Archive for the 'Appraisal' Category
Can’t sue me, I’m no expert!
My final ‘required’ course was taught by a CPA who is also a residential appraiser (Utah divides appraisers into residential and commercial). He got right to business, by handing out his business card to the class. I have already shared my opinion of appraisers in other lessons, so I have become rather skeptical when it comes to appraisers. That said, I was willing to give the guy a chance as most CPAs I have known have been pretty smart people.
He explained that he felt the best way to teach an appraisal class would be to share a sample appraisal which he has done. He began by sharing every appraiser’s secret weapon. Tax records. My ears perked up when I heard him explaining online records: “As Bart Simpson would say, ‘It’s on the computers now.’” Being an avid Simpsons fan, I must confess I have never seen that episode.
Sadly, things quickly became boring as he continued explaining property taxes and answered a barrage of rather silly questions from the class. I’d list them, but sadly none of them were dumb enough to be amusing. They were just silly questions.
I was surprised to hear him claim that corner homes are on average worth less than other lots. It had always been my impression that the opposite was true. He supported his claim by stating that the double traffic from bordering two roads will bring down the value in areas with any degree of traffic.
He mentioned that you can check to see if your home is in a flood zone by checking with FEMA. This can have an obvious affect on a properties value, particularly if the home cannot be insured. There are few areas in Utah Valley that are flood zones, places such as the riverbottoms are surprisingly not a flood zone, although homes very close to Utah lake are.
He explained that he will not actually evaluate a foundation or home structure. He claimed that he only looks at it and makes a guess. While I realize the instructor is not an engineer, it is troubling that an appraiser could give a high appraisal to a home with a faulty foundation. He claimed that he had never been sued, and was happy to proclaim that he wasn’t an expert on home structure, danger, or appearance - that he just gives a guess of what he thinks the property is worth. He continued on by telling us that he looks at very few of the home’s actual features, and that at times can do a ‘drive-by’ appraisal without actually having to go inside the home.
Perhaps that attitude is one of the reasons why there is little to no consistency in the appraisal industry. He did admit that he can pad an appraisal to come out to basically whatever he wants it to by changing the neighborhood he draws his comps from. Appraisals (and CMAs) rarely draw all of their comparables from similar neighborhoods, so if I wanted my home to appraise for double I could do so by comparing it to homes in the best part of town…or I could get it appraised for half it’s value by comparing it to places on the other side of the tracks.
It was interesting to learn that many appraisers use Marshall & Swift to determine the cost of building an equivalent home. Something I didn’t know, but that makes sense, is that new homes are actually more expensive than other ones. There is a premium paid for a new home, and as such it may actually depreciate in value initially (depending on the market).
He continued explaining the appraisal line by line and did so clearly, until he went off on a rant about 0% down loans and all the evil which they have brought about. I disagreed with a lot of what he said, but I’ll go into that some other time.
He stated that most appraisers are willing to give some leeway on their appraisals, and will often increase by 5% if you ask them to. I guess that says it all. If you want to have any influence on what the property appraises at, make sure that you talk to the appraiser.