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Sq ft adjustments

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KATHIJKG

Freshman Member
Joined
May 27, 2008
Professional Status
General Public
State
California
I've been in escrow on a condo for 6 months. The initial appraisal came in at $236,000 but the lender asked for another one because of the time lapse and it came in at $197,000. My condo was compared to another one that sold for $200,000 and is similar to mine in all respects except for the square footage. My condo is 111 sq ft larger than the comp but the appraiser only gave $3000 credit. It doesn't seem fair to me because the price per sq ft of the comp is $296.74. Multiply that by 111 and you get $32,938.14. If you add $200,000 and $32,938.14, it equals 232,938.14, which seems to be a much more accurate value to me. Because of the price drop, I may lose my condo. Can anyone help me?
 

LordofTexas

Member
Joined
Feb 21, 2008
Professional Status
Certified Residential Appraiser
State
Texas
Kath,

Typically, price per Sq. Ft. posted by realtors mean very little and do not cross translate to the appraisal. The price per Sq.Ft. adjustment used by appraisers varies from appraiser to appraiser. The "correct" way in deteriming this "adjustment" an appraiser uses would be to do a "paired sales analysis" of several somewhat similar sized condos in the same project. Also, numerous factors are involved in the total broker's Price per Sq. Ft. figure: view, corner vs. interior location, floor level, southern vs. northern location, total baths, upgrades, buyer concessions, etc. See; a lot of factors goes into this "total" figure used by them. The appraiser's adjustment of $3,000 for this line is ONLY for that line and not all the factors determining the total amount per square foot. Although somewhat related, they are totally different. I do estates as high as $75,000,000 and have only adjusted $200 per square foot on the living area line in cases where the living area sold at $3,500 per sq. ft. On typical appraisals ranging from $350,000 to $1,000,000; I only adjust $50 to $75 per square foot. It would be hard to understand if you were not an appraiser. Does that help?
 

toddmallard

Junior Member
Joined
Oct 4, 2007
Professional Status
Certified Residential Appraiser
State
Georgia
Do you really want to overpay for the condo? 100 sf+/- is not worth, in my estimate $30,000. If everything else in the same such as view, room count, floor location etc. Than the 2nd appraisal is showing a decline in the market. Now if you signed a contract that is not contingent "sp" on an appraisal, than you will either have to close with an extra cash outlay, or loose the deposit, which seems to be the proper thing to do. I have seen many people walk away from their deposits, due to the major decline in the market.
 

Mztk1

Senior Member
Joined
Dec 3, 2006
Professional Status
Certified Residential Appraiser
State
Florida
When buying a condominium you are buying more than square footage and a unit, you are also buying a community and the amenities.

At $296.74/sf on a condo worth about $194,000 (I'm guessing) means you are looking at a 650sf unit more or less for the comp and your unit is 760 to 775sf or so.

I don't know what your condominium building looks like, nor how many units are in each, but if we were to build a hypothetical one that is the standard 12 units per building with 3 floors where they average 800sf per unit at $300/sf, you are looking at a total price tag of the entire building at $2,880,000. The total price to build a 10,000sf, 12 unit building begins in my cost manual at $55.56. After accounting for roof type, exterior materials, flooring, etc. and adjusting for location multipliers (I'm saying Orange County, CA) the cost runs to about $95/sf. I don't know how old your complex is, but I'll assume 20% depreciation, so the cost to build our hypothetical building is roughly $729,600, leaving $2,150,000 value in the community, which all residents have an equal stake in.

Based on this totally guessed at cost distribution for what is an average quality, average type building, the cost figures went from $300/sf on price, to $76.00/sf attributable to the improvements.

But living area is only a fraction of that $76.00/sf. The grid separates the number of baths and bedrooms and gives separate adjustments for the types of quality on the inside, design etc. There are no fewer than 4 lines on the grid attributable to physical improvement. For instance, if a bedroom adjustment is considered, and an adjustment at $76/sf is also made, then you counted the bedroom twice!

So, by the time you are done an adjustment in the $25 to $35/sf range is likely not far out of line.

I don't want to misguide you in thinking that this is how appraisers come up with the living area adjustment. This is just a logical approach to why it makes sense. We try our best to "extract" a living area adjustment from the market. This is best accomplished by a paired sales analysis or by bracketing the subject's living area and attempting to read the mariket's reaction to the differences.
 

Michigan CG

Moderator
Staff member
Moderator
Joined
Nov 1, 2006
Professional Status
Certified General Appraiser
State
Michigan
Kathi,

When looking at construction and the cost per square foot there are many things factored into the property that are FIXED. Whether the property is 900 SF or 1,000 SF you still have to have a heater, air-conditioning, sinks, plumbing fixtures and the likes. To adjust at the $296.74 per SF would not be prudent on the appraiser's part.

Economies of scale come into play when adding extra square footage. In your example the 111 SF would only cost about $50/SF without doing much research on my part (and using my locations). To add $296.74 for every additional SF is not realistic.

The cost of a floor mounted toilet is $615-$1,080 according to my cost manual. The cost of a bathtub is $510-$1,555; the cost of a gas forced furnace is $2,260.

Those things are included in the cost of a 900 SF home or a 2,500 SF home. Adding an extra 111 SF is relatively cheap because all of those components are already in place; a 4 x 8 sheet of drywall is $15.00; flooring is only $3-10/SF.

Hopefully you are in the position to walk away from this situation since the market has changed drastically.

Best of luck.
 

CURT VAN HOOSER

Senior Member
Joined
Nov 3, 2003
Professional Status
Licensed Appraiser
State
California
Kat,

As far as the cost per sqft. the other posters pretty much nailed it. The angle you may want to approach this from is the difference in appraised value in the last 6 months. A $39,000 (33% annual)decline in value seems excessive but, not knowing your market, I won't say it's not possible. Perhaps you can convince the lender to order a review given the huge difference in value between the two reports.
 

KATHIJKG

Freshman Member
Joined
May 27, 2008
Professional Status
General Public
State
California
I appreciate all the answers, but like I said, I wanted to know about calculations when all the other factors are the same. If truth be told, my condo is much more desirable than the other. Another comp that the appraiser judged as superior to mine is actually the only one within the boundaries of my neighborhood and it sold for $248,000. It is also smaller than mine. If you ever had to live in a condo, you know that 100 sq ft is like a whole other room and space is valuable when there is not much of it. I know your job is complicated. I was just asking for some guidance and I don't think any of the four responses were sensitive to my question. But thanks for the effort.
 

Fred

Elite Member
Joined
Jan 15, 2002
Professional Status
Retired Appraiser
State
Virgin Islands
I've been in escrow on a condo for 6 months. The initial appraisal came in at $236,000 but the lender asked for another one because of the time lapse and it came in at $197,000. My condo was compared to another one that sold for $200,000 and is similar to mine in all respects except for the square footage. My condo is 111 sq ft larger than the comp but the appraiser only gave $3000 credit. It doesn't seem fair to me because the price per sq ft of the comp is $296.74. Multiply that by 111 and you get $32,938.14. If you add $200,000 and $32,938.14, it equals 232,938.14, which seems to be a much more accurate value to me. Because of the price drop, I may lose my condo. Can anyone help me?
The first few posts are a good sampler how you ended up where you are, an assemblage of assumptions in common.

To get a market-derived reading, the market would have to include sales of larger units. That would tell you whether the larger units also sell for $296/sf, more than that or less than that. Sometimes appraisers would look at older sales to see the ratio of increase added by the larger units, if any.

PS. You didn't lose the condo, because you never had it. If the appraisal is correct, you would have lost $29k buying it for 232k, because you can something equal for 203k.
 

Mztk1

Senior Member
Joined
Dec 3, 2006
Professional Status
Certified Residential Appraiser
State
Florida
We are a bit of a numbers club, Kathy. It is true that none of us were sensitive to your plea for help facing the possibility of losing your condo, but we are not advocates just strictly valuers.

The only possibility for arguing your unit is worth more than what it is appraised value for is to go back in the history of the project to where you can find several sales of your model type that sold at about the same time as several sales of this smaller model, and demonstrate how the market prefers the larger unit by much larger amounts than the current appraisal indicates.

I do appraisals in some condo projects where the 650sf unit sells for $140,000 and the 800sf unit sells for $200,000. In the project I am thinking of, the $200,000 has a second bath and is always a corner unit facing the rear of the building, while the 650sf unit is one bath, on the interior, and is always facing the parking lot. I try to only to compare the same model to the same model from inside the project. You may have a situation like that. If so, you'll have to do your research or find another appraiser or REALTOR who can assist you with it.

If this is the case and your unit is preferred by $30,000 plus, I assure you it won't simply be due to 111sf. I've lived in several condos. Some of my smaller ones felt larger than my largest one. The floorplan, the location, balconies, etc., add a lot to appeal. I think you got us all looking at price per square foot instead of differences in other potential areas of appeal.
 

TJSum

Elite Member
Joined
Nov 12, 2007
Professional Status
Certified Residential Appraiser
State
Maryland
Kath, the reason none of us answered your question directly is because we do not have enough facts on the situation to give a professional answer. For someone outside of the profession to isolate one factor and focus everything on that (GLA), there would be many other factors involved, as there always are. If we were to answer your isolated question, it could lead you down the wrong path not knowing the entire situation. If you are seeking input from the "professionals", we need to know the entire story to give proper guidance. To answer your question in general, there is no "mathmatical" ratio or hard and fast rule, each and every situation is different and can only be determined after all the facts are known.
 
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