Please help. Am I wrong in my thinking?

[sammiboii]

Hello everyone. I just moved up to North Carolina from Florida. I’ll first provide my appraisal experience. I have been appraising since June of 2002 and have appraised from the standard cookie cutter house up to $13,000,000. I have done numerous appraisals over $2,000,000 as I was referred by some realtors of the high end market as someone who knew what they were doing. I had my own company in Florida and have never been blacklisted or had any issues with any appraisal I’ve ever done. Even after some ridiculous appraisers reviewed and tried to slam my work to get me taken off some lists I have always been able to support my work. If you do good work no amount of mal-intentioned appraisers can harm you. I have moved up here and am working with an appraiser in Raleigh. However, the more I work with this appraiser the more some issues are coming up and I’m trying to understand whether they don’t know what they’re talking about or whether I am wrong in my thinking. Who knows, maybe appraisers just do things differently up here.

1. Quality of construction. When I think of quality of construction I think of just that. I think of the materials and craftsmanship used to build the house. I look at whether it has a metal, shingle or tile roof, concrete driveway or brick pavers, extra architectural designs, the design of the roof and basically the overall feel of the construction of the house. I don’t really look at counters, cabinets, appliances, light fixtures, the type of fans, crown moulding etc because after all you could put that stuff in any house of any quality of construction. This appraiser I am working with states that they believe that if a house has something as simple as granite counters, stainless appliances and upgraded fans that the quality of construction is higher. I believe these items are upgrades and not necessarily indicative of the quality of construction. If you have a boxy house put together by someone who has no clue or doesn't care no amount of upgrades will change that quality of construction from turd to average to good.

2. This appraisers states that all appraisers in North Carolina, at the lack of land sales, estimate the land value anywhere from 25% – 30% of the appraised value. This really winds my clock, because I believe there are three and only three ways to get land value. Land sales, which is usually the most preferred choice, Land Extraction which is choice number 2 and Land Allocation which is the final choice. I can’t see all appraisers in North Carolina following this thinking. Not all areas are 25% – 30% of appraised value.

3. Prior sales history for subject and comps. This isn’t that big of a deal I’m just curious more than anything. They report the last sale whether it happened within 36 months or 360 years. Now the form states they want the sales history for the subject within the past 12 months for the comps and 36 months for the subject. I mean if the subject sold, I don’t know, say within 40 – 45 months then yeah I agree I think that should be on the report. But if the last recorded sales of a subject appraised today happened, June 30, 1946 I think you can leave that one out.

4. Also this appraiser makes no adjustment if the effective ages are within say 5 years higher or lower than the subject. If the comps warrant no adjustment then the effective age is the same as the subject. If there is a difference there then there should be an adjustment made.

Please let me know what you guys think on these areas. I am more open minded than this appraiser I’m working with, so whatever your experience is let me know.

 

[Lawrence R.]

You may be on to something here.

Let me just say that it doesn't (or shouldn't) vary much from state to state, only property to property. What is good in Fl is Good in NC or SC.

Point one--I tend to agree with you

Point two--Applying a flat out percentage to come up with any value, or adjustment, that has no basis in the market can't be good.

Point 3--Posting ANY previous sale can be done, if the appraiser feels it isn't misleading, but I personally don't. I give that sorry form what it asks for.

Point 4--Now, as for effective age, search a few threads here and you will find at least 2 different schools of thought on that one. I personally do not use effective age, per se, as I feel it is a reflection of condition and I adjust for it there.



I think you may just be getting some bad advice. Stick around on the forum and you will find that you can be confident in the way you handle yourself. As far as settling some of the finer points with your co-worker, that may prove difficult, if not pointless.

Good luck

 

[ZZGAMAZZ]

Point 3: I was taught that this pertains to:

1) subject: 36 months prior to the effective date

2) comps: 12 months prior to the recent sale/transfer/activity, and NOT the effective date. That is to say, if a comparable is actively listed for 300 days, the threshold date would be 665 days prior to the effective date, or 365 days prior to the list date.

 

[Mztk1]

1. He's right. Upgrades do add to quality. And quality differences are relative to the market. In most cases your houses will be similar in structural quality and differ only in upgrading and selections. Granite is a better quality countertop then laminate just like a clay tile roof is a better quality matieral than a composite shingle one. But it is and can be troublesome, so I can relate. I solve the conundrum by having my quality rating on the form broken down into two catetories, the first is quality relative to the market (which is upgrading, etc) and the second is quality per cost manuals. So my quality line looks like this for most houses "Avg/MS Avg". I explain in my comments that "MS Avg" is Marshall & Swift's rating, and I make adjustments for both types when warranted.

2. He's taking short cuts and I wouldn't doubt if a lot of appraisers in NC do, but certainly not all. In Florida when I first moved here I was told by several appraisers I respected that land value was 1.2X the assessed value (and we have land sales around). They called their approach "allocation", but I never followed it. Just keep doing what you do, at least you can support it.

3. Who cares. Reporting the last sale is good practice, but not necessary.

4. Effective age is a subjective adjustment, so if his methodology has him not making adjustments for less than 5 years, so be it. I am uncomfortable making effective age adjustments. I just adjust for condition (avg/good, etc) and for actual age in order to reflect curable and incurable depreciation. But I'd never hang anyone on their method of a condition adjustment.

 

[The Warrior Monk]

1. Quality of construction. When I think of quality of construction I think of just that. I think of the materials and craftsmanship used to build the house. I look at whether it has a metal, shingle or tile roof, concrete driveway or brick pavers, extra architectural designs, the design of the roof and basically the overall feel of the construction of the house. I don’t really look at counters, cabinets, appliances, light fixtures, the type of fans, crown moulding etc because after all you could put that stuff in any house of any quality of construction. This appraiser I am working with states that they believe that if a house has something as simple as granite counters, stainless appliances and upgraded fans that the quality of construction is higher. I believe these items are upgrades and not necessarily indicative of the quality of construction. If you have a boxy house put together by someone who has no clue or doesn't care no amount of upgrades will change that quality of construction from turd to average to good.

I completely disagree.

In my market, finishing work, such as coffered ceilings, custom paneling, custom milled moldings, antique flooring, custom-built windows, etc. can significantly increase the value of home. The same is true of custom kitchen and bathrooms, as well as other amenities such as wine cellars and movie theaters.

This is one of the biggest problems that we have in my market with out-of-area appraisers. They ignore the interior finishing, which is part of the quality, and miss the market by hundreds of thousands, or millions, of dollars (overvaluing, as well as undervaluing). In these types of markets, one should do what they can to determine the interior finishings/amenities of these homes.

 

[Em Tee]

I completely disagree.

In my market, finishing work, such as coffered ceilings, custom paneling, custom milled moldings, antique flooring, custom-built windows, etc. can significantly increase the value of home. The same is true of custom kitchen and bathrooms, as well as other amenities such as wine cellars and movie theaters.

This is one of the biggest problems that we have in my market with out-of-area appraisers. They ignore the interior finishing, which is part of the quality, and miss the market by hundreds of thousands, or millions, of dollars (overvaluing, as well as undervaluing). In these types of markets, one should do what they can to determine the interior finishings/amenities of these homes.

I think you missed the OPs differentiation between upgrades in a house and the actual construction of the house. If you have a custom kitchen & bathroom in a house constructed in the 1950s, and you have the exact same custom kitchen & bathroom in a house with high quality construction and building materials, there's obviously a difference between the actual construction levels.

 

[The Warrior Monk]

I think you missed the OPs differentiation between upgrades in a house and the actual construction of the house. If you have a custom kitchen & bathroom in a house constructed in the 1950s, and you have the exact same custom kitchen & bathroom in a house with high quality construction and building materials, there's obviously a difference between the actual construction levels.

I didn't miss the difference.

Your comments don't make sense in terms of the OPs comments:

I think of the materials and craftsmanship used to build the house. I look at whether it has a metal, shingle or tile roof, concrete driveway or brick pavers, extra architectural designs, the design of the roof and basically the overall feel of the construction of the house.

Many of the above items can be considered upgrades. And some have nothing to do with quality...the roof might be designed well, but built like crap.

I think the OP is trying to separate things that really can't be separated. As an example, if one wants to have custom paneled walls and coffered ceilings that don't separate when the weather changes, some type of plywood (rather the sheetrock) will have to be placed over the studs to keep the room from shifting. The home is sturdier, and sets the base for what you call the "upgrade." If the "upgrade" isn't there, chances are no value is added by using plywood rather than sheetrock, even though one costs a whole lot more to install.

 

[Mztk1]

I think you missed the OPs differentiation between upgrades in a house and the actual construction of the house. If you have a custom kitchen & bathroom in a house constructed in the 1950s, and you have the exact same custom kitchen & bathroom in a house with high quality construction and building materials, there's obviously a difference between the actual construction levels.

Sure. But if you have a kitchen that is custom built in a 1950s house and it is top of the line, and you have a standard kitchen in a 1950s house that is tract, you are looking at a difference of quality there too.

I agree with David and the NC appraiser on this one. The finish is and does have value and it IS related to quality. Just the term "upgrades" means something. What are you upgrading? Condition? Quality? Appeal? I'd go against the the "Upgrade" adjustment and just make the adjustment based on quality. Like I said, I break down my "quality line" to show upgrading relative to market, and then to also show structural. There are times when a house is superior structurally but equal upgrade wise, and vice-versa.

 

[NC Old Guy]

I don't think all NC appraisers follow your bosses approach. Perhaps you need to check the bosses credentials.

I'll only comment on #3 as others have adequately addressed the other points. Methinks some need to re-read exactly what is asked for. The form says, "report the results of the research..." It does NOT specify a time frame. An earlier question deals with the 3 years and 1 year. Frankly, how do you show it was longer than 3 years (1 year) if you don't show the last sale as 1/1/01 (or whatever date). If you actually looked it up, you have the date & it is easy to type the date as it is to say "no recent sale" or whatever you use to not leave a blank box. If you don't show it, I think a very strong argument can be made that you have NOT "report the results of the research..." No reason to report sales price at that point so I tend to just use "na" for the older sales unless I think it is somehow relevant. Sometimes, if subject and comps all changed hands 3-5 years ago, then what their prices were at that time can be very interesting.

Just one old guy's opinion.

 

[Anthem]

Saying that all NC appraisers "do it this way" is a cop out. There is no way all properties have the same land to structure ratio - that idea would not hold up. Not to bash the guy because fact is our peers are probably not using a much better approach. I always try for land sales if I find them I include them if they are not available(which happens often) then I move through the methods.

Many appraisers do use quality instead of upgrades/features this is common but that doesn't make it right. This could be argued as many upgrades can improve improve the quality of the home but when you note M&S as your source for quality data that idea does not stand up. I have appraised 10,000 SF homes of Average quality and of Very
Good Quality both had granite counters. Builders have figured out that the typical buyer thinks Granite counters means the property is of higher quality, sad to hear some appraisers agree because those same builders are using the cheapest windows, toilets, fixtures-etc that you can buy - literally - I am still amazed when I see a Million dollar home with a $15 toilet in each bathroom.

Noting the last sale is not a bad a thing as long as you are still checking the box that it did or did not sale within the past time period and this way the reader knows you researched the prior sales. That is simply a preference.



Effective ages, this can start an endless thread of arguing.