Paul's Appraisal Blog

(Taken from Appraisal Institute News)

As home values dip, so do the value of many high-end home improvements, according to a Jan. 12 National Kitchen & Bath Association survey. Remodeling magazine’s Cost vs. Value Report 2009-2010 found that small-scale, low-maintenance projects and replacements and an emphasis on essentials over extras may lead the way to recovery in the housing market.

The 2009 results indicate that remodeling activity continues downward, despite the 2008 survey declaring the market was about to reach bottom and start turning up. In 2008, overall cost-value ratio was 67.3 percent, down 2.7 points from the year before; in 2009, the ratio was 63.8 percent, a considerably larger 3.5-point drop, according to Cost vs. Value the report.

“It’s not a good idea to over-improve to the degree you have the best home in the neighborhood. In a hyper real estate market, you can get anything; but in a depressed market, the likelihood of recouping many investments is reduced,” Appraisal Institute Immediate Past President Jim Amorin, MAI, SRA, told Remodeling magazine.

John Bredemeyer, SRA, from Omaha, Neb., agrees with implementing minor changes to bring a property up to par with its neighborhood. He told Remodeling magazine that in most cases, “freshening up” jobs, like re-facing cabinets, new flooring or counters, are worth executing.

Appraisers agree that windows and siding tend to have reasonable paybacks in most markets. But some other energy and resource-efficient home improvements may still be too uncommon — and therefore not reflected in usable comps — to appraise near their cost, according to Remodeling magazine.

As for design trends, simplicity is king in 2010. Shades of white, off-white, beiges and bones in kitchens and bathrooms remain the safest bets. Ceramic, porcelain and natural stone tile are popular flooring options. For countertops, granite continues to be all the rage, according to the National Kitchen and Bath Association’s survey.

Cherry is the most popular wood for kitchen cabinets, and pull-out faucets will continue to reign over standard kitchen faucets. French door and freezer bottom are the two most popular refrigerator styles, and the gas range leads the charge in cooking options. Standard dishwashers will be the most common in 2010, according to the NKBA’s survey.

    I read a scary article on MSN.com about people that have bought houses, only to find out that they were at one time "Meth Labs".  Labs used to make methamphetamine, or meth, are incredibly toxic and more often than not leave behind dangerous levels of toxic chemicals.

    Although one might think that these types of houses are only found in lower income areas, along side "crack houses", the fact of the matter is that they have been found in every conceivable neighborhood, from low end slums to "well off", affluent neighborhoods.

    The toxic residue left behind has caused numerous medical problems for the occupants, some of which are very serious, especially for young children. Additionally, once you discover you have a "Meth House", it is very costly for clean up and you cannot sell it without disclosure.

    One of the scariest things is that you cannot tell by looking if your house was a "Meth Lab".  It could appear very clean and well maintained, yet still have dangerous levels of toxic residue. I, personally, am very concerned, especially knowing that San Diego is the Meth capital of the United States.

    I'm no expert, so don't take my word for it. Go on to Google or some other search engine and look up "Meth Houses" and other similar phrases. You will be shocked at what you find.

    Here is a link to Meth Lab Homes, a website dedicated to the problem.

    I am going to do some research and find out if there are any reasonably priced testing services a person could use before close of escrow so I can post on my site.

    Do you have a comment?  Let me know what you think or if you have any good resources. Thanks!!             

(These are samples of "Meth Labs" and "Meth Houses")

    As we look at the current real estate market, many people are amazed at how low values have gotten. This is because the vast amount of foreclosures have forced banks to sell at ridiculously low prices to get them off of their books as fast as possible, even if it means losing large amounts of money. As these properties start to get bought up, prices will start to stabilize and home values will start going up. People will start to realize that the number of houses for sale is going down will rush in to get the good deals before they're gone.

    I already am seeing this happen as homes go on the market, there are multiple offers and the typical market time for a home that is realistically prices is often under 30 days.  In a normal market, 90 -180 days is typical. In my neighborhood, I am seeing prices starting to go up. There is a guy rehabbing houses and getting good prices for them. He bought one for $180,000, fixed it up, and sold it in less than a week for around $290,000. I am seeing signs in other markets of prices going up, too.

    Another phenomenon I'm starting to see is that banks are holding on to properties to doling them out little by little to try and keep the prices high. There is a house on my street which was foreclosed on over 6 months ago but has yet to be put on the market.

    I guess what I'm trying to say here is that I think we are pretty close to the bottom, if not there. If you are thinking about buying a house, this is probably the best time ever to get in. Even if prices go down, it won't be as drastic as it was at the beginning.

    If you have a question or just want to chat, go ahead and shoot me an email at paulmcewen@cox.net or call at 760-525-2742

   I got a call the other day from a guy that was a little upset. He had just bought some property in Riverside county for $19,000 or so. When he got the tax bill, it was assessed at $38,000 and his taxes were about double what he thought they would be.

    It turns out that when you buy a property, you are taxed on what the assessor thinks it's worth, not what you paid on it. Many times, people get great deals either through bank-owned or short sales. They need to understand that if these properties were normal sales, with the appropriate amount of marketing exposure, they would sell for significantly more.

    This is why someone might buy a home for, say, $170,000, but be taxed on $225,000.  When the market was hot, the sales price was the market value. Now, market value is a little trickier to find, with all of the distressed sales going on.

    So, when you buy your house, don't be surprised if your tax bill is for more than what you bought it for. If you think there is a mistake, you can challenge it, but I think the assessor is pretty conservative in value.

    If you have a question, go ahead and shoot me an email at paulmcewen@cox.net or call me at 760-525-2742.

Often, when someone needs an appraisal for a non-mortgage use (divorce, estate settlement, tax purposes), they are unaware that there are different appraisal products that can serve their needs. These other products have the same credibility as a full appraisal, yet can be cheaper. I recently did an appraisal for a couple that was filing bankruptcy. They were tight on money and shopping around for the best price on an appraisal. They had quotes from $300-$350. After talking with them, I told them that they could get an appraisal without measuring the house, and no sketch for about $75-$100 cheaper. The results are just as reliable, assuming that the house has not been modified and that public records are correct. They contacted their lawyer and confirmed that this type of appraisal was adequate.

So, next time you need an appraisal, ask to see if there might be a cheaper alternative. I, personally, will always try to find the most economical product for the client. I know what it's like on the other end when I'm the one that has to pay. If you need an appraisal or more information, feel free to drop me a line at paulmcewen@cosx.net  or call me at 760-525-2742.

I know it's been quite a while since I've written anything on this blog.... At the beginning of the year, I became very busy. Then, on May 1st, my business died with the HVCC. I took advantage of this time to step back and examine the direction of my chosen profession and to spend a bit more time with my family. (I actually trained for and ran my first marathon!!) Well, after a few months of procrastination on the web site, I've decided to come back and see if I can get some business. I am realizing that many appraisers are or will be throwing in the towel, which should put me in a better position in the future. I will be here for the long haul. I figure I have about another 15 or 20 years before I hang my license up. Who knows what appraising will be like in that time. Probably all aerial photos and computer modeling....Anyway, for the five or six people out there that might actually be reading this, I will start posting more often, I think, with my 2 cents worth.

    In this market of declining values, REO's, Short-Sales and Home Auctions, you may find yourself in a position where you've made an offer on a property, but then wonder if you really got a good deal?  Unfortunately, your real estate agent won't always be honest with you about this- it's in his or her best interest to "make the deal work", so that they can get their commission. And actually, the more you pay, the more they make, so it behooves them to get you to pay the highest price possible.

    This where your friendly local appraiser comes in. You, as the borrower and purchaser, can ask for any appraiser you want. The lender may him and haw, but if you say you want such and such to appraiser you house, they won't argue. (As long as the appraiser is approved by the lender making the loan)  By getting your own appraiser, you can tell him or her that you are concerned about the value and want a totally honest opinion about the value, whether it comes in at the purchase price or not.

    The fact of the matter is that the value of a home is usually a range of values, and many times an appraiser will "bring it in" at the purchase price, provided the purchase price is within the range of values arrived at in the analysis.  If you choose your own appraiser, you can express your concern about the value so the he or she does a more careful job of arriving at a single value conclusion.

    So, if you find yourself in this situation, give me a call. I will take the time to do a thorough analysis and let you know if you are over-paying for you house.

    Many people seem to be unaware that there are several report options for a single family residence, or SFR. The range from the desk review without inspection to the full URAR form 1004. Here are the options:

    A BPO is a Broker Price Opinion and entails looking at recent comparable sales and active listings. It doesn't require a physical inspection and is usually done by gleaning data from the local Multiple Listing Service, or MLS. These can be completed by licensed or certified appraisers as well as real estate agents or brokers. These are the most inexpensive reports, but can be pretty inaccurate if the subject or comparable sales have a lot of differences. These generally not usable for loan purposes. The fee is around $50 to $75 or so.

    A Drive-By appraisal (Form 2055) is a step above a BPO and requires a physical inspection of the exterior of the subject and the comparable sales from the street.  There is no measurement of the improvements or verification of the interior condition. These can be suitable for certain types of loans and for tax purposes. The fee is around $175 to $250 or so.

    The full residential appraisal, or URAR (Form 1004) is designed for loans and is the most thorough of the three. It includes a full interior and exterior inspection of the subject, measuring the the subject and verifying the gross living area (GLA), and inspecting the comparable sales and neighborhood from the street. A comparable form, the GPAR (General Purpose Appraisal Report) is designed for non-lending purposes, but is similar in scope of work. The normal fee is around $300-$400 for tract-homes, more for larger, complex, or custom homes.

    So, the next time you ask for an appraisal, you might want to consider what you really need. You might be able to save a few dollars. Give me a call if you want more information. If you can get by with a cheaper appraisal, I'll let you know.

    I recently found an article in the San Diego Union Tribune that whether you should appeal your property taxes. As it said, if you bought in the last couple of years, you certainly should. The link to the story is found at: Property Tax Story Link

    One of the ways you can appeal is by providing a recent appraisal, which is usually much stronger evidence of home value than recent sales chosen by the average person. Many people make the mistake of choosing sales that are too big or too small or too old. There are many factors to take into consideration, so an appraisal is a better bet.

    I can help you by telling you ahead of time if your home has lost enough value to make it worth your while. I have access to public records and can see what the assessed value is and give you a rough estimate of your current value. I won't try to sell you something that won't do you any good.

    So, if you think you're paying too much, give me a call and we can talk about it. I will let you know if it's worth getting an appraisal and appealing your property tax. Like I said, I won't try to sell you something you don't need and I can give you a good price on an appraisal if you do need one.