Realty Pupil - Secrets of Real Estate

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.

How to Lower Your Property Taxes For Less Than a Dollar

Depending on where you live, you will usually receive a letter from the county assessors office towards the end of the year detailing the assessed value of your home. Unsurprisingly, these values almost never decline. This can lead to you paying thousands of dollars in taxes for an overvalued home.

Thankfully there exists a method for resolving inflated taxes. This can often be done for less than a dollar and can save you a small fortune. Here’s how:

First off you’re going to need evidence that your home is overinflated. The best proof is an appraisal performed by a certified appraiser. Try calling around to find an appraiser who will cut you a deal. Often you can find ones that will give heavy discounts if you let them know you just need something fast and simple to present as a property tax appeal.

If you don’t want to spend the $250 or so for an appraisal to be done, try calling a local real estate office. Ask for a CMA (competitive Market Assessment) to be done on your home. Never pay for this to be done. It takes an agent less than a minute to enter your home into their CMA analysis program, and most offices are happy to do it. Some may insist you come into their office to get one done. That’s fine, but don’t sign anything. We just want a CMA.

If you for some reason cannot find an agent, or an appraiser, you can prepare a CMA of your own. What you want to do is compile a brief list of 3 or 4 homes which have recently sold in your area that are similar to yours. Zillow.com can greatly assist in this, or you can take a look at your County Assessor’s website and find out what similar homes are going for.

If nothing else, you can gather some for-sale fliers from local listings and use those as your comparables. Just remember, the more evidence the better.

Once you’ve compiled your evidence, I would suggest taking your information with you and going down to your local assessor’s office. You can mail it in, but it’s much harder for them to say no if it’s in person than it is for them to send out a denial letter. If you do get a denial letter, I’d recommend going into the office and trying again in person.

Whether writing in or presenting in person, you will want to be brief. The less you say the better. Dress well, be polite, and DO NOT do anything more than say “I wish to appeal/dispute my assessed value.”

Present your evidence, be brief when answering any questions and don’t be argumentative. If you don’t get anywhere, try again another day with another clerk/assessor. If that fails you can always appeal at a higher level. Keep in mind that if you have enough evidence and are polite you will almost always succeed.

Find out if your local office has a manager or some degree of appeals. They will direct you accordingly. At this point you may want to consider getting an attorney willing to work for a portion of the saved taxes if they succeed. Chances are you won’t have things get that far. Just remember, you CAN win an appeal.

This page is ’still’ a work in progress. Expect it to be finished very soon.
It already covers an extensive review of all the material taught and discussed in a Real Estate course I took here in Utah as research for a book I’ve been writing.

These notes contain TONS of information on quirky real estate laws, things every agent should know, as well stuff I found hard to memorize. They serve as an excellent study guide, as well as the perfect tutorial for any one looking to get into real estate investing, property management or just buying their first home.

Given that I noted everything I found of interest in each lesson, and then proceeded to easily pass both the Utah State and the National Real Estate exam, these lessons should be a sufficient guide for anyone looking to become a real estate agent. Reading this will save you having to take notes through most of your Real Estate Courses.

Keep in mind that while some of these lessons focus on Utah State Licensing law, most of the information is applicable to the entire United States, particularly Colorado, Idaho, Georgia, Montana, Wyoming as well as Alberta, Canada.

I apologize for all the missing lessons. Look for the second parts to appear as the week progresses. Thanks for reading!

I’ve gotten a few scans up from some of the class material and other odds and ends.

Car Ad - There is a specified parking area for all Real Estate Students in the back, I guess so as not to scare off potential walk-in clients who park in the front of the school’s brokerage and could potentially see our not so blinging cars(Front lot has hummers). I park in the front anyway because I’m lazy, but I tried the back lot the other day and found this on my windshield when class ended. I have since started parking in the back more on the hopes that I will be given job offers by other celebrities.

Criminal History - Here are some of the criminal background questions asked of all agents. Answering yes won’t necessarily preclude you from becoming an agent, but lying can. This wasn’t nearly as detailed as a blood donor questionnaire. Now those things are thorough!

Closing Problem - This was handed out to us with the challenge that no one ever gets it right. Spending five minutes trying to answer will show you why. This is probably worth reading over simply because it provides some genuine sample closing-related documents.

Real Estate Purchase and Sale Agreement - This was provided as extra information for the above problem. It created more questions than it answered.

Exclusive Sale And Listing Agreement - This is a dated listing agreement used by agents to list a property for a seller.

Closing Instruction Sheet - This is actually somewhat useful for double checking a closing statement to make sure everyone was charged the right fees.

Blank Closing Statement - Want to try doing a closing statement of your own? Knock yourself out.

I guarantee it, or most of your money back

Today brought another required class presented by the school’s mortgage broker partner. Most real estate agents and brokerages work with a specific mortgage loan officer who pays a kickback for referrals received. Often, when you approach a Real Estate agent as a buyer, there are three things they will attempt to accomplish with you as their new client.

1. Establish a relationship of trust by wowing you and proving they know their stuff.

2. Commit you to a contract, which will often lock you into paying them a commission regardless of how you find the home you buy over the next year.

3. Get you preapproved (and locked into using their mortgage broker…which means extra money for the agent, and possibly, a worse deal for you)

If you want to see your agent at his or her worse, tell them once they have finished their presentation, that you do not wish to sign a contract.  If your agent blows up at you, imagine how things would have been had things started to go bad after you signed. Most agents will be kind but firmly insist you sign the contract before they can speak to you.  They may even tell you it’s illegal for them to talk to you without one (have we been breaking the law for the last hour then?)

If you have some interest in using this agent (always remember that you’re welcome to shop around) then negotiate!  Everything in real estate is negotiable. EVERYTHING.  If your agent isn’t willing to be flexible on something so small as an agent agreement, how will act when it comes to negotiating other things such as sales price?  Will they insist you offer more?  If they won’t bend their best interests in order to get you as a client there is a good chance that once you are a client they’ll act the same.

I find it amusing that the agency where this school takes place has a handout addressing their mortgage loans with a “$500 low rate guarantee” which claims, among other things, that since they have the lowest rates you DON’T EVEN HAVE TO BOTHER SHOPPING AROUND. Convenient huh? I’ll give you the best deal, so don’t even bother talking to anyone else…otherwise I might have to pay up the $500. Which by the way they never do. These low rate guarantee programs are generally designed in such a way as to be impossibly hard to get, often requiring that you pay a non-refundable appraisal fee of $500-600 in order to qualify.

Getting back to today’s class, I arrived late just as the instructor was discussing a certificate he had already handed out. Thankfully, I manage to get my hands on a handout and sit down. I’m ready to learn about financing!

Surprisingly, this mortgage broker proved to be the most clear and consistent instructor I’ve seen so far. I’ll share what we learned in part 2 of this lesson.