View Adjustment Guidance and Opinion Help Please

[Vermonter]

The other thing to consider is RE agents are under no obligation to list sell, or negotiate to a benchmark of "market value". They have no interest in MV for its own sake, except that in a financed deal, they hope the property "will appraises out". Their goal is sell the property, make a commission, and whenever possible get the highest price so they can use that as to dangle as bait to get more listings..

This is the biggest disconnect with appraisers....many don't get that agents have a very different objective.

That being said, view adjustments are very market specific. Around here, the view with the bigger panorama is king. Partial views, seasonal views, etc rarely have a market reaction.

 

[Terrel L. Shields]

How would the underlying land characteristics inform as to the view in any particular unit assuming each unit owner has the same property rights?

You can't but that is a condo. The value of a house includes an undivided right to the land.

 

[Deleted member 157170]

In my market we have Sound, Mountain, Lake, space needle, and 2 different city views in opposing directions. So I do these kinds of weird adjustments all the time. In my experience, there is usually almost no real paired sales to support any adjustment for a second story window view with a concrete answer. If it were me, I’d find the adjustment for a legitimate full view with a few comps and then take 25-50 percent of that paired sale adjustment. Apply it to the comps without views and adjusting the opposite for the full views. I say something along the lines of “there were no recent comparable sales of similar views from only the second floor, zzz comps were superior views and zzz comps were inferior views and adjusted as such”. Never had anyone come back to me asking for more info. It’s more of a judgement call on the appraiser, but I find that if you tell clients your reasoning for using a more qualitative approach like that, they don’t make a fuss.

If the agent complains and makes a big deal of it afterward, they can send comps in formal ROV and you can adjust if they find something you didn’t.

 

[Long Walk]

My limited dealings with commercial brokers is that they were more professional and fact based .

I used do sell real estate ( for over 5 years ) prior to becoming an appraiser, and on a personal level, I can enjoy interacting with agents. But as far as business, I have a low level of respect for the typical residential RE agent. They do have to follow the law especially regarding fair housing, contracts, escrow funds (if a broker ), and they by law must disclose known defects. Other than that, pretty much anything goes.

As you note, even though we are handling the same product, they are in a different world. Their world is the sales world Their time is spent marketing themselves, getting listings, and snagging buyers. Though they like to call themselves "market experts", most are not , (with a few rare exceptions who I do respect) .

Appraisers should also consider that the average RE agent farms and works in a very small area and type of property ( again, with exceptions ). A RE agent might specialize in luxury beach area condos, or tract homes in her own subdivision. The agent rarely sees, lists, sells, or knows anything about other properties or areas beyond their niche - even though, like anyone else, they can pull data at a click, and then proclaim they know all about the entire region.

The other thing to consider is RE agents are under no obligation to list sell, or negotiate to a benchmark of "market value". They have no interest in MV for its own sake, except that in a financed deal, they hope the property "will appraises out". Their goal is sell the property, make a commission, and whenever possible get the highest price so they can use that as to dangle as bait to get more listings..

Fantastic post. Totally agree.

 

[RCA]

The subject property is facing a canyon across the street and there are two bedrooms on the 2nd floor level that have a view of the canyon if you stand up and look out the window. The listing agent is very adamant that this constitutes a view. I have no comparables in the subject neighborhood that have a similar situation. However, I do have comparables with views of a canyon / mountain that can be seen from the living room, kitchen, dining room, and the backyard.
I would like to get everyone's opinion on this matter. Do you believe the subject constitutes a view? If so, how would you approach extracting value for this view from only two bedrooms (while standing directly in front of the window)?

Thanks for your time everyone, I always appreciate everyone's great feedback.

These features don't stand in isolation. They compete with each other. Would a buyer trade that view for a much nicer kitchen? Most likely yes. View is more important to some people than others. Many are aware of the fact that most of the time they shut the windows and are on the computer or watching TV. You want to know the market reaction. But to get that you need comps. That means properties with comparable features. But views can be quite different. So, you are on your own in many cases. There is a cap on what such quality/aesthetic features are worth as a whole. That cap creates competition between features. So, your view is not just competing with other views or no views, - it is also competing with other features in other homes.

There is a good way to deal with this using residual analysis --- but that is not what you are looking for. What you are looking for is probably impossible. Even if you could find two houses that were the same in every respect except one had a view similar to your subject, that wouldn't necessarily mean that your subject view was worth the same thing. You need more evidence than just one incident. Yet, of course, current protocols accept "matched pair analysis" and so would accept that result. - Certainly in the absence of better information. But, then again, you don't have that. So what do you have? Nothing. --- Unless you could use residual analysis - which you most likely can't. But essentially if you were to, then you would have 100+ comparables, build a model with MARS, then estimate the sale price using measured attributes such as GLA, Lotsize, etc., then subject that estimate from their actual sales prices to get the "residual" value -which would be the value of all the unmeasurable features such as "view". Then you would rank all of those comps from most negative residuals (those properties which actually sold for less than expected) to the most positive residual (those properties which sold far above what was expected from their measured attributes), and then rank your subject against them to get a so-called CQA (Condition-Quality-Aesthetics) score to then estimate its residual. Then you could divide that estimated residual up any way you want between the unmeasured attributes, including view. The cap is on the total value of all unmeasured attributes - and how much you assign to each has not impact on the final value conclusion. But that is the way I would come up with a value for the view. --- Again, it is not the particular value for the view that is so important, as the total for all unmeasured attributes --- according to how the subject ranks against the comparables. Look at page 11 of:

https://www.pacificvista.net/price-models-san-mateo-county/hillsborough2c-ca

You might have a house in Hillsborough that has a CQA of 7.0 - that is a residual of about $130/sf. For a 3000sf home that is the about $390,000. You might divide that amount up between Condition, Quality, View, 33.3% each. So, you might assign the view value of $130,000. It is up to you as an appraiser to make that decision. If someone wants to challenge you, then show them the houses below and above your ranking and ask them whether they agree they are on one hand less desirable and on the other hand more desirable ----with respect to the unmeasured attributes. That is where the focus should be. Features usually compete with each other. You usually cannot view them in isolation.

 

[Airstream]

I appraised in Door county, WI for 10 years. The view of Green Bay or Lake Michigan made a very very big difference in value. And it was even more so if there was a view of a bay with the village in the background. Those were in extreme high demand. Sites with a view on 2 acres could sell for $600,000 to $800,000. And that is with no waterfront. Then we had view sites that would sell for $150,000 because of the distance from the water. So we had to make view adjustments for quality of view. We did that primarily through extraction and a kind of paired sales analysis. For one thing we didn’t have enough sales of vacant sites to always analyze the exact difference. We often would go back and time to find anything that might give a handle on it. It was great when we did, but after awhile the vacant sites get bought up. But just by knowing the market one can tell that certain views were more desirable. So what I would do is make all the other adjustments first. Then look at how the value was different from one comparable to the other. I would not adjust for acreage unless it was a fairly big difference (like 5 or 10 acres). And it worked out pretty consistent that distant view and close views had a pretty consistent value differential. If you don’t have land sales, about the only way to do it is through extraction or some sort of market paired analysis. Of course the more differences you have between the comparable sales in the features the more inaccurate the view adjustment. That’s why we all hated doing what we call bluff view homes. Often not that many comps, and the sites could be wildly different in value. We always felt that bluff view homes were more difficult to appraise than waterfront for that very reason. But after doing them awhile the data becomes a bit more clear. And we had a work file to support it. The problem would creep in when a vacant site sells on the same road for $350,000 and the extracted value is $600,000 for another sale on the very same road.


The other thing you could do is interview the buyer. Simply ask them, “How much did that view affect your valuing the house?” I don’t know why appraisers are afraid to do that. You could also call trusted real estate agents that know their stuff. I have done that on a number of different features. Just ask, “Do people seem to pay more for a house with a certain amenity vs without that amenity?”