Are Appraisals Preventing a Housing Recovery? Part 2 of 3

The day of the appraisal I waited at the property with my comparable sales in hand to help justify or at least come close to our Sales Contract price. The first thought that entered my mind when I saw the appraiser was "is he out of high school yet?" A young man walked in and as he introduced himself I took the opportunity to see where we stood on valuation. I casually struck up a conversation asking a series of questions.

"So what kind of adjustments do you make for a home with a recently updated kitchen and bathrooms?" 

His answered "unless they are within a year, we do not give them any value"

“The updates were about four years ago,” I explained, “and are quite extensive.” “The seller even took a wall down to open up the living room during the process". I added, but decided to move on.

"How about impact windows" I asked

 "We do not give them any value." He said much to my surprise.

"Did you notice the authentic Chicago brick circular driveway? There are also extensive Chicago brick patios in the back yard extending all the way to the water. It would easily cost over $40,000 to do this to any other property."

"We don't give it any value," he shot back, making notes on his clip board as he walked through the house.” He added, "A new buyer may not care about any of these improvements."

"Well...I had two buyers who must have cared about them because they both made offers within two weeks of each other and the property has only been on the market for six weeks," I noted.

"How about the fact it is on the wide part of the lake with panoramic views?" I asked, and then handed him one of my comparable properties. "This house sits at the end of a canal facing his neighbor about 25 five feet away, with no direct views and the soot collects on the water in front of their dock," I said, almost begging.

This may shock you...

"We don't make an adjustment for that," he retorted.

"The seller also buried the electric in the back yard and brought in the tropical landscaping and palm trees at a cost of about $15,000.  Here is a property that sold for $410,000 about 8 months ago with no landscaping, and it had to be completely renovated," I said, handing him the listing sheet.

"We don't adjust for landscaping."

“So basically, all you’re doing is appraising the land and treating the improvement (the home itself) as a shell?” I asked.

He didn't answer.

After this encounter, I went to work again preparing my seller to come down from our contract price and my buyer to come up from a possible low appraisal.  With years of experience in the real estate business, I have kept my fair share of deals together. To be continued.