Well the first umpteen pages are very thorough but are they needed for the intended user? Does the intended user really need all of this? They certainly don't expect it. That is more detail than I put in a commercial report.
Your effective date has been redacted but I am going to assume 2015 or 2016 since those are the latest land sales included. How is a land sale from 2000 or 2009 pertinent to the effective date?
In the land value section you give 18 sales from 2000-2018 and then with nothing else tell me a land value of $345,000? This section doesn't tell me how you got there. I am going to assume it is far later in the report? Wouldn't a column telling the reader the $/SF for the land sales be useful information?
In the lease comparable table I would (as an appraiser) like to see $/SF for the leased properties. It tells a lot more story than the table included.
Are we comparing apples to apples here? Two of your rent comps are 2,100 SF while others are about 1,000 SF. We have only 18 data points with significant size differences and an R2 of ~0.70.
A cap rate was used similar to apartment buildings? I am not sure I buy that and your peers do not use cap rates for residential properties but rather GRMs. Maybe the GRM analysis comes later. Is it not typical for landlords to pay water/sewer and trash? If so that would be an added expense.
I like Figure 23 on page 50.
On page 77 it appears you are implying an adjustment of $70/SF for difference in GLA yet the total cost new of the improvements is only ~$130/SF (for the house).
The hardwood only feature indicates that my house with 50% hardwood is worth $10,000 more when the total cost new is only $130/SF and the depreciated value is ~50% of that.
The difference in one bathroom vs. two bathrooms is ~$18,000? That is higher than cost new for a bathroom.
I like the interior photos of the comps in the report. We do that for all of our reports.
You use a lot of subjective interpretations throughout the report.
I got to page 82 of the report and from the beginning I didn't buy any of this. Then I saw a $1,484 adjustment for a ~$800,000 property in your grid. $2k is 0.00025% of the property value. Appraisers are not that good and this is based on a regression model with a ~0.7 R2.
I couldn't quit reading this. So we have a cost approach value of $400,000, an Income Approach Value of $500,000 and a SCA value in the $800,000 range.
Houston, we have a serious problem here. When one approach is 50% of another approach one of them was completed completely wrong (actually two in this case).
If the land value is $345,000 (I don't buy that either as there is nothing telling me how you got there) and the value of the home by the SCA is ~$800,000 then the improvements have a contributory value of $455,000 or ~$529/SF which is more than three times your cost of the improvements NEW.
Your income approach is not even remotely reliable. Using a GRM of 200 ($3,600/month rent) would be a value of $720,000. Your cost approach does not take into account EI which in my world is 20% but even that doesn't help your valuation although it does push the cost approach to $480,000.
Your ten sales, adjusted (from the grid), tell us that your value is somewhere between $747,000 and $806,000 but it takes you 150 pages to give us completely unsupported analysis for two approaches and you make a $1,454 adjustment for an $800,000 property. I find the whole thing to be hogwash.
I am kinda impressed with the flow of data so I decided to try and recreate it the old fashioned way and also through the eyes of a real market participant. I went to the MLS and searched all 800 Sq.Ft to 1,000 Sq.Ft homes and ended up with about 8 closed sales. The years built were 1956 to 1967-The average lot size was between 4,600 to 5,500 Sq.Ft. All of the sales appeared to be basic builder stock quality similar to a Fannie Q4 rating. My four most similar sized homes were 800 to 840 Sq.Ft and 2 bedroom & 1 bath models. The larger models were 920 to 1,080 Sq.Ft.
The old fashioned results: No regression method ( Note all the comparable sale's had updated kitchens and baths and based on MLS interior photos all were in good condition or a Fannie C-3- Based on the OP'S description the subject was dated and probably rated as Average or C-4 Fannie.
1- My adjusted sales range was between $790,000 to $802,000 with a weighted average of $798,592. The market trend back then appears to have been slightly positive with almost all closed sales and listings with green arrows. If this was a desk top report and using the information provided my final opinion of value would have been $795,000 to $800,000. I do not want to beat up on Bert's regression or the other analytical tools he uses but I did not find most of the adjustments to be credible or supportable and both the cost and income approaches were way off.
My conclusions : On Bert's-Nuclear Powered Flux-Capacitor Super Regression Machine.
1- The sales comparison approach at $800,000 is supported - Although it' results would have almost been the same if he had taken-ten similar sized 800 to 900 square foot comparables, totaled the prices and simply divided them. I actually tried it and I magically arrived at a value of $812,000.
2- The cost approach was not even close and based on my research of lot small lot sales in that City I was seeing $500,000 to $550,000 just for the lot. I did my own cost approach and using a site value of $500,000 I arrived at about $782,000.
3- The income approach was not credible or supported because I did a rental survey. I won't argue with Bert's estimated rents although I have my doubts. Anyway I used his rents and a typical GRM up there is normally between 220 to 222- I used 220 as my multiplier and arrived at $792,000. I have no idea why Bert used a Capitalization Rate because its not a traditional or recognized method on residential properties, and that may have been one reason the income approach was so out of wack.
4- Adjustment issues :
I am not going to try and micro manage his or anyone else's adjustments but I believe his regression and data pool may be so large that on a small 800 square foot home the machine is confused and coming up with adjustments that are not market supported. A $1,400 separate line item adjustment on a $800,000 home is just not how buyers or sellers act in a real market. In my opinion even using a percentage based system it would be very rare that I used anything less than 1% and often that would be on a cost to cure or repair item.
5- The bottom line is the appraiser may need to consider that a typical reader or user is not going to read this report and they will go directly to the value based on the Sales Comparison Approach. If it was reviewed by a peer group of MAI or SRA'S they would not be able to replicate it, and therefore most likely they would reject it as nothing more than a poorly programmed AVM. Even if these type of reports are used only for private assignments, who wants or needs this much data on a stupid 800 Sq.Ft. California Bungalow.
Funny : This kinda gives me flashbacks to 1979 when my father and I were going to pour a patio, I had framed and poured quite a few sidewalks, driveways and patios, and so I knew what I was doing. My father had a PHD in both engineering and mathematics. Anyway I am framing the patio and he comes over and says is 4" inches going to be thick enough ? I respond yes it will- He then pulls out his stupid HP scientific calculator and asks me how much weight it will hold ? I respond with I have no idea and I don't care. He then says wow I think it will hold X-thousands of pounds- I yell at him that we are not gong to drive a freaking truck across it !- He was highly offended and walked back into the house, we did not talk for three days and then he lectured me on why I needed to be more detail oriented, I kinda feel that way about Bert's regression machine, Hey Bert we are just appraising a stupid little house were even the most goofy Realtor could arrive at a value just by looking at three or four recent sales.
