Hello ZZGAMAZZ,
Thanks for the response, all very good.
1) The aspect of city records/permitted is the core of the question here. Are there general requirements in appraisal standards that state how this is to be handled? Or does the appraiser do their best to quantify the effect? In my case, the appraiser stated that it was in essence a "hard rule," as dictated by the "code enforcement" of the city, that it not be considered. Does "code enforcement" really dictate the manner in which an appraisal is performed? I would venture that the more reasonable approach, as previously stated here, is to attempt to evaluate the market value in the non-permitted living area. This could range from "fully considered" (my phrase), to not considered. It should, I believe, all depend on the quality of the work, as well as the potential negative for buyers due to not knowing how well the electrical, framing, plumbing were done. But I believe stating that it is worth $30 sq-ft, vs. $500-700 sq-ft does not accurately represent the market valuation (all SFH in this neighborhood sold for > $500 sq-ft in the last year, whether 900 sq-ft homes or 2500 sq-ft homes, unless "fire damage," "fixer upper," etc. In fact, one of the comps the appraiser used was listed as "fire damaged, bring your contractor," which also seems incredible).
2) I agree, finding comparables w/ similar "permitted/non-permitted" situation would be difficult just by looking at MLS data. Also, very few SFH sales in this neighborhood.
3) I agree. Being based in the area helps, but not necessary, as long as an understanding of neighborhoods is present. The appraiser did fine in this regard (except for picking a "fire damaged" property).
4) I generally agree regarding the significance of the CA real estate agent. But the point here is to demonstrate that since the disagreement is so large ($758,000 appraised value vs. $1,150,000 - $1,300,000 agent estimation) as to cast further doubt on the appraised value. A real estate agent will not get any additional business if they list at $1,150,000 and then have to tell the owner they must reduce the price $400,000 in order to sell.
5) I disagree. Price-per-square-foot is of practical value, and varies within normal ranges. Larger properties do see a degradation in value for each additional sq-ft, upgraded kitchens, bathrooms, etc., increase the resultant amount. But all SFH in this neighborhood sold for > $500 per sq-ft, for all sizes. Some 2,500 sq-ft homes sold for > $700 per sq-ft (VERY nice homes, view, beautiful construction). In my case stating that 2 bedrooms and a bathroom are worth $30 per sq-ft, when the general quality is indistinguishable from the "permitted" area, cannot be substantiated.
Thanks to all who read this.
gavin
Thanks for the response, all very good.
1) The aspect of city records/permitted is the core of the question here. Are there general requirements in appraisal standards that state how this is to be handled? Or does the appraiser do their best to quantify the effect? In my case, the appraiser stated that it was in essence a "hard rule," as dictated by the "code enforcement" of the city, that it not be considered. Does "code enforcement" really dictate the manner in which an appraisal is performed? I would venture that the more reasonable approach, as previously stated here, is to attempt to evaluate the market value in the non-permitted living area. This could range from "fully considered" (my phrase), to not considered. It should, I believe, all depend on the quality of the work, as well as the potential negative for buyers due to not knowing how well the electrical, framing, plumbing were done. But I believe stating that it is worth $30 sq-ft, vs. $500-700 sq-ft does not accurately represent the market valuation (all SFH in this neighborhood sold for > $500 sq-ft in the last year, whether 900 sq-ft homes or 2500 sq-ft homes, unless "fire damage," "fixer upper," etc. In fact, one of the comps the appraiser used was listed as "fire damaged, bring your contractor," which also seems incredible).
2) I agree, finding comparables w/ similar "permitted/non-permitted" situation would be difficult just by looking at MLS data. Also, very few SFH sales in this neighborhood.
3) I agree. Being based in the area helps, but not necessary, as long as an understanding of neighborhoods is present. The appraiser did fine in this regard (except for picking a "fire damaged" property).
4) I generally agree regarding the significance of the CA real estate agent. But the point here is to demonstrate that since the disagreement is so large ($758,000 appraised value vs. $1,150,000 - $1,300,000 agent estimation) as to cast further doubt on the appraised value. A real estate agent will not get any additional business if they list at $1,150,000 and then have to tell the owner they must reduce the price $400,000 in order to sell.
5) I disagree. Price-per-square-foot is of practical value, and varies within normal ranges. Larger properties do see a degradation in value for each additional sq-ft, upgraded kitchens, bathrooms, etc., increase the resultant amount. But all SFH in this neighborhood sold for > $500 per sq-ft, for all sizes. Some 2,500 sq-ft homes sold for > $700 per sq-ft (VERY nice homes, view, beautiful construction). In my case stating that 2 bedrooms and a bathroom are worth $30 per sq-ft, when the general quality is indistinguishable from the "permitted" area, cannot be substantiated.
Thanks to all who read this.
gavin
