one bedroom

[Mountain Man]

If you are going through an agent, sit down and look at the sales and listing data.
If not, then you may need to hire an experienced broker. Maybe even hire an experience appraiser, not one who has jumped in the biz in 2000 and has done nothing but form appraising for Appraisal Management Companies. Unfortunately, and with the lax licensing requirements in recent years, many newer residential appraisers (and real estate agents) haven't been properly trained... all they do is find the most recent 3 or 4 sales in the past 6 months to make the lender happy. When working for a grand fee of $190 to $220 from big box lenders, they can't spend enough time to do a thorough analysis. I've run into the same thing on several occasions, and have been successful in proving the appraiser wrong. However, it must be done professionally, tactfully, and with solid market data. Believe me, a good RE agent earns every $$$$ they get at closing.

 

[KD247]

...Let the market dictate the value.

What if the typical market reaction to the property would be, "Sure there's only one bedroom, but look how easy it would be to convert it to two" - wouldn't Jim's position more accurately reflect the market?

I agree with you in the sense that an identical comparable sale would give the best indication of value but if there are no identical comparables, the appraiser should look at the situation from all angles, and form an unbiased opinion as to how the typical buyer of this property would react.

 

[Mztk1]

Well this isn't quite the place to get into such a discussion, But are you saying there is no difference for a one bedroom house that has a 10 X 12 room and a one bedroom house that has a 10 X 24 room that can be easily converted to a two bedroom?

If you are, you are avoiding what is there.

The FHA technique of imagining a partition to determine whether a large, open room could be counted as one room or more can apply to a certain point; but because the room requires privacy, it cannot be done without a cost factor.

The fact is, if a one bedroom house is a functional inadequacy, and we measure functional depreciation by acceptable methods as found in AI's Appraisal of Real Estate, you are going to have a much larger adverse effect on value if you have to build an addition to add a second bedroom then you will if you merely have to build a partition.

That is not just textbook PE, but common sense. It is a shame that an appraiser would have to have it pointed out to him when a one bedroom house could easily be converted to a two bedroom; it is more of a shame that an appraiser who has this pointed out to him thinks it doesn't matter.

 

[KD247]

That's why the discussion shouldn't center around the labels and the quantifications. When comparing the subject to recent sales, the market's opinion of "better" and "worse" or "less desirable" and "more desirable" should be first on our minds. Sometimes the market pays most attention to GLA and Room Count, and sometimes they are the least important factors.

 

[Michigan CG]

There are very good points here.....find out the appraisers qualifications. You have a willing buyer that has looked at the Market. Also get the RE agents to find comparables that support the value. If they are there then the appraiser may not have been diligent enough to find them.

you did not mention how low the appraisal came in.....1%?.....10%.....$5,000?.....$25,000? That might be helpful to know.

 

[jgirl3003]

ok, here are more facts on the house:

it was listed at 129, sold for 118, appraised at 94

here are pictures:
forsaleinbloomfield.wordpress.com

the comps used were all 2 or 3 bedrooms in the neighborhood - none had been remodeled. one sold recently as a 2 bedroom, and although i did not go in it, my realtor told me that it has an 80's kitchen and needed a ton of work.

my view on this is - a one bedroom loft style house is VERY desirable to a number of people - but they are generally not the normal buyer. they are upwardly mobile SINGLE young professionals, or older retired adults who want to move back into the city from their large expensive to heat suburban homes.

i have 4 people already scheduled to see the house this week.

 

[Ruben Ramon]

The appraisal was done for market value, that would be considering the actions of a typical buyer, not a segment of the market. Perhaps in your market, there is a discount for a property with a limited market. I would guess that the number of buyers seeking a one bedroom home is substantially limited in your market as opposed to those not.

 

[PropertyEconomics]

Well this isn't quite the place to get into such a discussion, But are you saying there is no difference for a one bedroom house that has a 10 X 12 room and a one bedroom house that has a 10 X 24 room that can be easily converted to a two bedroom?

If you are, you are avoiding what is there.

The FHA technique of imagining a partition to determine whether a large, open room could be counted as one room or more can apply to a certain point; but because the room requires privacy, it cannot be done without a cost factor.

The fact is, if a one bedroom house is a functional inadequacy, and we measure functional depreciation by acceptable methods as found in AI's Appraisal of Real Estate, you are going to have a much larger adverse effect on value if you have to build an addition to add a second bedroom then you will if you merely have to build a partition.

That is not just textbook PE, but common sense. It is a shame that an appraiser would have to have it pointed out to him when a one bedroom house could easily be converted to a two bedroom; it is more of a shame that an appraiser who has this pointed out to him thinks it doesn't matter.

Jim ... in 1990 I purchased a one bedroom home at $x as that was its market value. I then partitioned the home into a two bedroom home and sold it for $x plus 50% one year later. I understand where your post was coming from. The issue I had was what the property was as of the date of inspection. I was hired to do an appraisal not consult with the owner about how to maximize their value. Two different assignments I think ... dont you?

 

[Mountain Man]

The appraisal was done for market value, that would be considering the actions of a typical buyer, not a segment of the market. Perhaps in your market, there is a discount for a property with a limited market. I would guess that the number of buyers seeking a one bedroom home is substantially limited in your market as opposed to those not.

Ruben... did you not read the post above!!?????
A contract in hand, appraiser used sales that aren't comparable and needed many $$$$ in repairs and upgrades, AND have multiple showings/interest. When a house is getting that much activity in the market... the appraiser flat out missed it, they did a very poor job.

 

[jgirl3003]

i just took another offer from the first person to look at it this week. I have 4 more people in line to see it. i do believe the market value is there for this house. a total of 9 days on the market and 2 offers? (it was up for 5 days when the first offer came in and 4 days when the second offer came in)

also - i looked at the appraisal from before because i discussed the appraisal issue with the current buyer - and the comps are from 2007!!!! i thought they were supposed to be recent market comparisons - of which there are at least 7 houses in the neighborhood that have sold in 2008. none are one bedroom, but he was not using one bedrooms anyway.

i believe there is a market for smaller houses and especially now that the cost of gas and living is going up. you can walk everywhere from this house - grocery, bus line, bars, restaurants. it's less costly to heat. less space to clean and furnish. if you are a single first time home buyer or an empty nester, why would you want 3 or 4 bedrooms? there is a growing trend in downsizing. do some research. just because the house is not a McMansion in the 'burbs doesn't mean it's not desirable.