 

cgjerdetu

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Jan 29, 2002
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I 've heard other Bay Area appraisers say to look at the "potential" buyer for this type of property and look for other properties the buyers might consider if the subject was not available. Many times buyers of higher end homes will search a wider area to get the features that they are looking for. One clue to the potential buyer may be to analyze the marketing of the subject. Was it marketed regionally or nationally, or just in local MLS and local paper with maybe a weekend open house? If regional or national marketing this can lend support for going outside the neighborhood for similar homes.


Carolyn
In the SF east bay where prices aren't that crazy compared to some other parts of the bay.
 

Farm Gal

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Nebraska
Steve:

Does this happen to be a Julia Morgan (architect) home?

Time frame and size sounds right. If so that adds another quirk to the mix, as there are still some 'Morgan collectors' out there. I've been in a few of them... Bragging rights/appeal of a house built by the woman who did Hearst Castle does constitue 'added value' for some properties.

Regards,
Lee Ann in KS
 

Lee in L.A.

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"Name" architects can definitely make a difference. Theres' some of those around here. So can things like the usable pad part of the lot (2 acres flat, or 2 acres vertical?), view quality and "size", and of course quality and condition of the construction. Most of it seems to be the same sort of variables as a $1M or $3M estate, just bigger and better.

Then there's the ones that were celebrity owned, how you gonna adjust that? :lol: And the ones that don't seem to make much sense. Maybe a case of more $$$ than sense? :lol:

Definitely a minimum 4 figure fee, and stretch those parameters, explaining it all as you go. 8)
 

David S. Roberson

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Tennessee
Lee in L.A.;

Funny you should mention celebrity owned homes. I was wondering if that had any impact on value. Not that there are any around here in my market, it's just one of those things you wonder about. Is there a measurable buyer reaction to them?
 

jtrotta

Senior Member
Joined
Jan 16, 2002
Very limited similar props. here, more towards Fairfield County, but not quite that high; the largest we've done was 6,000 SF with 11 build able acres (that weren't sub-divided) at the time of our inspection.
Being around for sometime, allows for some thoughts on various area's of the country; I've noted that the "Palm Coast of Florida" has had some interesting builders over the years, catering to the multi-million dollar props. (15M to 45M); as well as Miami; Boca and some area's on the West Coast.

Good Luck in your endeavor 8)
 

J. Parker Graham

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Jan 19, 2002
Mr. Varga

Appraising the multimillion dollar niche market does not have to be impossible. Comparable sales can be used that are up to two years old, and are often found without the MLS or brokerage. Check with the Deed Transfer Afidavit files, for area. Sometimes they show up as a $1.00 sale. The $1.00 transaction can be uncovered as a deed search with the help of a title company, this however is not cheap.

Measure the property as over time what you actually find can greatly depart from the field sheet. Take a helper with you. Take interior pictures as well.

Forget about net and gross, but try to bracket. Never make an adjustment for a specific item less than the depreciated cost of the item. For example do not use adjustments out of line with the entire dwelling. Baths should be $10,000 (+) rather than $2,500. Keep adjustments consistant and use 5-6 comparables at a minium.

Condition and deferred maintenance is a heavy consideration in this market. Lot size differences use area or front footage but not both. Check for water damage in the attic. Take a very good look at the foundation and for termites. The 1920's the electrical system is inadequate. Unknown areas write up as "subject too". and call for outside
inspections if needed.

Most Underwriters at this level will be able to understand your report. The only red flags I have encountered are from the realtors, with their sales hype. The rest of the report should fall in line, including the fee's.

I have done for the last 3 years niche market multimillion dollar appraisals. They are very interesting to look at and the reports get long but it shure beats looking at the subdivision clone. Sometimes it helps to define what you are about to do with underwritting before getting underway. Be upfront what you expect as a fee.

Post if you need further assistance.

J. Parker Graham
 

Lee in L.A.

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David R.

I've never tried to quantify or even research a difference for a former "celebrity owned" house. My feeling is that it can go both ways. Anecdotes?

OJ Simpsons house. Not a situation to increase the value. Buyer tore it down, although I don't think any agent would have called it a "teardown" if it wasn't for the infamy. Same thing with that "Heavens Gate" cult, remember those looneys? :lol: :cry: A teardown.

Other homes are advertised as formerly owned by "celebrity" in the generic, sometimes they give the name. Maybe an old movie star from wayback, or someone newer from TV. I have my doubts this makes a measurable difference to the value. Maybe for someone with more $$$ than sense.

I personally appraised a house sold by "Slash" of Guns and Roses, in Sherman Oaks hills (He had already moved out). Lots of black tile as I recall, and major storage built in for CD's in the LR. This house did not appear to sell for any premium because he owned it. But, there are bigger stars out there.

LA Times reported a while back that Wilt Chamberlain's house was on the market but not drawing as much interest as might be expected. Seems it had some unusual features, special padded sex room or some such. Bottom line, people didn't like it, too personalized. so maybeeee, who cares who it belonged to??

What about things like Madonnas house. Supposedly used by a big name gangster in the 20's as a speakeasy. Redone to her (unusual) tastes (I've read). How much is it worth to be able to say So and So lived here? If you're in that price range especially? you might be more famous or have more money! :mrgreen:

So, probably too much said, but I have never and probably would not make adjustment for that sort of thing. It would be interesting to see what support you could make for such an adjustment though. :lol:

Ain't this bidness fun. :lol:
 

vargasteve

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Jan 21, 2002
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Certified Residential Appraiser
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California
Thanks for your suggestions - all is going well with the assignment under the circumstances :D Home is not a celebrity estate. Thanks again - Steve
 
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