Home talk with Brenda Kolbrich & Tracy Canning

BRENDA: The number one question I get asked by my sellers is, “What do you think my home will appraise for in this market? And what are the appraisers looking for when putting a value to my home?” The answers may surprise many homeowners. We have asked Tony Pudwill from Meridian Appraisers some of these very important questions our clients ask us. Tony, when appraising homes do you look first for a conventional sale and then look for the short sales and foreclosures?

TONY: In my initial data search I make no distinction between conventional and distressed sales. I want to see them all. A major issue in today’s appraisal environment is the use of foreclosed and/or short sale comparables. With 60-70 percent of all current transactions being REO or distressed properties, this market segment cannot be ignored by appraisers. In most areas, the differences between the distressed property transactions and conventional transactions has become negligible. The high volume of distressed homes continues to put downward pressure on pricing.

TRACY: How many comparables are the lenders typically asking for now?

TONY: Three comparable sales are still the required standard for the industry, however very few appraisals prepared by my office have less than five comparables. Some lenders/clients require to stay within the subject neighborhood. Using market data from outside your neighborhood is the easiest way to arrive at an inaccurate value estimate. Gross sq. footage, quality and condition of the home are other significant units of comparison looked at when choosing the best available indicators of value.

BRENDA: What are homeowners’ “upgrades’ really worth and do appraisers put any “value” to these. i.e. granite, hardwood flooring, upgraded kitchen cabinetry.

TONY: Quality upgrades do contribute to the value of residential properties, however, typically less than their actual costs. Kitchen and bathroom upgrades generally bring the best return. If an item is obviously dated or in disrepair replace it in order to maximize your sales price. If it is in good condition and functional, upgrading it will not be a good investment.

TRACY: The market continues to be very busy with buyers and sellers but not all transactions get closed. In the past year many homes under contract did not appraise at the contract price which caused a number of sales not to go through. If the buyers and sellers cannot work it out then the home goes back on the market.

TONY: I would hope people understand that appraisers do not set the market, they reflect the market. When a market is as distressed and volatile as today’s housing market is, the accurate appraisal of homes becomes more challenging. What I would like to see is less government-mandated requirements and more individual responsibility placed on lenders to utilize competent and experienced appraisers.

TRACY:

It is so important to listen to an experienced real estate agent and look closely over the comps when making a decision on what price to sell your home. Although real estate agents are not appraisers, we will still use similar if not the same comps that an appraiser will use when pricing your home. In this market, it is extremely important to price your home correctly.