Yes, my listing agent was very thorough with the comps. She even created a list of comparable sales that were very close to this property and attached it to the listing (for viewing by other agents only). The comparable sale analysis came out with $867,000 as the average for this type of home. The list included the homes I mentioned before that have the same type of stairs issue and small lot. They were not remodeled and they did not have the same quality of views.
So, she marked it up with a note “$53,000 premium for new remodeled condition and superior views”. That was when she was trying to get the $925,000.
I’m sure she will be using the same list to review with the bank’s designated appraiser.
Your agent is smart to provide the comps info for the appraiser. I successfully disputed one appraiser’s valuation years ago and since then have always provided a list of comps as well as a one page list of upgrades and special features for our homes. We’ve had appraisers make mistakes in the number of bathrooms, square footage, age of house, number of HVAC systems, etc., and not once have the mistakes been in our favor. The only guy who reacted negatively at first was an appraiser who’d screwed up on the same house previously, and after I pointed out the significant errors in the first report he changed his tune.
I hope the superior quality of your work and finishes will be readily apparent to your appraiser and closing will go smoothly.
^ Unfortunately, in appraiser-land the difference between superior condition and average condition is usually not a large amount.
After the real estate crash, changes were made in how appraisers get assigned to evaluate a property. It’s an anti-fraud measure - during the boom leading up to the crash in 2009 there was a lot of collusion between agents, appraisers, mortgage brokers and owners, as properties were flipped back and forth multiple times in a short amount of time at ever higher prices, with the final sale either to a mark who thought he was making a good purchase based on comps which had been artificially raised by this process, or to a “phantom” buyer who was paid a fee to buy the place, with collusion by the appraiser to set the value and the mortgage broker to push through a mortgage even though the buyer was not even remotely qualified and may even have never intended to try to pay the mortgage. These loans were all immediately sold, and almost immediately defaulted on.
We saw it a lot in my area, especially among the immigrant/illegal community, where people who lacked English language skills and had little financial sophistication put their trust in certain people and were basically robbed. A couple of the bank-owned properties we acquired showed this pattern, and we picked up some places for less than 50% of the previous sale amount.
As a result, the use of private or self-employed appraisers was dropped in favor of bank-affiliated ones, and you can often wind up with an appraiser who doesn’t live anywhere close to the property and has no idea of the local market conditions. They may not even have access to the local MLS to do proper research. So it is wise, almost essential, to spoon-feed them as much information as you can, because you just don’t know who you are going to get.
My understanding is that the banks now have to go through a ‘clearing-house’ to order an appraiser. They will put in an appraisal request to the clearing house to enforce a ‘hands off’ on who the appraiser will be. The clearing house is a whole new business that makes money as the middle man. They have set rates for their pool of appraisers. The appraisers in the pool are making hardly any money. Independent appraisers who work for themselves and do not join one of these pools are out of business now. So, one part of the recession is that there wasn’t enough work for appraisers so they lost their jobs, but many appraisers also lost their jobs because they didn’t join these clearing houses.
I have ended up with appraisers coming from the Inland Empire (Riverside, San Bernardino) who don’t have any knowledge of valuing coastal properties or unusual properties. My biggest beef (as described by notrichenough above) is that they will give an added value of $25k or less for ‘remodeled’ or ‘superior’ condition. Really??? Why don’t you refer me to the contractors and remodelers who will do all this work for $25,000? I would really like to hire them. Do they really think buyers look at a trashed house and say “I can get this into Superior condition with a budget of $25k”. ???
Another amazing thing about bank appraisals is that 90% of the time the value of the home comes out exactly the same as the sales price. I find it amazing that a home selling at $550,000 appraises at exactly $550,000. Not $548,000 or $560,000 - really?
That is because the appraiser’s neck is not on the line and the bank wants to do the deal.
Try to appraise the property without an offer in hand, for tax purposes, then the appraised the value will be way under the real value. We did exactly that for my mom’s condo, when we did an appraisal right after her death, it was a very low value about 40% below what we sold for, when it was in contract, the appraisal magically raised to the sale value. We had two appraisals after it was in contract, both are back dated to the date of death as well as the first appraisal. We could not use the buyer’s bank appraisal, because that is based on sale date, several months later after death.
In my case, the buyer put more than 60% down, so the appraiser knows about it and the bank has no risk to make the loan. There is no risk for the appraisers, so they just raise the value to the contract value, total of 4 appraisals, one is 40% below the other, go figure.
Yes, I noticed that. We had a bank appraisal for a refinance on my personal residence - no sales price to dangle in front of them. It came in ridiculously low, very conservative. I didn’t care because we were just trying to refinance the mortgage but I found it interesting.
Just received a great email from the City Building Inspector. Every time he came through the house I kept joking that I was doing the City a favor by taking a Health and Safety mess off their hands and renovating the home into liveable condition. I kept promising to show him ‘before’ pictures. Just a couple of days ago I finally got around to sending him an email with the before photos lined up against the after photos. He could care less that I was selling it, he made it clear to me after he signed the final inspection papers. He said “I just signed the final, please tell me what you are planning to do with this house. Are you going to sell? Or are you going to live here?”
He just replied back:
Thanks for the photos. You did an excellent job taking an eyesore and turning it into a beautiful livable home. Congratulations!! I hope you continue to search out other houses that are in need of you talents. It was a pleasure working with you on this project
You don’t want a low appraisal at death. Then if you sell at a higher price, you have to pay cap gains taxes, right? (There are exceptions if there are estate taxes).
What is a better appraisal than what a place is actually selling for? The sales price is kind of the market price at that moment in time. There are exceptions.
My daughter’s place was bought at an all time high and it appraised at that number.
Well, one important factor as to the value of a property is the actual price negotiated in an arm’s length transaction in an open marketplace. So, if the price is otherwise in the ballpark, it makes sense that it would appraise exactly at the contract price.
When DW the real estate agent is present for appraisals, they always want to know what the price is. They clearly still have some incentive to come up with a number that lets the deal get done, and if an appraiser blows up too many deals with low-ball numbers I think they will find themselves getting very little work IMO.
“You don’t want a low appraisal at death. Then if you sell at a higher price, you have to pay cap gains taxes, right? (There are exceptions if there are estate taxes).”
You are exactly right, but if you are keeping the house, the appraisers will not put their necks on the line and make a high appraisal for you. Its their necks vs IRS. Only when it is sold then they will back date the appraisal in light of the sell price. Remember, in my case, mom died 7 months prior to the sale. The first appraisal was one month after her death and it was not on the market so the low ball result.
Just so I understand… If you need to sell a house out of an estate/trust for the beneficiaries. You need to get an appraisal right away? Or can you wait until you sell the house and then get it appraised for current market value and then ask for a separate document that is re-valued back to the date of death?
What if there were major capital improvements between date of death and sales date? Does the appraiser care (since they don’t seem to put much value on capital improvements anyway)?
In commercial world, the difference could be more dramatic. After the 2007-8 crash, I was getting a refinance loan for this motel, the first appraisal came in 3.5 million and after lengthy negotiation, it ended up 5 million and we were in contract to sell the property before the crash for 9 million, go figure.
“Just so I understand… If you need to sell a house out of an estate/trust for the beneficiaries. You need to get an appraisal right away? Or can you wait until you sell the house and then get it appraised for current market value and then ask for a separate document that is re-valued back to the date of death?”
You can wait until offer in hand to back date the appraisal. But when we did the appraisal one month after her death because we were going to keep the condo for one of my brother. It turned out that my brother could not move to CA, thus the sale.
Improvements do not add value to the appraisal, because in theory, you appraise the value to the date of death and to that condition. That is in THEORY.
“Do you have to have the property appraised at death?”
Yes for tax purposes. If the property is not sold, the gain will be realized later any way, so the appraiser is going to be very conservative AND in a way it is a basis for splitting/distribute the estate.
Artloverplus, aren’t capital improvements after the appraisal at death added on to the value of the appraisal for tax purposes.
So, property appraised at $500,000. $100,000 capital improvements after appraisal. Cost of property is $600,000?
Then you can add on costs to get the property for sale if they are done before 90 days of the property closing? Painting…carpeting , etc, can be deducted from the sales price or added to the costs…I can’t remember and the taxes come out the same.
We had appraisals of 3 properties after SisIL died. All 3 properties were very low ball appraisals, way below even the property tax valuations. We even had the properties appraised twice and it was low both times. Our realtor said we’d probably get at least double the value of one of the appraisals if we sold the property.
We wanted high valuations for depreciation, since we are renting out the properties. We also may sell the properties at some point and prefer not to overpay capital gains. Oh well, when we sell, it will probably a 1031 exchange for other rental or investment property.
