Should we make more bedrooms or a studio apartment?

[NORTON]

Hi,

I am an asker here also. But your question triggers a question that keeps bothering me.

My place is a single family detached. For my neighborhood, overwhelminly places are single family detached. Why does my place get two-families as comparables?

who is providing the 2 family homes as comparables...ask them.

 

[Delta85]

We have a home now that we are redoing. The home has one bedroom now and a studio apartment downstairs. We were wondering if we should add more bedrooms and and do away with the studio apartment. We would like to know which way usually appraises more?

Thanks

In my market additional bedrooms or a bathroom would contribute value. If you can create a 2nd and 3rd bedroom you'd see a substantial increase in market value. At least in my area. Also depends on your square foot living area too. If you are able to expand your living area while adding utility you'll maximize value. At least in my area.

 

[Learner]

Always a single family

Did you convert your (now) single family from (then) a two family without telling anyone?

My place has always been a single family detached as are most of my neighbors. Yet the last three appraisals have each included two places with "attached guest casita" or "attached guest house" -- ie, a two family.

 

[KD247]

...We were wondering if we should add more bedrooms and and do away with the studio apartment. We would like to know which way usually appraises more?

For a million reasons (okay, maybe only a hundred thousand reasons), you'll be better off concentrating on whether a bedroom or an apartment is more valuable to you, personally.

What are your goals in remodeling the property? If you are flipping the house, any potential increase in value could be offset by a loss in marketability. For example, you might find yourself with a duplex that is worth 20% more than the single family home but is almost impossible to sell. Or vice versa.

If you are intending to live in the home, the best advice is usually to build exactly what you personally prefer because you will receive the value of living in a place you like and because the market will probably respond favorably to your choice when it does come time to sell.

Two caveats though. First, you need to "know thyself" well enough to realize whether you might have some quirks that other buyers won't appreciate. For example, it might be okay with you if a bathroom is adjacent to the kitchen, but most buyers would see that as a negative. If you think that there's the slightest chance that you will do something in a non-standard way, consult with architects, designers, friends, etc. before building. (I think that it's a pretty safe generality to state that most people would prefer to live in a house without a live-in tenant. However, there are also those people who would enjoy earning an extra thousand a month in rents or would like the opportunity to have their mother live under the same roof.)

Second, if you budget according to the improvement's worth to you, personally, it is unlikely that you will over or under-build. Figure out the cost per month, of a bathroom for instance, and decide if that extra expense is worth it to you. If it is, it will probably be worth a similar amount to the next owner of the home. During the real estate boom, it was common to see kitchen additions that had a cost of about $400 per month over the expected life of the kitchen. The same people that built them would say that they would never pay that much for a kitchen but that the next buyers would. The days of speculating on a home's value are coming to an end and more and more owners are making their decisions based on how much they will personally pay to enjoy the remodel themselves. If it's not worth it to you, don't build it!

My place has always been a single family detached as are most of my neighbors. Yet the last three appraisals have each included two places with "attached guest casita" or "attached guest house" -- ie, a two family.

Appraisers are trained to cast a wide net for applicable data and then sort the sales in order of relevance. Often the best comparables will still fail to bracket (bracket the process of comparing with a slightly inferior and slightly superior sale) one of the subject's important characteristics. In that case, it's often necessary to use a sale or two that may differ in other respects.

The most common example is when the subject is on a very large site for the neighborhood. Most appraisers will want to include the most relevant sale of a property with a similar or larger site, just to set a boundary for the other sales' upwards site adjustments.

Compared to other variables found in complex properties, it's usually pretty easy to formulate a reasonable and supportable adjustment for a guest house. I'm sure the appraisers used those sale because, in spite of having a guest house, they were the best indicators of value available and because those were the sales that other buyers and sellers would take note of when making their decisions.

 

[Learner]

Parallel universes of appraisals

ou

The most common example is when the subject is on a very large site for the neighborhood. Most appraisers will want to include the most relevant sale of a property with a similar or larger site, just to set a boundary for the other sales' upwards site adjustments.

Compared to other variables found in complex properties, it's usually pretty easy to formulate a reasonable and supportable adjustment for a guest house. I'm sure the appraisers used those sale because, in spite of having a guest house, they were the best indicators of value available and because those were the sales that other buyers and sellers would take note of when making their decisions.

A very good answer, really. But they are NOT guest houses -- they are attached -- i.e., they are living units created by putting up a door or wall or otherwise slicing an existing house into two living units. A two-family building by cheapskate conversion.

[I do NOT intend to contest or appeal any appraisal -- but there are disturbing elements to all five.]

In one case, they locked a door and cut off an open area and created a "bedroom". But this "bedroom" has an entry but no exit and no independent heating source. Appraiser number 3 counted it. In another case, a bedroom is below grade -- You don't want to know how many appraisers counted it over a five month period.

In fact, it seems like we have two professions:

1) those of you who answer here; and
2) those who appraise my house.

They have little in common. One my appraisers had no absolutely NO interest in finding a lot anything like mine. He defined a 100 sq mile neighborhood, found four sales comparables and two listing comparables BUT NOTHING nothing large than 2.1 acres -- mine is 5.17 acres. Incidentally three house on five acre lots in my subdivision in my village were for sale.

But the appraiser leaves my subdivision and my village to find four sales comparables -- two listing comparables -- four of within two-tenths of a mile of each other in a single metal rich neighborhood in a less desirable village -- and the largest lot is 2.17 acres -- exactly three acres smaller than mine, and the house one this lot is 1,400 sq ft smaller than mine.

[The smallest "comparable" is on less than an acre.]

Miraculously, 2.17 acre place sold for $25,000 than mine as valued by said appraiser, and it actually benefited from being a two-two family slice job. It sold for more than $200 per square foot while my place was valued at $120 a square foot -- a foreclosure/short sale/bankruptcy neglected property price for a place like mine.

I would tell you more about my appraisals and my comparables but I wonder if you would believe me.

 

[KD247]

... I would tell you more about my appraisals and my comparables but I wonder if you would believe me.

I'd believe you, but it would be kind as if we were sitting at a bar talking about cruelty to animals and you told me that you once met a pet dog that had to live on nothing but dry food and water.

The appraiser's first job is to identify the important value determinants for the subject's specific area. It would be pretty fairly unusual for a buyer, anywhere, to say that their decision was significantly affected by the fact that a door was locked or that a removable partition was in place. Needless to say, an appraiser who significantly deviates from the market's reaction to a property is not doing their job. But, appraisers are contractually bound by lender's requirements whether those requirements are logical or not, provided that appraisal standards are not compromised. It can get complicated.

In most markets, lot size only contributes to value to the extent that it enhances privacy, setting, view, or utility (having room for the buildings, etc. that the typical owner wants in that area). I've done many appraisals where homes on small lots adjacent to open space compete favorably with homes on tremendously larger sites. In fact, liability and maintenance concerns can even favor the smaller lot provided it has the same setting and view of the larger lots. In other markets, bragging rights might be the main concern and it doesn't matter that the extra 200 acres are nothing but arid desert. If the market recognizes value in a particular characteristic, it's up to the appraiser to consider the impact. And, sometimes, bracketing a characteristic like lot size can lead to a misleading report. It boils down to a judgement call by the appraiser.

The real art is being able to look at things as if through the eyes of a knowledgeable and capable buyer. With the myriad of appraisal rules and regulations, and with lender's demands, it's easy to lose sight of the forest for the trees.

 

[Learner]

Four of the six comparables were located within 2/10 of mile of each. Three are within 1/10 of a mile of each. A foreclosure and a short sale are included in that 1/10 of a miole. -- their lots are 30 feet from touching each others. You could pick them and their lots up, and drop them unchanged into my lot and have more three acress left over.

One acre might seem large and relatively uncrowded but the neighboring homes are packed with as many as 10 metal sheds of varying colors, conditions, materials AND quarters for two burros. One of my comparables has a dung heap at its front gate.

Some have views -- walk to the end on the lot, look over your fence, peer between homes and sheds, and see a slice of a mountain.

Thisfinancially troubled, ltierallay rancid 1/10 of mile supplies three comparables for my place in a five acre neighborhood.

I am a PhD from an Ivy League university -- but to you I'm just another guy in a bar.

 

[KD247]

... I am a PhD from an Ivy League university...

Oh good, then we can talk about the difference between appropriate appraisal methods and reporting requirements.

As you know from your first statistical analysis classes, you need at least 27 data samples to have a reasonable confidence level when only one variable is changed. Care to estimate how many variables there are in a property like yours? It's impossible, and that's why strictly quantitative statistical methods aren't applicable in a case like yours.

When forecasters face too many variables and not enough data, their refuge of last resort is the empathetic analysis - they put themselves in the shoes of their subjects. And that's what an appraiser is likely to do when considering a property like yours - gather the same information available to the very most well-educated and rational typical buyers (and their agents) and form an opinion as to how those buyers would hypothetically react to your property. Then they develop, refine, and support that conclusion by further researching, analyzing, and reporting actual market actions (sales) that exemplify the principles that guided their conclusion.

There are a few places where it's generally agreed that land sells for so much per acre and that houses sell for so much per square foot. Most places aren't like that, and buyers typically spend most of their efforts comparing, not calculating. So, in this situation, all quantitative aspects become relative, not absolute. Because buyers look at bigger/smaller, better/worse, cheaper/costlier, selecting the best sales for comparison, and properly ranking them, becomes more important than deciding whether a bedroom meets the full definition of a "bedroom." The more important consideration is how the market sees the space.

That said, residential appraisals are typically submitted on a form that is designed to guide the appraiser through a mostly quantitative analysis and FNMA's lending guidelines favor appraisals that break properties down into separately analyzed individual components (which we all know is not how most buyers view the whole package that comprises a property).

Most appraisal disputes revolve around whether the comparables used were appropriate, being the most efficient combination of those that come closest to FNMA's recommended guidelines for physical differences, but also considering those that are wholly the most comparable in overall appeal. So, it's never really a question as to whether a comparable is "good" or not, but always a question as to whether there are significantly "better" comparables or not. The answer to that question is always going to be an opinion, not a fact - just as the value estimate on the appraisal report is actually an opinion, not an estimation of a fact.

 

[Learner]

That 27 is fairly meaningless unless you define a significance level. And then the number of cases required for significance will depend upon the strength of the relationship.

The old prof has to tell you that I looked up all houses in Nambe that were currently listed on the day of the appraisal or sold in the previous year. I eliminated all those on less than 1 acre or with legal/financial problems -- e.g., foreclosure. I discounted the eight remaining cases at the same rates that appraiser used.

Then I ran a simple correlation between price and square feet. You get a relationship like .98 -- I don't want to look up the exact number. It was very close to a straight line. One house was a little above the line -- it was genuine horse property with plenty of water. Another was above the line -- it was twelve acres. So it seems thatmore acres are worth more than fewer acres in Nambe. So maybe my lot is worth more than another in Nambe that is 1/7th the size?

That's eight cases and significant at the point .01 level at least. (don't want to look it up.) I entered my sq ft in the resultant formula and -- I take the resulting nnmber seriouly -- the appraiser we have been discussing came in more came in more than $300,000 lower. Actually, I found an almost perfect relationship between square feet and price for homes in my old nieghborhood back in VA.

So that is two neighborhoods out of that do show a relationship that you report is very rare.

If I use Zillow's number nfor the date of the appraisal my number is very high -- even for Nambe. It is almost twice the value produced by said appraiser.

Moreover using his professional judgement of the local market, the appraiser passed up all of those houses in my village including three in my subdivision -- all of us on five acre lots and similar views and one of them virtually the same house size. All custom built with non-stock materials -- different interpretations of the pueblo/santa fe style. The previous appraisers, using his best professional etc took two of them for comparables -- which was possible for both appraisers following professional guidelines.

Instead that low-ball appraiser crosses an Indian reservation to pick three homes -- all on one acre -- one a foreclosure and another a short sale. Even he admitted on the form the quality of construction and condition of the third home (with metal neighbors0 was below average. Two burros right across the fence did add a distinctive smell to the place. And the dung heap at his front gate added to the aroma.

They have a garden, fruit trees and "livestock" on their own one acre. Howver, this is illegal -- they have a legal right to one-acre feet of water for household use only Supposedly they use a cistern on the roof and run-off from the road -- but it would have to flow up. And that cistern is a joke in the high desert. If that cistern were occupied the entire lot, it would pull in 1.5 acre feet a year.

Incidentally, I have 3 acre feet of crystal clear, pure, passed all tests well water that pumps out at 12 gallons per minute. (Incidentally I get nothing for that -- but lot takes major whacks in comparison to lots with no well and no permit to drill one, but it has "rights" to an unkown amount of surface water supplemented septic systems leaking into the system.)
Back to my "comparable" somebody stuck them with this and they are trying to pass it on. But it is not working and they continue to change agents and drop the price. It is now listed for $123 per square -- the same figure that my place appraised for. Incidentally, their place is anothe a two family slice job.

Speaking of metal neighbors the've got a bunch and one did sell -- you know, long and narrow with a big window at one end -- and skirt and nice steps and a cute little roof.

It sold for $132 a square foot -- more than my place is appraised at. It's on a lot less than 1/8th the size the size of mine and within noise distance of a major highway. This property are four comps in the village which is considerably less desirable than mine. The realtors and owners pretty much admit this by pretending they are in Nambe.

So a jacked up trailer, tiny lot, hghway noise, no views,

is worth more per square toot than

a site built custom built, high quality,72 massive vigas -- the walls have double 2x6 studs. Put those vigas with their existing spacing on that trailer and it would be crushed like a bug.


we have almost 80 windows, glass doors, and skylights, dual zone heating ac, the two heaters are propane -- but we can switch entirely to two jotuls backed up with electric to take advantage of lower prices.

The brick in the kitchen area is decorative -- but they are also columns that hold that hold up the vigas and make possible a 60' x 40' L shaped open great room.

Two master suites with walk in closets and baths -- one has in addition to the large -- a two person

View of 5 independent mountains more than 12K ft, thus snow capped. the two of the three highest in NM. Out the back we see a hundred foot cliff with a box canyon cut in. Never been grazed back there -- it is unchanged -- the way nature made it. It's a protected view -- we and the neighors own more than a mile of this cliff.

Two miles up a dead end road. I am not overpriced for my neighborhood which has some incredible homes larger than mine -- I don't make the top fifth of the homes. Should I go on? Will you continue to think that said appraiser came up with reasonable comparable and a reasonable value for my home.

I used to live in a modest home but a lot of blind luck and I don't anymore. It's no jacked up trailer. My assessed value is blatant balderdash

Should I mention that his stated data source of is the MLS, drivebys and a claim to have inspected two of the homes.

Without explanation there are numbers nowhere close to those in the MLS. Not a single word of explanation although many statements about which guidelines he violated for how many comparables -- in at least one case he violated the same guideline for all six homes -- it is gross adjustment -- in fact, it's over 30% for five comps.

The square feet of three homes are different than that reported in the MLS -- in every case all four digits are wrong, the largest error more than 1,000 feet off. So the $/sq ft is also wrong. And he identifies the age of home when the MLS says build date unknown. No explanation of course.

In his professional judgement using his knowledge of the market -- he changed hard numbers?

.

 

[Webbed Feet]

That 27 is fairly meaningless unless you define a significance level. And then the number of cases required for significance will depend upon the strength of the relationship.

The old prof has to tell you that I looked up all houses in Nambe that were currently listed on the day of the appraisal or sold in the previous year. I eliminated all those on less than 1 acre or with legal/financial problems -- e.g., foreclosure. I discounted the eight remaining cases at the same rates that appraiser used.

Good for you! You'd be amazed how it is that when the public wants to challenge property taxes all those sales with "legal/financial problems" are all now demanded by the public to be valid comparable. Bias is very alive and well.

Then I ran a simple correlation between price and square feet. <....snip....>

No, no, no, and no. Not only is your above a bad method, it becomes vastly a worse method when acreage properties are at play. Toss your results out and start over.

That's eight cases and significant at the point .01 level at least. (don't want to look it up.) I entered my sq ft in the resultant formula and -- I take the resulting nnmber seriouly --

Thus showing how higher education often results with people thinking they can atypically tackle what they've never been trained to do.

the appraiser we have been discussing came in more came in more than $300,000 lower. Actually, I found an almost perfect relationship between square feet and price for homes in my old nieghborhood back in VA.

So what? One might as well say that since they've found a perfect relationship between planetary objects and the mean distance of their orbits from their anchoring sun that the relationship can be used to determine the number of attached barnacles on ships sailing south from Paris. You've got two different markets, and your using a highly questionable method. Nice try though.

So that is two neighborhoods out of that do show a relationship that you report is very rare.

I heartily recommend you ponder..... http://www.twainquotes.com/Statistics.html

If I use Zillow's number nfor the date of the appraisal my number is very high -- even for Nambe. It is almost twice the value produced by said appraiser.

Did you have a point?

Moreover using his professional judgement of the local market, the appraiser passed up all of those houses in my village including three in my subdivision -- all of us on five acre lots and similar views and one of them virtually the same house size. All custom built with non-stock materials -- different interpretations of the pueblo/santa fe style. The previous appraisers, using his best professional etc took two of them for comparables -- which was possible for both appraisers following professional guidelines.

So many complaints, so little time...

Instead that low-ball appraiser crosses an Indian reservation to pick three homes

He was "Brave" to do that.... LOL

-- all on one acre -- one a foreclosure and another a short sale. Even he admitted on the form the quality of construction and condition of the third home (with metal neighbors0 was below average. Two burros right across the fence did add a distinctive smell to the place. And the dung heap at his front gate added to the aroma.

Seriously, appraisers just don't care what people are made out of these days. It's all this diversity stuff... They can be made out of wood, plastic, even slime (I try to avoid shaking hands with people made out of slime) and we just don't pay any attention to any of it!

They have a garden, fruit trees and "livestock" on their own one acre. Howver, this is illegal -- they have a legal right to one-acre feet of water for household use only Supposedly they use a cistern on the roof and run-off from the road -- but it would have to flow up. And that cistern is a joke in the high desert. If that cistern were occupied the entire lot, it would pull in 1.5 acre feet a year.

Did you have a point again? Illegal gardening, you should hop over a forum or two and discuss that with the northern California appraisers here on the forum.

Incidentally, I have 3 acre feet of crystal clear, pure, passed all tests well water that pumps out at 12 gallons per minute. (Incidentally I get nothing for that -- but lot takes major whacks in comparison to lots with no well and no permit to drill one, but it has "rights" to an unkown amount of surface water supplemented septic systems leaking into the system.)
Back to my "comparable" somebody stuck them with this and they are trying to pass it on. But it is not working and they continue to change agents and drop the price. It is now listed for $123 per square -- the same figure that my place appraised for. Incidentally, their place is anothe a two family slice job.

This is turning into reading a rant.

Speaking of metal neighbors the've got a bunch and one did sell -- you know, long and narrow with a big window at one end -- and skirt and nice steps and a cute little roof.

Just a moment, I need to go pour myself a drink and after I get a few down myself I'll follow your points better.

It sold for $132 a square foot -- more than my place is appraised at. It's on a lot less than 1/8th the size the size of mine and within noise distance of a major highway. This property are four comps in the village which is considerably less desirable than mine. The realtors and owners pretty much admit this by pretending they are in Nambe.

So a jacked up trailer, tiny lot, hghway noise, no views,

is worth more per square toot than

........... Ok, I'm back.... Yes, per toot.... I get that now.

a site built custom built, high quality,72 massive vigas -- the walls have double 2x6 studs. Put those vigas with their existing spacing on that trailer and it would be crushed like a bug.

What kind of bug? Appraisers like detail.

we have almost 80 windows, glass doors, and skylights, dual zone heating ac, the two heaters are propane -- but we can switch entirely to two jotuls backed up with electric to take advantage of lower prices.

I have a drill press and a table saw..

The brick in the kitchen area is decorative -- but they are also columns that hold that hold up the vigas and make possible a 60' x 40' L shaped open great room.

Sounds wonderful!

Two master suites with walk in closets and baths -- one has in addition to the large -- a two person

You know, once I went to after getting back but then it was later. Hey, have to refill.... be right back.

View of 5 independent mountains ............

I'll admit it, I get jealous of wealthy mountains.

.......... more than 12K ft, thus snow capped. the two of the three highest in NM. Out the back we see a hundred foot cliff with a box canyon cut in. Never been grazed back there -- it is unchanged -- the way nature made it. It's a protected view -- we and the neighors own more than a mile of this cliff.

Sounds wonderful! Say, what are your neighbors made of?

Two miles up a dead end road. I am not overpriced for my neighborhood which has some incredible homes larger than mine -- I don't make the top fifth of the homes. Should I go on? Will you continue to think that said appraiser came up with reasonable comparable and a reasonable value for my home.

I used to live in a modest home but a lot of blind luck and I don't anymore. It's no jacked up trailer. My assessed value is blatant balderdash

I favor the word poppycock myself.

Should I mention that his stated data source of is the MLS, drivebys and a claim to have inspected two of the homes.

I'll ask some other appraisers if we should start a poll to decide if you should have mentioned that or not.

Without explanation there are numbers nowhere close to those in the MLS. Not a single word of explanation although many statements about which guidelines he violated for how many comparables -- in at least one case he violated the same guideline for all six homes -- it is gross adjustment -- in fact, it's over 30% for five comps.

Appraisers cannot "violate" a "guideline." These are guidelines, not "Rules."

The square feet of three homes are different than that reported in the MLS -- in every case all four digits are wrong, the largest error more than 1,000 feet off. So the $/sq ft is also wrong. And he identifies the age of home when the MLS says build date unknown. No explanation of course.

In his professional judgement using his knowledge of the market -- he changed hard numbers?

.

Since when did MLS information become the factual reference for Realty information? Erroneous data is entered into all MLS systems daily my friend. Yes, appraisal reports should state the sources of information. If it were stated that solely MLS data was used, it should match. If this later is the case and nothing matches up, I would encourage you to file a state Appraisal Board complaint regarding that appraisal report.