Paul's Appraisal Blog

    In this market of declining values, REO's, Short-Sales and Home Auctions, you may find yourself in a position where you've made an offer on a property, but then wonder if you really got a good deal?  Unfortunately, your real estate agent won't always be honest with you about this- it's in his or her best interest to "make the deal work", so that they can get their commission. And actually, the more you pay, the more they make, so it behooves them to get you to pay the highest price possible.

    This where your friendly local appraiser comes in. You, as the borrower and purchaser, can ask for any appraiser you want. The lender may him and haw, but if you say you want such and such to appraiser you house, they won't argue. (As long as the appraiser is approved by the lender making the loan)  By getting your own appraiser, you can tell him or her that you are concerned about the value and want a totally honest opinion about the value, whether it comes in at the purchase price or not.

    The fact of the matter is that the value of a home is usually a range of values, and many times an appraiser will "bring it in" at the purchase price, provided the purchase price is within the range of values arrived at in the analysis.  If you choose your own appraiser, you can express your concern about the value so the he or she does a more careful job of arriving at a single value conclusion.

    So, if you find yourself in this situation, give me a call. I will take the time to do a thorough analysis and let you know if you are over-paying for you house.

    Many people seem to be unaware that there are several report options for a single family residence, or SFR. The range from the desk review without inspection to the full URAR form 1004. Here are the options:

    A BPO is a Broker Price Opinion and entails looking at recent comparable sales and active listings. It doesn't require a physical inspection and is usually done by gleaning data from the local Multiple Listing Service, or MLS. These can be completed by licensed or certified appraisers as well as real estate agents or brokers. These are the most inexpensive reports, but can be pretty inaccurate if the subject or comparable sales have a lot of differences. These generally not usable for loan purposes. The fee is around $50 to $75 or so.

    A Drive-By appraisal (Form 2055) is a step above a BPO and requires a physical inspection of the exterior of the subject and the comparable sales from the street.  There is no measurement of the improvements or verification of the interior condition. These can be suitable for certain types of loans and for tax purposes. The fee is around $175 to $250 or so.

    The full residential appraisal, or URAR (Form 1004) is designed for loans and is the most thorough of the three. It includes a full interior and exterior inspection of the subject, measuring the the subject and verifying the gross living area (GLA), and inspecting the comparable sales and neighborhood from the street. A comparable form, the GPAR (General Purpose Appraisal Report) is designed for non-lending purposes, but is similar in scope of work. The normal fee is around $300-$400 for tract-homes, more for larger, complex, or custom homes.

    So, the next time you ask for an appraisal, you might want to consider what you really need. You might be able to save a few dollars. Give me a call if you want more information. If you can get by with a cheaper appraisal, I'll let you know.

    I recently found an article in the San Diego Union Tribune that whether you should appeal your property taxes. As it said, if you bought in the last couple of years, you certainly should. The link to the story is found at: Property Tax Story Link

    One of the ways you can appeal is by providing a recent appraisal, which is usually much stronger evidence of home value than recent sales chosen by the average person. Many people make the mistake of choosing sales that are too big or too small or too old. There are many factors to take into consideration, so an appraisal is a better bet.

    I can help you by telling you ahead of time if your home has lost enough value to make it worth your while. I have access to public records and can see what the assessed value is and give you a rough estimate of your current value. I won't try to sell you something that won't do you any good.

    So, if you think you're paying too much, give me a call and we can talk about it. I will let you know if it's worth getting an appraisal and appealing your property tax. Like I said, I won't try to sell you something you don't need and I can give you a good price on an appraisal if you do need one.

    If you order appraisals, have you ever thought about the impression your appraiser makes on your clients? If you think about it, your appraiser is part of your team and to some extent is a reflection of your company.

    When I first started appraising, I remember working with guys that would show up to inspections in shorts and tee shirts, army camo, or the more happening "hip-hop" attire consisting of baggy pants, oversized sweat shirts and gold chains around their neck. Back in the day when loans were fast and furious, this probably didn't matter much. However, in these days of economic insecurity, I think people feel a lot more comfortable when a professional knocks on their door.

    As a representative of your team, my colleges and I always perform inspections in a professional manner, with appropriate dress and attitude. We strive to instill confidence in the person who's house we are inspecting and are always polite and cordial. Unlike some appraisers who quickly and superficially look over a property, we take the time to perform a thorough inspection and answer any questions. If any questions arise later, they are always answered with courtesy and professionalism.

    Our mantra: "Customer Service is Job One!!"

    So, the next time you're thinking about hiring an appraiser, think about the impression they will make on your client. Do you want to risk losing a deal because your appraiser made a bad impression or insulted your client? Feel free to give me a call if you need a professional appraisal in a timely manner. I can help you and your clients with all of your valuation needs.

    Are you feeling squeezed lately?  Finding it a little hard to make ends meet? You're not alone, my friend. This economic downturn is of historical proportions and has caught many a good citizen by surprise.    

    I, myself, had been thinking that I was the only one having a hard time. My colleges appeared to be doing well with no outward signs of hardship. However, after talking with them a little more in depth, it turns out most everyone has had to tighten their belt and hunker down for the duration.    

    Although these are scary times, we can all bring away something from this. Personally, this situation has gotten me to keep tighter track of my money- I'm actually bugeting, which money managers have been urging people to do forever. I'm diversifying and trying to bring in different sorts of business. I'm networking more and taking classes to increase my knowledge and skill base. (Now that I have more time on my hands!) I'm living within my means and paying down my debts.

        I think we will be in this mess for a couple of years. For some reason I think 2010 will be the turning point- it's just an intuitive hunch. Although real estate and the stock market have taken big hits, in the long run, this is where to put money. I read somewhere that there have been 31 recessions since the turn of the century, along with 31 recoveries. There is no reason to believe this will be any different.

    Stay strong, think positively, and do the best you can. This, too, shall pass. I firmly believe that if we learn the lessons this has taught us, we will be stronger for it.

    Have a comment? Shoot me a line. Thanks for visiting my site.

     I recently appraised a beautiful home in Carlsbad that had a value of approximately $1,750,000. As I analyzed the home values for the last 2 years, I found they the rate of decrease in value was much smaller than that of lower valued homes.  Over the last two years, the homes in this area lost about 10% or so, while homes in low-valued areas of, say, Oceanside, lost about 25%-30% over the same period.

    I researched other areas and found the same trends. Higher valued homes tended to hold value much better than lower valued homes. One can speculate that this is the case because at the peak of the market, when homes were probably over-valued, people could only get in to the lowest priced homes with risky, adjustable-rate loans and little to now documentation of income. One the other side of the coin, people who can afford the higher-end homes tend to be a bit more knowledgeable about finances and can more easily document income and get traditional 30 year fixed products.

    When the adjustment came, the market was flooded with lower priced homes in foreclosure while the upper end homes remained unscathed.

    Anyway, I'm just writing this in case you're wondering what YOUR home value is doing. If you're in a high-end area, you're in pretty good shape. If not, then you're probably seen a substantial drop in your equity.

    If you have any questions or comments, feel free to drop me line at paulmcewen@cox.net and I'll get back to you right away. Thanks!!! 

    I did an appraisal the other day in Riverside county. It was a purchase and the buyer was there to deliver the check and make sure everything was ok. It was a nice house and he told me that he actually got in a little bidding war over it. He won, obviously, but at a slightly higher than asking price. It was on the market all of 4 days. When I pulled comparable sales to use in the report, they were all in a very tight range of values with market times of under 3 months.

    Bidding wars? Market times under 3 months? Hmmm... sounds like the old days before the real estate downturn. I think, my friends, that we are at, or very close to, the bottom. Prices are so low that people can't resist buying- but they are also low enough so that people can buy them. Housing is affordable again!!!

    If the credit market can be kept viable, I think home prices will stabilize very soon. If you are in the market for a house, I think now is the time. Once all of these foreclosure properties get mopped up, that's it!

    What do you think? If you'd like to talk, go ahead and shoot me an email at paulmcewen@cox.net . I always enjoy hearing from any readers out there. Thanks for visiting my site and reading my blog!!

    Many people think that when they order an appraisal, they are getting the product of a scientific or mathematical algorithm which, when applied properly, renders an exact number which represents the value of a piece of property on a specific date.

    Although an appraisal is the product of detailed analysis and computation, it is anything but exact. That is to say, an appraisal done by two different appraisers on the same piece of property on the same day could easily render two different values. This is because an appraisal is an opinion of value, not a scientific fact. The opinion must be supported by facts and analysis, but the conclusion is the product of human opinion.

    That being said, if the appraisals are done in a conscientious manner with proper analysis, the value conclusions should be very close. The problem arises when the client or borrower has a different opinion than the appraiser. In my experience, it is very common for a client to believe that their home is worth more than it is. They often point to comparable sales that are over 6 months old, or are much bigger or in superior condition. In this market, many people are still unaware that home values have been plummeting for the last few years and that home values today haven't been seen in 5 to 8 years, depending on the location.

    Although everyone is entitled to their opinion, it really doesn't mean much if it isn't supported by fact and detailed analysis. That's why we strive to keep abreast of the current trends in the real estate market and continually update our education on the latest data analysis techniques. In this market, one cannot haphazardly spit out appraisals (as some appraisers did in the past) without making a detailed analysis of the market and other factors contributing to value.

    If you have a question or would like more information about real estate appraisals, give me a call 760-525-2742 or shoot me an email at paulmcewen@cox.net. Thanks for visiting my site!!

    In a previous post, I talked about the first basic part of a real estate appraisal- the verification of the property attributes. In this post, I will talk about the determination of value.

    In any real estate appraisal, there are three approaches to value that can be used:

    One approach is the income approach, which determines the value of a property based on the amount of income it has brought in and is expected to bring in. This is usually used for income-producing properties such as multi-unit residential and commercial properties. It has very little application in primarily owner-occupied properties because there is no income.

    The next approach is the cost approach, which calculates the cost of constructing the building coupled with the value of the land. If the property is relatively new, this can be a fairly accurate way to find value. However, if the building or "improvements" (as we like to say in the business) are older, then the the calculations become less reliable. There is also the problem of determining a valid value of the site if there are no recent comparable land sales to use for the value. (By the way, on my home page there is a link to building cost.net which is a free service that will calculate the cost of building a home in your area - give it a try!!) 

    In residential appraisals of single family residences, (SFR's or Condos), the most commonly used method for determining value is the sales comparison approach. The concept is quite simple: Three or more recent comparable sales are found that are near the subject. The assumption is that if these comparable sales sold for $X, then the appraised property should also sell for $X.  The problem is that sometimes the "comparable sales" are not as comparable as one would like. They may be bigger, smaller, older, newer, in better or worse condition, have a better or worse location, etc.  When this is the case, then the appraiser has to make an adjustment to compensate for this difference. How do we know how much to adjust it for?  What we have to do is find two or more comparable sales that are only different by that one attribute that we want to adjust, and then see what the difference in price is. This is called a paired sales analysis and can be very eye opening.

    What many people don't understand is that we make an adjustment based on how the real estate market reacts to the improvement, not to how much it cost to put in.  For example, someone might pay $20,000 to put in a pool, but a paired sales analysis indicates that home buyer will typically only pay an additional $10,000 for a pool.  Someone might pay $10,000 to put in a new deck, while a paired sales analysis shows that home buyers really don't react at all to this feature- in other words, it really doesn't add much value. These are only examples and every area is different.  Pools in Oceanside near the ocean aren't worth as much as pools in, say, Palm Springs- for obvious reasons.

    So, I hope this helps people understand a little bit about the appraisal process. You can actually get a pretty good idea of what your home is worth by paying attention to the recent sales in your immediate area (in this market they shouldn't be more than 3-4months old with the same living area and within a half mile).  

    If you have any questions, feel free to give me a call or email. I'll try my best to answer them. Thanks for visiting my site!!

    Someone contacted me stating that he was a first-time home buyer and asked what the process was. Here is my response. Not that I'm an expert, but I have purchased a few properties, so I am familiar with the process. I thought it would make a good blog post for those of you considering buying a home for the first time.

    The first thing I recommend you do is get pre-approved with a lender to find out how much house you can buy. (They don't have to be local- you can get your loan from New York if you want, if they have the best deal. The thing is, most lenders have about the same rate, so one that is somewhat local makes it a bit easier at signing time.)  Many people will not even look at an offer if you do not have a letter stating you are approved for a loan of a certain amount. Make sure it is a letter of pre-approval and not pre-qualification. You can always change lenders later if you decide to, the letter just states that you are good for the loan. If one pre-approves you on the low side, try another. That happened to me when I bought my first house- the first broker approved me at $170,000. Then I went to another that approved me for $210,000. Big difference!!  (That was a long time ago......)