Real Estate Appraisal Between The Lines

Episode 083 - Appraisal Gap Contract Language

With increasing markets come a slew of negotiating tactics by buyers. One of the most talked about is the "appraisal gap" language that many buyers are adding to their offers to ease the concern of sellers over the appraisal valuation. Does that affect the appraised value though? What does an appraiser do with that information? Brian gives his take on this topic.

SHOW NOTES

• 03:10 – What is an appraisal gap?
• 05:00 – Appraisal gap language should not affect the appraised value.
• 06:20 – The market value of the property is indifferent to the contract. The contract or its terms does not have any impact on the market value of the property.
• 06:55 – Does the appraiser feel comfortable writing a "low" appraisal because they know the buyer will make up the difference? NO!
• 08:45 – The contract does not automatically set market value.
• 09:20 – Transparency in Brian's appraisals and appraisal gap contract language.
• 10:40 – Buyers have communicated their contract was above market value. Have the conversation with parties.
• 11:55 – Appraisal gap language is fine in a contract, but don't automatically assume the value of the property is based upon that language.
• 12:30 – Buyer can pay more for a property than what it is worth.
• 14:00 – Appraisers: Do not assume the contract means anything. Do your job, analyze the information, and estimate the market value.

SHOW LINKS

• Leave Your Shoes by the Door Podcast – https://www.mibor.com/about/episode-21-brian-c.-lee/
• Andrew Huber – https://www.linkedin.com/in/andrew-huber-200740129
• Halloween movie – https://en.wikipedia.org/wiki/Halloween_(franchise)

BETWEEN THE LINES LINKS

Email

[email protected]

Web

brianclee.com

Facebook

https://www.facebook.com/groups/realestatebetweenthelines/

https://www.facebook.com/Brian-C-Lee-111822417027919/?

YouTube

https://www.youtube.com/channel/UCcv4dHU39-b5_QVVCIhbcBA?

Episode 082 - Your List Price Increased AFTER Contract?

You're the listing agent and you changed your list price to match the purchase contract. Is it a trick or simply communicating? What does an appraiser think about it? Brian has a candid discussion about that topic and has some suggestions. Bottom line, don't do it!

SHOW NOTES

• 00:30 – I do adore and love my wife.
• 02:30 – Example of retconning the list price.
• 03:50 – How appraiser's view this practice?
• 05:25 – Are you trying to help others by communicating information that might help other sales?
• 07:35 – Unintended consequences to market data that isn't helping you or anyone else in the market.
• 09:20 – Communicate pending price in another way. Agent to agent comments.
• 10:30 – Don't trick or deceive anyone. Be truthful. Act like a professional.

SHOW LINKS

• Retcon Defined – https://www.dictionary.com/browse/retcon
• Star Wars Special Edition – https://starwars.fandom.com/wiki/The_Star_Wars_Trilogy_Special_Edition

BETWEEN THE LINES LINKS

Email

[email protected]

Web

brianclee.com

Facebook

https://www.facebook.com/groups/realestatebetweenthelines/

https://www.facebook.com/Brian-C-Lee-111822417027919/?

YouTube

https://www.youtube.com/channel/UCcv4dHU39-b5_QVVCIhbcBA?

Episode 081 - It's "Grid"-Iron Time

Agents, you want to prove your comparable is good? It is time to put up or shut up. Grid your comparables to show that you put in the work and prove it to yourself, your clients, and the appraiser.

A good comparable grid will break the properties down into the vital elements so you can make a more accurate comparison. Don't do what other agents are doing. Use a comprehensive grid (Brian has one for you if you would like it) so you can see where the value really shows itself.

Go Colts!!

SHOW NOTES

• 01:05 – NFL preseason is here!
• 02:30 – Valuation step that gets missed by agents, gridding comparables.
• 04:00 – The URAR (1004) appraisal form has a grid. Agents are not as lucky.
• 05:40 – Just because it is hard to grid, doesn't mean you shouldn't do it.
• 05:55 – Email Brian if you would like a copy of the Excel file.
• 06:55 – Note all the differences or agents and appraisers will not be on the same page.
• 07:30 – Helpful for agents to communicate with your clients and the appraiser.
• 08:55 – The devil is in the details. Analyze those details to have an accurate comparison.

SHOW LINKS

• Best chili recipe – https://sugarspunrun.com/best-chili-recipe/
• Indianapolis Colts – https://www.colts.com/
• Las Vegas Raiders - https://www.raiders.com/
• Super Bowl 18 – https://en.wikipedia.org/wiki/Super_Bowl_XVIII

BETWEEN THE LINES LINKS

Email

[email protected]

Web

brianclee.com

Facebook

https://www.facebook.com/groups/realestatebetweenthelines/

https://www.facebook.com/Brian-C-Lee-111822417027919/?

YouTube

https://www.youtube.com/channel/UCcv4dHU39-b5_QVVCIhbcBA?

Episode 080 - Is Your Comparable, Comparable?

Agents and appraisers disagree about many things but almost none more vehemently than what comparables to use. Don't fret though, other appraisers, lenders, and homeowners constantly argue with appraisers too. The tough part, there are no rules or definition on what is a comparable property.

In this episode, Brian talks about things to consider when searching for comparables and how to better help yourself in writing a CMA, discussing properties with an appraiser, and just maintaining your sanity on this topic.

SHOW NOTES

• 01:30 – Appraisers do not hate agents.
• 03:05 – Already up to 80 episodes.
• 03:20 – One of the top reasons for agents and appraisers to argue is over comparables.
• 03:55 – Many professionals don't agree what is a comparable is.
• 05:00 – There are some descriptions of a comparable: Fannie Mae and Freddie Mac, USPAP, and other text.
• 07:20 – Difficult to "define" a comparable so it becomes subjective.
• 08:10 – Things to consider when searching for comparables: bracketing.
• 10:00 – Lender will chime in on comparables. Appraiser has to appease the underwriter.
• 11:05 – Comparables should be similar physically, economically, locationally, and legally.
• 11:40 – Many people "know" what a comparable is, like it is a fact. Not possible.
• 13:10 – Agents have some awareness of comparables because they might know what a typical buyer would do.
• 15:10 – A comparable is not necessarily one that just supports the contract price, but not similar in amenities.
• 16:35 – Fannie and Freddie look at adjustments to the comparables. The more adjustments, the property might be less of a comparable. Proximity and sale date are also factors.
• 18:55 – A comparables is not a fact, so don't get mad because the appraiser doesn't use your comparables.
• 20:00 – Everyone says they have the "best" comparables but did they back it up? Explain why your comparables are the "best."
• 20:50 – Explain why a property might NOT be a good comparable.

SHOW LINKS

• Comparable described by Fannie Mae – https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/Subpart-B4-Underwriting-Property/Chapter-B4-1-Appraisal-Requirements/Section-B4-1-3-Appraisal-Report-Assessment/1032992441/B4-1-3-08-Comparable-Sales-10-02-2018.htm#:~:text=Comparable%20sales%20should%20have%20similar,compared%20to%20the%20subject%20property.&text=Fannie%20Mae%20does%20allow%20for,appropriate%20for%20the%20appraiser's%20analysis.
• Appraisal Scoring Model – https://singlefamily.fanniemae.com/media/20576/display#:~:text=CU%20provides%20a%20numerical%20risk,that%20may%20require%20further%20attention.

BETWEEN THE LINES LINKS

Email

[email protected]

Web

brianclee.com

Facebook

https://www.facebook.com/groups/realestatebetweenthelines/

https://www.facebook.com/Brian-C-Lee-111822417027919/?

YouTube

https://www.youtube.com/channel/UCcv4dHU39-b5_QVVCIhbcBA?

Episode 079 - Specifically Speaking About Specific Data with Steve at Yawkey Way Appraisals

What is better than listening to one appraiser tell you what to do? Having two appraisers with the same twisted mind telling you what to do. Brian invited his and brother from another mother, Steve Crellin with Yawkey Way Appraisals onto the show to talk about a very important topic, data collection.

Quite often when there is a difference of opinion between appraisers and agents, it comes down to data. If they are not looking at the same data, the valuation may be skewed.

This is part 2 of 2, where Brian and Steve talk about the subject property elements and data that can and do affect the valuation of a subject property.

SHOW NOTES

• 00:55 – Steve Crellin w/ Yawkey Way Appraisals is back, and he is a HUGE Boston Red Sox fan.
• 05:25 – Recap from last week; outside influences such as legal, locational, and demographics. This week is all about the property.
• 06:30 - URAR has 23 line items to dissect a property.
• 08:10 – Look at all of the elements of the subject property. We touch on few elements but pay attention to the details.
• 08:40 – Lot size; how the home sits on the lot; lot has a huge ravine or on the side of a mountain.
• 10:55 – View; elements that affect sight, hear, and smell. Farming, airports, and railroads.
• 14:15 – Design; ranch versus 2-story; multi-level home; historical homes; log cabins.
• 16:50 – Steve: appraisers saying they "must" or "can't" do something; all we must do is explain. Episode 72.
• 19:52 – Quality; composition of the materials that make up the property.
• 22:15 – Condition; how well have the elements of the subject been maintained; updates to the property.
• 24:00 – Square footage; difference between above and below grade living area; room count.
• 27:00 – Bedroom and bathroom count between above and below grade.
• 29:35 – Car storage; tandem garage; size of garage.
• 33:40 – Exterior elements; patios, porches, fences, and pools; can affect marketability.
• 38:25 – Should Steve come back?
• 39:25 – The details do matter. Pay attention to the specifics about the property.

SHOW LINKS

• Steve with Yawkey Way Appraisals – https://www.instagram.com/yawkey_way_appraisals/?hl=en
• Boston Red Sox – https://www.mlb.com/redsox
• Chicago Cubs – https://www.mlb.com/cubs
• Big Sky, Montana – https://en.wikipedia.org/wiki/Big_Sky,_Montana

BETWEEN THE LINES LINKS

Email

[email protected]

Web

brianclee.com

Facebook

https://www.facebook.com/groups/realestatebetweenthelines/

https://www.facebook.com/Brian-C-Lee-111822417027919/?

YouTube

https://www.youtube.com/channel/UCcv4dHU39-b5_QVVCIhbcBA?

Episode 078 - Generally Speaking About General Data with Steve at Yawkey Way Appraisals

What is better than listening to one appraiser tell you what to do? Having two appraisers with the same twisted mind telling you what to do. Brian invited his and brother from another mother, Steve Crellin with Yawkey Way Appraisals onto the show to talk about a very important topic, data collection.

Quite often when there is a difference of opinion between appraisers and agents, it comes down to data. If they are not looking at the same data, the valuation may be skewed.

This is part 1 of 2, where Brian and Steve talk about the outside influences and data that can and do affect a subject property.

SHOW NOTES

• 00:55 – Introducing Steve Crellin w/ Yawkey Way Appraisals
• 06:00 – Questions asked by agents. What is a comparable?
• 09:00 – Devil is in the details. Pay attention to the small pieces. Are we comparing apples to apples?
• 09:55 – General data described.
• 10:18 – Legal, economic, locational, and demographics.
• 11:15 – Legal components; highest and best use; zoning; HOAs; historical districts.
• 14:10 – Steve's example of zoning issue with a property that has an ADU (Additional Dwelling Unit.)
• 16:45 – Economic components; market trends; provide support for your conclusions.
• 18:55 – Locational elements; shopping and recreation sources; schools; employment; vacation homes.
• 22:36 – Who is the typical buyer for the property?
• 24:48 – Steve talks about skiing communities in Montana.
• 26:25 – Demographics; age; occupants with children; what is the largest population components and what do they make up in the greatest number of buyers.
• 27:35 – Steve talks about retirement communities. Sun City, Arizona
• 31:25 – Recognize the importance of the general data that affects the subject property so comparables can be found that have the same external influences.
• 33:23 – This is not trivial information. Do a better job for your clients, be intentional, be honest, and have integrity.
• 36:36 – Next week is part 2; Steve will be back to contribute; talking about specific data.

SHOW LINKS

• Steve with Yawkey Way Appraisals – https://www.instagram.com/yawkey_way_appraisals/?hl=en
• Marvel – https://www.marvel.com/
• Step Brothers Quote – https://www.youtube.com/watch?v=e23SotgestI
• "Show me the money" – https://www.youtube.com/watch?v=FFrag8ll85w
• Sun City, Arizona – https://suncityaz.org/
• Loki – https://www.disneyplus.com/series/loki/6pARMvILBGzF

BETWEEN THE LINES LINKS

Email

[email protected]

Web

brianclee.com

Facebook

https://www.facebook.com/groups/realestatebetweenthelines/

https://www.facebook.com/Brian-C-Lee-111822417027919/?

YouTube

https://www.youtube.com/channel/UCcv4dHU39-b5_QVVCIhbcBA?

Episode 077 - Market Value vs. Market Price

Real Estate 101 exam question: Define Market value and market price, and explain the difference between the two. Just kidding! This isn't a test.

In this episode B talks about what they are and how they are very relevant in today's market. Knowing the differences can really help you on your next CMA and appraisal challenge.

SHOW NOTES

• 02:00 – Market value vs. Market price.
• 03:10 – Refresher on the terms.
• 05:00 – Market price is a factual number.
• 06:10 – Intrinsic value: what is the property worth to this specific buyer/seller.
• 06:35 – Balanced market the market value and market price are usually the same.
• 07:45 – Market price has increased higher than market value.
• 08:15 – Buyers are motivated.
• 09:15 – Why does this matter?
• 10:45 – Buyer's motivation drives market price, but does the buyer's motivation drive market value?
• 12:10 – Lender is concerned with market value.
• 13:00 – Market price can be supported with multiple offer information.

BETWEEN THE LINES LINKS

Email

[email protected]

Web

brianclee.com

Facebook

https://www.facebook.com/groups/realestatebetweenthelines/

https://www.facebook.com/Brian-C-Lee-111822417027919/?

YouTube

https://www.youtube.com/channel/UCcv4dHU39-b5_QVVCIhbcBA?

Episode 076 - It Depends

Ever ask an appraiser a question and all they give as an answer is "It depends"? Why can't they just give a straight forward answer? There are many reasons for that and B gets into that in this episode.

SHOW NOTES

• 01:10 – Asked many questions, and the answer is usually it depends.
• 02:30 – How much is a basement worth? A garage bay?.
• 03:20 – The appraisal process is not linear.
• 03:55 – Adjustments are the most common question for appraiser.
• 04:10 – Variables change the answer. Value of property, diminishing returns.
• 05:10 – Basements: value, finished area, quality, partitions, windows, walk-out.
• 05:45 – Tandem garage description.
• 06:40 – Specific answers would be nice, but many variables change the answer.
• 07:00 – Valuation is hard to learn.
• 07:40 – It takes time to learn the valuation process; the mechanics, the process, etc.
• 09:00 – Appraisers are worth their money because they know how to work through all of the data points.
• 09:30 – Steve, Yawkey Way Appraisals.
• 10:15 – Forget about adjustments.
• 11:55 – Most things are missed because you didn't grid or fully analyzed element.

SHOW LINKS

• Turkey Run State Park – https://www.turkeyrunstatepark.com/

BETWEEN THE LINES LINKS

Email

[email protected]

Web

brianclee.com

Facebook

https://www.facebook.com/groups/realestatebetweenthelines/

https://www.facebook.com/Brian-C-Lee-111822417027919/?

YouTube

https://www.youtube.com/channel/UCcv4dHU39-b5_QVVCIhbcBA?

Episode 075 - Buying a Porsche By Its Weight

Pricing property should be as easy as pricing a car, especially when you only use one unit of comparison. However, pricing houses does require some effort if you want accuracy and belivability.

Pricing a home only by its size misses so many vital elements and does not provide much relevancy or support in justifying a property's value. Take the extra steps by educating yourself on the valuation process to provide credibility in your CMA, purchase price, and appraisal rebuttal.

SHOW NOTES

• 02:00 – Want to buy a Porsche. How would you price it?
• 02:45 – "Comparable" vehicles sold by the same weight.
• 04:35 – Pricing a property by its square footage is wrong.
• 06:25 – Many elements are missed such as location, lot size, view, age, condition, basements, etc.
• 08:00 – Pricing a property by size is easy but is not accurate or reliable.
• 09:05 – It is not easy but put properties on a grid. Break the elements of comparison down. Put in the work.
• 11:25 – Overall price per square foot vs. line-item square foot adjustment.
• 13:00 – "Rule of Thumb" on a line-item basis.
• 15:10 – Do the hard work and you will get better results.

SHOW LINKS

• Barber Race Track – https://barberracingevents.com/
• Porsche Experience – https://www.porschedriving.com/track-experience
• Porsche 718 Cayman GT4 – https://www.porsche.com/usa/models/718/718-cayman-gt4/

BETWEEN THE LINES LINKS

Email

[email protected]

Web

brianclee.com

Facebook

https://www.facebook.com/groups/realestatebetweenthelines/

https://www.facebook.com/Brian-C-Lee-111822417027919/?

YouTube

https://www.youtube.com/channel/UCcv4dHU39-b5_QVVCIhbcBA?

Episode 074 - What To Give An Appraiser

Agents ask the question all the time, "What should I give an appraiser?" The answer is easy, a bottle of Captain Morgan and not a hard time.

In this episode, B talks about what to give an appraiser, how to craft the information, and how to provide to the appraiser. It might take a little bit of work, but that is your job as a fiduciary for your client.

Help the appraiser with information to help your client, the transaction, and possible your sanity for your next appraisal report.

SHOW NOTES

• 02:00 – Don't give the appraiser a hard time, and probably not comparable sales.
• 02:40 – Give the appraiser information that an appraiser does not know or may not readily be aware of.
• 03:35 – What is a comparable?
• 05:15 – Put comparables on a grid to substantiate your research and purchase price.
• 07:25 – Unique property situations and comparables. If you know of a property that is like the unique property, send that to the appraiser.
• 08:22 – Explain a property that might be a comparable but is not similar based upon condition or motivation, and the property sold under duress.
• 11:05 – Include list of updates to the property with some detail including price and dates.
• 12:25 – Multiple offers are also helpful. Listen to episode 73 about multiple offers. Provide details to the appraiser.
• 13:10 – Explain your position. Write a few paragraphs about how you came up with the purchase price.
• 14:56 – How to get this information to the appraiser.

SHOW LINKS

• HAMCO MIBOR – https://www.facebook.com/HamCoMIBOR/
• The Palladium – https://www.visithamiltoncounty.com/events/palladium/
• Captain Morgan – captainmorgan.com

BETWEEN THE LINES LINKS

Email

[email protected]

Web

brianclee.com

Facebook

https://www.facebook.com/groups/realestatebetweenthelines/

https://www.facebook.com/Brian-C-Lee-111822417027919/?

YouTube

https://www.youtube.com/channel/UCcv4dHU39-b5_QVVCIhbcBA?