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Unique Home - Client unhappy - HELP

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Squid32

Thread Starter
Freshman Member
Joined
Feb 19, 2008
Professional Status
Licensed Appraiser
State
Texas
We appraised a 10,000 sq foot house in an area that has started building up over the past 10-15 years. Big houses, a few on acreage. This property has some unique features, including waterfall's in the front that the owner says cost $1 million to build. Very few sales in the area of equal sf and acreage in combo, with pool, cabana and tennis courts, and the waterfalls. Spent a lot of money, but seemingly overbuilt. Had a huge box of receipts but could not offer printout of materials or costs, so we didn't feel like there was enough information to develop the cost approach (client reports lots of imported materials, custom made doors, etc). Used comps from area and adjacent community, very similar market. Sales averaged almost 400 DOM, nothing for over $2.8 (which was closest in GLA and on more acreage). Appraisal came in at $3.8. Client is very angry, wanted way more. Said bank appraisal was $6.5. Here's what he said:
They based it on something they called subjective determination and crastsmanship overload
They indicated the value of the home was 4.5 million, 1 million for the land and 1 million for exterior upgrades
They indicated there's a 7 million dollar house on john mccain that is a little smaller, more land and not quite as decked out
In their conclusion section they wrote "appraising this residence is difficult if not impossible by using recognized methodology approved within the industry. However, with that said, this residence and its total package are in fact unique and nothing like it has ever been seen by this examiner. As such, using purely subjective analysis, this home is made from the finest material known to man. The craftsmanship and attention to detail is unparalled."
Using this criteria, you should be able to match this figure, but I need it tomorrow.
Think about it and let me know

MLS, realtors in area, including his own, nothing reveals the sale on jm he refers to.

How would you respond? (We said if we could look at the bank's appraisal we might be able to garner the data to add the sale he refers to. We wonder though if the bank came in at that number why he needs us to - not that we will!).
 
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Montana
Competency

It is probably time to come clean on the competency issue. Best bet is to think regionally and find the appraiser regionally who does over the top homes. You need more advice than can be gotten on this forum. I would not guess on anything, even the unlikelihood of finding that the million dollar waterfall is a super adequacy. I would also spend some time on locating real estate agents regionally that sell these types of homes.

This is a $5,000 to $10,000 assignment. Maybe even more. Over 5,000 square feet, charge $1.00 per square foot. I hope you are being paid enough for this job. You may have to fly to see some comps. To do the land analysis alone is a lot of work. The guy should also take his shoe box to his accountant and total up and produce some real costs.

My mentor told me to do it right or not at all. He also told me to charge accordingly.
 

David Wimpelberg

Moderator
Staff member
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Joined
Mar 30, 2005
Professional Status
Certified General Appraiser
State
New York
In their conclusion section they wrote "appraising this residence is difficult if not impossible by using recognized methodology approved within the industry. However, with that said, this residence and its total package are in fact unique and nothing like it has ever been seen by this examiner. As such, using purely subjective analysis, this home is made from the finest material known to man. The craftsmanship and attention to detail is unparalled."

------------------------------------------------------------------

How would you respond? (We said if we could look at the bank's appraisal we might be able to garner the data to add the sale he refers to. We wonder though if the bank came in at that number why he needs us to - not that we will!).

Is this really a bank, or is it a Mortgage Broker. My experience is that lenders in this price range are a little more sophisticated, and are not willing to toss a few extra million out when there isn't collateral to back it up. Of course, Mortgage Brokers don't care; it's not their money and it's a commission for them.

The quoted comment from the "lender" is nonsense. If they really believe that, then they shouldn't bother with the appraisal.

The market for such properties can be regional, unless, of course, your market area consists of many such homes. "Unique" properties transfer every day. Beyond that, there is not much else to say, without knowing your market area.
 

DTB

Elite Member
Joined
Jun 11, 2004
Professional Status
Certified Residential Appraiser
State
Illinois
Is this really a bank, or is it a Mortgage Broker. My experience is that lenders in this price range are a little more sophisticated, and are not willing to toss a few extra million out when there isn't collateral to back it up. Of course, Mortgage Brokers don't care; it's not their money and it's a commission for them.

The quoted comment from the "lender" is nonsense. If they really believe that, then they shouldn't bother with the appraisal.

The market for such properties can be regional, unless, of course, your market area consists of many such homes. "Unique" properties transfer every day. Beyond that, there is not much else to say, without knowing your market area.

While many times the market for these properties can be regional or national, I think it is often not the case.

What is the draw to this region? It has to be WAY more than just this particular house, a draw of these type of buyers must be present first IMO.

I'm thinking white elephant at this point.
 

Squid32

Thread Starter
Freshman Member
Joined
Feb 19, 2008
Professional Status
Licensed Appraiser
State
Texas
More info

The only really unique thing is the waterfalls, and the acreage. There are any number of houses that size listed, but they aren't selling (over a year DOM). The ones that have sold went for $3 mil or less. We are working with the client, he is looking for an appraisal to take to the bank. One listing is across the street and is the client's current home. It is 10,000 plus sf and was listed two years ago for 4.5 million. It is now listed for 2.9, still with no bites. The problem is that homes similar in size and construction are there, they just aren't selling. The area is home to lots of CEO's who are looking to live in the general area, where there are a lot of these types of big homes to choose from. While this home will appeal to a certain clientele, the area is home mostly to people who work in that area.
The land was really the easiest, as land sales in the area are plentiful.
 

CANative

Elite Member
Joined
Jun 18, 2003
Professional Status
Retired Appraiser
State
California
We are working with the client, he is looking for an appraisal to take to the bank.

Will the bank accept an appraisal where the client is the borrower?

Are you working with an appraiser who is certified? Not that I doubt your abilities, it's more of a regulatory thing as this is obviously a complex property with a high transaction amount on the loan.

Tell him he's welcome to take his opinion to the bank but that you were hired for your opinion.:)
 

Mike Kennedy

Elite Member
Joined
Sep 28, 2003
Professional Status
Certified Residential Appraiser
State
New York
Observations

"Sales averaged almost 400 DOM, nothing for over $2.8 (which was closest in GLA and on more acreage). Appraisal came in at $3.8. "

If so - how :shrug:


"Client is very angry, wanted way more. Said bank appraisal was $6.5. "

Owner? Mortgage Broker? Bank Lender?

Intended Use???


"Here's what he said:

"They based it on something they called subjective determination and crastsmanship overload

They indicated the value of the home was 4.5 million, 1 million for the land and 1 million for exterior upgrades. They indicated there's a 7 million dollar house on john mccain that is a little smaller, more land and not quite as decked out

In their conclusion section they wrote "appraising this residence is difficult if not impossible by using recognized methodology approved within the industry. :Eyecrazy:



However, with that said, this residence and its total package are in fact unique and nothing like it has ever been seen by this examiner. As such, using purely subjective analysis, this home is made from the finest material known to man. The craftsmanship and attention to detail is unparalled."



:new_2gunsfiring_v1: Using this criteria, you should be able to match this figure, but I need it tomorrow.


Comments:

Suggest USPAP Competency applies to both OP & bank "examiner".

Suggest the bold statements above clearly indicate NO WEIGHT should be given to the "metholody" nor conclusion of the "examiner".

Suggest the "Clients" transmittal of that so-called appraisal and most assuredly the clients' last BOLD STATEMENT above.....are unquestionably Coercive.

Suggest attempting to mullify the clients' "anger" and acceding to the DEMAND represent Collusion and Advocacy.

Concur with other opinions that OP should have declined the assignment or engaged services of Cert.Res or Cert Genl., or simply.....referred the client to one.

Truly hope the workfile is AIRTIGHT and the OV is fully documented and supported. :unsure:
 

Mike Boyd

Elite Member
Joined
Jan 18, 2002
Professional Status
Retired Appraiser
State
California
I'm thinking white elephant at this point.

I agree. If there is no proof (comps) in this market area for such a property, how can you appraise to the most probable selling price? You must be able to show that there are similar properties in the market area even if you have to go back in time several years then adjust for date of sale. No proof, no deal.
I have gone 20+ miles for comps in rural areas as the market is similar in that region.
 

Ross (CO)

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Ask your client to forward to you the "bank appraisal for a $6.5M value".....and inquire why the bank is not simply using this appraisal that they already have. This sort of assignment appears to be one big pi**ing contest enraptured completely with claims and statements about how much this-and-that costs, and how much so-and-so paid for this-and-that......and then the appraiser is supposed to somehow strike agreement that cost = value. Pool, cabana, tennis courts, waterfalls....and the "best materials the money can buy". This one just might tip-toe over the line toward being a "complex" property.

If you are a Licensed appraiser then I'm surprised that your client did not already mention the magnitude of THIS property's specs as the two of you seriously discussed the S.o.W. necessary to bring this one together, with perspective upon the market data that you would need to gather, and ice it all down with the accepted fee quote.

Help us out here, just for some basic info......what is the Intended Use of your report ?
 

Lost Cause

Senior Member
Joined
Sep 17, 2004
Professional Status
Certified General Appraiser
State
New York
High-end Market Disconnect

I'm thinking white elephant at this point.
It sounds a lot like the property has obsolescence up the gazoo. The HO's comments make it clear that he doesn't understand that cost is not value. No matter how much he spent, the issue (of course) is not only how large an area would this market encompass and how many participants there might be.

From what is said about the bank appraisal, it seems they don't understand that cost is not value, either. "Subjective determination", eh? I would agree that once a certain price level is reached, the definition of market value begins to take on water. Folks who can afford to be entirely subjective often will be. That kind of subjectivity does not conform to the idea of an informed purchaser as used in the definition of market value. If value in this rarefied market is something other than what the appraisal profession typically defines to be market, it certainly complicates the valuation of these properties.
 
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