Quality of construction

[drive]

I’m trying to better understand what “Quality of construction” really means on an appraisal.

Are things within the home counted under this category, appliances, granite counter tops, marble floors, jetted tubs, light fixtures?
Are they compared to what my comps might have, old appliances, formica counters, vinyl floors?
Or is it truly the construction of the home, wood vs brick, siding, etc?

Background…
My neighborhood consists of homes built in the 50’s using stick frame and siding. Some have crawl spaces some have basements. Most are between 900-1800sqft. I’ve completed an addition about 3 years ago and had a refinance done about 2 years ago. The appraisal during the refi marked “vinyl/average +”. My comps were “vynl/average” “stucco/ Avg+” “brick/average +” for “quality of construction”.

Now my home is on the market and the buyer had it appraised. The appraiser marked my home and all the comps as “average” for quality of construction. My home and one of the comps are out of the “norm” for our street and “over built”. I brought up the concern to the buyers mortgage broker about “quality of construction”. He said he called a few other appraisers and they all said they only change the rating if it’s brick vs vinyl. I called my last appraiser (from the refi) and he looked over my info and the current comps and said he’d still mark my home as “avg +” and not “avg”.

Please help me understand what quality of construction truly means for an appraisal.

 

[CANative]

This is kind of a complicated issue and difficult to explain. But if you just want to see an example of descriptive terms about quality you can trying going to this website...

www.building-cost.net

Hit the bar that says: Start Caluclator

On the next screen click one of the buttons for the number of corners your house has (it doesn't matter which one at this point because you're just trying to get to the screen with the descriptions).

On the next screen type a square footage into the box under "total living area."

This will take you to a screen where you enter quality ratings. In the far left "orange" column you'll see various things like foundation, windows, etc. and a linking under each one that says: "Show Quality Classes."

This is where you'll find a description of quality ratings.

 

[drive]

Thanks Greg, If this is what you saw… would you leave the appraisal at avg or avg+?

 

[Walter Kirk]

In years past many houses were built with lower quality materials, without standardized codes and without permits or inspections. It is relatively easy to identify older, poor quality construction. In many cases frame construction was always lower quality than brick or stone.

Modernly most construction conforms to standardized codes and the basic structure of houses of all quality levels is the same. The difference in quality in modern construction is normaly identified by room sizes, ceiling heights and finish materials like door and window trim, hardwood or ceramic floors, cabunets, countertops and fixtures.

I consider construction quality to be "average" when it complys with the standards of the market (most of the houses in the neighborhood are similar). Therefore a mansion in a neighborhood of mansions would be considered "average".

 

[brianward]

According to the Appraisal Institute, the quality row includes the materials and workmanship of the structure and features. Some people create a separate line item and call it 'upgrades' but I include it all in the Quality row and have never had a problem. If there is a large adjustment required for Quality, then it is a good idea to include a detailed description of the differences between the properties in the summary. To cover my bases further, I have a paragraph in my work scope explaining that Quality includes structure and features.

As a side note: Quality and Condition are among the weakest links for most appraisers and reviewers/underwriters. MANY appraisers (dare I say more that 50%?) refer to quality when condition is appropriate and the other way around, or don't consider either at all and call all properties equal in condition and quality. As a contrast to quality, Condition refers to the degree of deterioration and/or renovation present and can be relative to a property's actual age. I also put this in the work scope since it is so often confused.

 

[Mary Tiernan]

Unfortunately, you have just been given the definition of "opinion of market value."

Although there are educational requirements and an extensive apprenticeship period in order to become an appraiser, it all boils down to how someone was trained, how they view they market, and the opinions that are formed as a result of that.

In a perfect world, quality of construction adjustments would not be used as all three comparable sales would be similar to the subject. However, in this tight market, adjustments are sometimes necessary due to lack of relevant sales.

 

[Ian Valenzuela]

In the end, comparison is a more realistic way of looking at a home than attempting to determine an "exact" quality rating. When I took Advanced Sales Comparison, the instructor gave the class 5-6 retail properties to drive and inspect and asked us all to rate them from 1 to 100. Even among appraisers, we found that one person rated a property as a 50, the next had the same property as a 70, and a third person (we're talking about already licensed and/or certified appraisers here) had the property ranked at a 40.

HOWEVER, when the properties were arrayed, just about every person had them ranked in the same order. In other words, my top rating was a 90, another, perhaps more jaded person or one who had more experience with high value properties scored it as a 75, but all of us agreed it was the best one. And any differences in rank were always between properties that were the most similar and closely grouped, such as one where I had two graded as 40 and 45 out of 100, and another appraiser had them as 55 and 50.

So, you see the pitfalls when making a judgment based on pigeonholing a property. Using the building cost dot net calculator without context, you might think you've got a class 2.5 while your appraiser has it as a 3, and in the grid one person may call it "average" while another calls it "average plus". However, when ranking the sales, and comparing the subject to the comps, and placing it within the range, it's quite likely that your home will end up in the same location in the array, where it's clear to an objective observer that it is superior to some, inferior to others, and hopefully most similar to the ones given most consideration by the appraiser.

In brief: don't fight the rating itself, that's far too subjective, but rather focus on the comparison, making sure that the value comes from sales that are as similar as possible to the subject.