Archive for the 'Excellent Agent' Category
A View from the Field- Part 4
On the road again for appraisal class. One more trip to New Milford next week for a 1/2 day of review and then the Big Test. Then I can take my broker exam in January and I’ll be all done with studying for awhile.
There were a couple of interesting “in the field” points that were made this week in class, particularly in regards to fighting appraisals that come in less than the contract price. Houses “not appraising” is becoming more common because banks are really cracking down on appraisers. They really want to ensure they’re not overpaying for the asset. A few years ago the pendulum was swinging the other way, banks were too lax on appraisal reports. Hopefully we’ll eventually end up at some happy medium in the near future.
But in the meantime, we’ve got all of these properties that are not appraising. In this situation, the Seller seems to be in a more difficult spot than the Buyer. In most cases, the Buyer will not agree to pay more than the appraisal report states as that’s the value that’s accepted by the bank. The bank will not lend on more than the appraisal report indicates, unless the Buyer is willing to make up the difference by bringing more cash. That situation is really not happening now.
So what’s a Seller to do if the house does not appraise to the agreed upon contract price? Well, they can always walk away from the deal. No one is forcing them to sell their house. They can agree to the value on the appraisal report and lower the contract price. Finally, they can try to fight the appraisal, but this is typically very difficult to do and in almost all cases unsuccessful.
Our instructor seemed to indicate that the only good way to get an appraisal reevaluated would be to bring some less than obvious information to the bank/appraiser regarding one of the comparable houses used in the analysis. One way would be if the agent could prove that a comparison sale was not an “arms length transaction,” that might do the trick. For example, if the Seller of the comparison sale sold their house to a relative or a neighbor. That wouldn’t necessarily be an “arms length transaction” because they might be willing to accept a lower price in this type of situation. The comparison sale would then be brought into question, so it could be argued that it should be replaced with a different comp for the appraisal report.
Unfortunately for the Seller, it’s fairly difficult to track down this type of information. And in most cases the appraisal is valid, the appraiser is a trained service provider and they’ve done all the necessary research and are just reporting back their opinion of value for that specific day.
The market is becoming more challenging on all fronts. If you’re a Seller and you find that the appraisal value comes back short, talk to your agent about your options. Everyone’s situation is different. Some sellers will take their house off the market, some will choose to sell to that buyer, and some will keep their house on the market but the buyer will walk away. Only you can make the right decision for you.
A View from the Field- Part 3
Trek #3 out to New Milford for appraisal class. At least I only paid $2.99 a gallon for gas this week.
Today I learned about 2 of the 3 different approaches to appraise different types of properties; the Sales Comparison Approach and the Cost Approach. Next week we’ll learn about the third approach, the Income Approach. Really fascinating stuff to the lay person, I know.
But now I know that if I want to appraise a house, I would use the Sales Comparison Approach and use sales of similar type properties to arrive at a value. Adjustments are made here and there to take into consideration various attributes. It’s really not that different than what I would do for a market analysis for a seller or buyer.
I also know that if I want to appraise some unique building, that the Cost Approach would be the best way to go. For example, if I want to appraise the new Yankee Stadium (boo, hiss!), this would be the correct approach. Essentially you determine the depreciated reproduction cost of the building (how much it would cost to rebuild from the ground up, using the same materials) and add it to the underlying value of the land on which it sits. Fun!
Much of what I’m learning in class isn’t necessarily relevant to my area of practice in real estate, but it does give me an understanding of the bigger picture, which is always helpful.
At the beginning of today’s class, we were given the chance to talk about our local markets and the trends that we’re seeing. Here were some of the revelations…
Litchfield County- Land purchases seem to be moving. Buyers aren’t developers, but “regular” people. For example, someone will buy 18 acres at $20,000/acre with the hopes of eventually building a house on a large tract and then maybe spinning the rest off in the future to a developer. These “regular” people are hedging that land in Litchfield County will continue to be desirable to city folk.
Also, developers like Pulte and Toll Brothers are starting to explore the market again, anticipating that things will rebounding in the next few years, so they will be poised to react.
Greenwich- Houses in the $5-$8 million range are still selling very well. Huh. Must be nice.
Lower Fairfield County- Houses with a first floor bedroom are highly desirable and commanding premiums, as they are in low supply. The baby boomers are looking to downsize, but don’t want to move far, so they’re fighting over homes with a one-floor living option. I believe this will become more prevalent in all areas, particularly if boomers don’t want to live in 55+ communities.
A View from the Field- Part 2
Today was session 2 of my 30 hour appraisal class. Back out to New Milford I went.
One concept we talked about that I found particularly interesting was the highest and best use for a property. In order for an appraiser to determine a final value conclusion for their appraisal report, they must understand the optimum use to which land or improved property can be put. To do this, they’ll look at 4 tests:
1. It must be physically possible.
2. It must be legally permissible.
3. It must be financially feasible.
4. It must be maximally productive.
The most common way to use this would be to determine if a large piece of land with a house on it could potentially have a higher and better use by appraising the property as subdividable land, rather than appraising it for the value of the house plus the lot as it currently exists.
The reason I am fascinated with this is because I think I have a higher and better use for my neighbor’s property. I’d like to annex their lot, move their house to another location, and build a garage for my house. My current lot probably not big enough for a garage, based on Hartford’s zoning laws. My neighbor would most likely disagree with my plans. So let’s put it to the test… 
1. It is physically possible to move their house and build a garage.
2. It is legally permissable to move their house, annex their property, and build a garage.
3. It is financially feasible to move their house, annex their property, and build a garage. (though not reasonable considering resale value)
4. It is not maximally productive to remove their house in order to build a garage. It fails the highest and best use test.
And because I’m a logical person, I don’t want to violate highest and best use. And now my neighbor is going to hate me for publicizing my diabolical scheme.
Funniest part of the day: We were looking at a Killingworth town engineering map in class. There is actually a street called ROAST MEAT HILL ROAD in Killingworth. I am not joking. Who could actually live on Roast Meat Hill Road? Doesn’t that really kill resale value? Does PETA set up daily protests? Talk about politically incorrect…