Mikelly Posted August 31, 2005 Share Posted August 31, 2005 So we just went through an appraisal and are refinancing our home. Our place has a bunch of upgrades, but could certainly use new interior paint and better landscaping, especially in the back yard! However, We've got a LOT of stuff/ amenities, including the 3 car detached garage with upstairs and the new paved driveway, upgraded floors, new appliences, and a re-surfaced deck. Our home also added about 540Sq.Ft. additional to the home since Summer 2003 when we last had it appraised. Last time we got an appraisal, I didn't have these extras other than the garage and it came back at $218,000 then... We just got the appraisal and it was $324,000. My concern is that we have home much smaller, on smaller lots, with less amenities on the markter and selling for that price. I realize that the appraised value and the "market" value are different, but what factors are used to determine the appraised value of realestate? I'm happy with the amount the home has gone up. It has been an excellent investment for me, since I bought it for $126,000 in May 1998. I'm very pleased, but still a bit confused. We may sell it next year or the year after. Or we may rent it out and wait a few more years to see what the market does... But I want to educate myself more... Mike Mike Quote Link to comment Share on other sites More sharing options...
Guest Battle Pope Posted August 31, 2005 Share Posted August 31, 2005 I know a couple of appraisers but have no idea how it works. Quote Link to comment Share on other sites More sharing options...
Tim240z Posted August 31, 2005 Share Posted August 31, 2005 Having had my place appraised a few times for refinancing reasons over the past few years, this is my understanding: They look at 'comparable' homes with 1 mile of yours and see what they sold for. Then they look at the size of your house and general condition, lot size etc. If no homes have sold in your area over the past month or so, then they go by the median price in your area..... Quote Link to comment Share on other sites More sharing options...
Bartman Posted August 31, 2005 Share Posted August 31, 2005 In general they just get infomation about other homes that have sold in your neighborhood and then compare those houses to yours. They have set values for differences in liveable square footage, lot size etc. I had my house appraised not to long ago and I was a little disappointed in my value as well. I found out that the upgrades don't really make much of a difference in the appraised value. I have a 500 sq ft covered patio, a $40,000 + pool and jacuzzi, a loft and an additional garage that I build (with permits); and it hardly added anything to the appraisal. My house has gone up quite a bit (I bought it brand new in 94 for $130k and it's now worth around $500k), but it should be worth more than the other houses in my neighborhood that don't have all the upgrades that I do. Did you get the complete report? You can request a copy and see how they actually calculated the value. Quote Link to comment Share on other sites More sharing options...
Tim240z Posted August 31, 2005 Share Posted August 31, 2005 I was really impressed with my last appraisal, even though it was very conservative: paid $280k 6 years ago, appraised earlier this year for $805. we did put on a $200k addition (adding 930 sq.ft to the orig. 960 sq ft), but realistically, in this area, we could get $900k tomorrow without advertising on the 'market'......don't go by the appraised value for selling purposes.....talk to a realtor (a good one, with experience in your area). They will give you the realistic value in the current market (although the market has slowed drastically, it is still pretty vibrant) Quote Link to comment Share on other sites More sharing options...
Mikelly Posted August 31, 2005 Author Share Posted August 31, 2005 I"m gonna ask for a copy of it. My home is a custom contemporary, and finding something to compare it to in my area is difficult. I'm not overly concerned, since I've had within the last 18 months two different realtors offer me $350K for it from buyers who were car guys. I expect we'll get about $350-400K if we put it on the market next year, but we'll be buying into the same market, buying something in the $500-600K range. Who knows... We pulled our own comparisons and the only homes in our combined THREE subdivisions cam in at $289-325 and were about 700SqFt. smaller with No garage and smaller lots... Oh well. Mike Quote Link to comment Share on other sites More sharing options...
Metallicar Posted August 31, 2005 Share Posted August 31, 2005 Appraisers are folks who put "values" on homes for the benefit of protecting the mortgage holder. Yes, they use what they call "comps"; usually they need three or more, sometimes six, depending on the mortgage originator. If GOOD comps are not available, such as you have "more or less" than local recent sales; the appraiser starts making judgment calls on your "adjustments" (your pool or extra garage). The thing to remember is, he has to be conservative, because if he over-states the value, and you default, and the mortgage company cant get their money back at a sheriff sale or however, the appraiser will lose his customer or worse. Since the real estate market has been busy for the past two years, due to lower lending rates, home sale prices have gone up. These current "high" prices are considered over priced by many, and the market is going to make a "correction" and prices will fall or at least go flat. Listen to talk radio and you will hear about all of the cities where the "bubble has burst". Since the lender is worried about his money for the length of the loan, and the news is bleak, current appraisals will look weaker than they would have if done about six months ago, depending on your market. Me, I don't know if I would wait to sell, if I were thinking about it. Prices are going soft, interest rates are going up, No real government change due for a few more years. I think it's sell now, if it is not too late AND wait to buy in another year, after prices drop. A warning! DO NOT get caught up in the high price frenzy. Be very careful not to overextend yourself, because it is very easy to do. The high sale prices have made it easier than ever for folks to leverage the **** out of their homes. Plan your budget like you had to pay your mortgage based on a rate of 2.5 percent of what you pay now. Quote Link to comment Share on other sites More sharing options...
Mikelly Posted August 31, 2005 Author Share Posted August 31, 2005 Oh trust me, We are not eating into the 80% range. Nowhere close. What I've seen in Northern Virginia, where the market has only gone up and up, with a slight plateau in the early 90s is that the housing market here, and the shortage in affordable housing will not slow, even as interest rates rise. Mike Quote Link to comment Share on other sites More sharing options...
Metallicar Posted September 1, 2005 Share Posted September 1, 2005 the shortage in affordable housing will not slow That's a fact! With one million people or more in the deep south looking for a place to live now...... Moving to Houston and a place near you! Home Building is the business to be in. Build houses that folks who make $30K can afford, at a profit, and you will never be out of work. Quote Link to comment Share on other sites More sharing options...
wheelman Posted September 1, 2005 Share Posted September 1, 2005 Home Building is the business to be in. Build houses that folks who make $30K can afford, at a profit, and you will never be out of work. This is exactly what's going on in the market where I live. Many developers have moved in and are building very low priced houses and cutting into the rest of the market. I own a rental house and a 4-plex which I'm now forced to lower the rents on in order to compete with the new cheap (in more ways than one) housing. Be very careful about purchasing a house right now. I think the market is about ready to either platue or contract which will cause home values to stagnate at best and fall at worst. If I were in Bart or Tim's situation I'd get out while the gettins good, sell and move to another area where I can get a comparable house at a much lower price and invest the rest. Anyway to comment on the real question about appraisers. It sounds like your house has no comps in the local area which forces the appraiser to be conservative in their "guess" of the house value and in a volatile market they are more conservative as well so you have 2 things working against you. Wheelman Quote Link to comment Share on other sites More sharing options...
Here comes trouble Posted September 1, 2005 Share Posted September 1, 2005 Sell now... there ia a good chance this market is going to belly flop since lenders are approving mortages in amounts the buyer cannot afford Quote Link to comment Share on other sites More sharing options...
Mikelly Posted September 1, 2005 Author Share Posted September 1, 2005 I'm not about to sell right now. Matter of fact, I won't be selling until my brand new Senior in high school, soon to be 18 year old stepson is out of highschool next spring/ summer at minimum. Won't do that to him in his last year. I'm not sure about other parts of the country, but the Washington DC area has been pretty immune to the rollercoster ride that has seems to constantly impact other parts of the country. Worst case scenario I could rent it out for between $2000-2200 per month and come out ahead (By about $500-700) on it and sit until the market regains more momentum. We're fortunate where my house is located that it is a good, middle class neighborhood with excellent schools and good shopping within 2 miles. Mike Quote Link to comment Share on other sites More sharing options...
Pop N Wood Posted September 1, 2005 Share Posted September 1, 2005 From what I have seen appraisels ususally come in about $500 over the selling price. Tell the appraiser what the buyer has agreed to pay for the house, or what you want to refinance you own house for, and the appraiser will do the rest. And not everybody wants pools or multi car detatched garages with lifts. Upgrades are nice, but the single biggest thing setting the price of your home is the availability of houses in your area. The only real way to tell is to see how quickly overpriced homes sell in your area. A realtor can do that for you. And the real estate boom/bust is highly regional. I live near Ft Meade and the NSA area. The recent round of base closing are suppose to bring something like 20,000 additional jobs here in the next two years. They might even extend the DC metro to here. This is after the price of my home trippled in 5 years. Homes in my neighborhood sell in hours. Overpriced ones might take a few weeks to sell. Prices are not going down anytime soon where I live. Quote Link to comment Share on other sites More sharing options...
Metallicar Posted September 1, 2005 Share Posted September 1, 2005 Sell now... there ia a good chance this market is going to belly flop since lenders are approving mortages in amounts the buyer cannot afford Yep, lenders have been giving money away to alot of people. It is all part of the market frenzy. The lenders felt confident that as long as home sale pricing was going up and up and up, they (the lender) stood on good ground and that they could better than recover their dough in the worst case scenario (the borrower's default). The real estate market like everything else is cyclic. Some realtors I know, say it is historically a 10 year cycle, well in the Eastern PA, region anyway. I think, the DC Beltway is no exception to this, as Mike said, it has just kept going up with a slight plateau about what? ten years ago? So as I said in an earlier post, the prices may not drop during this period, but they will go flat. Flat is better than down. Quote Link to comment Share on other sites More sharing options...
wpnmkr Posted September 1, 2005 Share Posted September 1, 2005 Won't do that to him in his last year. You're way cool Mike ! Quote Link to comment Share on other sites More sharing options...
Phantom Posted September 1, 2005 Share Posted September 1, 2005 Mike, The appraisals in this area are done much the same way as those already described. Some items, however, affect the appraisals in different ways - specifically any structure not part of the home. One example would be a swimming pool - it's worth a flat $7,000 in this area - no matter what you paid for it. Outbuildings can actually lower the appraisal value of the home if they don't compliment the architecture of the home or - if they provide something the average guy wouldn't want/need - they add very little. Landscaping will also affect it. Grass & a specified number of shrubs garners the average. If it's in poor shape it hurts "curb appeal" and lowers the appraisal - if it's really nice - just the opposite. The age of the home also affects the appraisal. The home next to me was actually built 5 years before mine. Because of that it appraises at a lower value/sq.ft. that mine. When I bought my house I got it for about $55/ft, now it's worth about $80/ft - but then I've sunk over $100,000 in upgrades and landscaping into it over the past 20 years. Quote Link to comment Share on other sites More sharing options...
RB26240Z Posted September 1, 2005 Share Posted September 1, 2005 Since I do appraisals and real estate for a living, I'll put in my .02 cents. Most of the comments are right on target. In terms of a home's value, a house is appraised based on the value of similar homes that sold in a one mile radius within the past six months. Usually 4-6 comparables are used and price adjustments are made. Some examples, (here in California, it might be different for other states) Swimming pool= 10,000 Jacuzzi=5000 Bathroom= 3000-5000, if the property is on a busy street or near a freeway an adjustment up to 35,000 can be done. Age of the building 10,000-25,000, adjustments are also made for external and functional obsolescence, e.g property being near an airport or railroad tracks. All these numbers are not fixed, it is the result of different data, county records.... If there is an addition to the property, it is only considered by the appraiser when it is done by a permit and the city records show the addition. Personally, I get the question of "What do you think will happen to this market" about 4 -5 times daily. And, my answer is, if I knew I would not tell anyone and make lot of money! However, my own opinion based on this market is we might see a slight downward adjustment by the end of the year and a period of flat movement ahead. I don't think there is going to be a sharp drop. Real Estate in Los Angeles sells for up to 500/sq.ft, for areas that were selling for 185/sq.ft 5 years ago. Are these houses worth that much, I think not. It is the market and human psychology. When there is equilibrium, the market is flat. When sellers are in control market goes up, and when buyers are in control, market is generally on a downslope. If you are not planning to sell your home in the next 8-10 years, it does not matter what happens to the real estate market (granted you have a good loan program locked in for at least 10 years). If you are trying to get the top dollar for your house, now is the time to sell. If you are buying, I would wait till next year. Sorry for the long post, hope it 's of some help. Henry Quote Link to comment Share on other sites More sharing options...
Tim240z Posted September 1, 2005 Share Posted September 1, 2005 Good info Henry, thanks! We are locked into a 15 year mortgage, fixed at 5.25 APR....so we are happy and not going anywhere.....at the rate we are going, we will have it paid off in 12 years.... Quote Link to comment Share on other sites More sharing options...
RB26240Z Posted September 1, 2005 Share Posted September 1, 2005 That's a good program with a good rate. This is exactly what I was talking about. (Not planning to sell and locked in a good program). Good choice Tim Quote Link to comment Share on other sites More sharing options...
Mikelly Posted September 1, 2005 Author Share Posted September 1, 2005 I spoke with the appraiser today. He said they looked on the comps for the last 30 days and found nothing comperable. They pulled 60 day comps and found nothing comperable. He then called the lender and asked what we needed and adjusted from there. He told me flat out that my home was worth $30-40K more if it were on the market, but we were just looking to refinance at the end of an arm period, and wrapping up my oldest stepson's college loan in it and a few other small bills. He explained a few things that made more sense, and told me the one or two things I needed to know in preparation for selling it next year. Mike Quote Link to comment Share on other sites More sharing options...
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