Property Appraisal Accuracy

[Nir]

Hi Everyone,

How accurate is a property appraisal done by a certified appraiser supposed to be? Is it usually underestimating the real property value, overestimating or just about right? Is it supposed to be more accurate than the free estimates real estate agents provide?

I need it for separation purposes.

THANK YOU!

 

[RebeccaBryan]

As far as appraisals go in my experience, it`s all over the board. When you get it done for a bank, when purchasing a property, it`s always close to the price you are buying the property for to make the bank happy. They look for properties that are similar and then juggle the comparables to make it match the purchase price.

I`ve gotten great deals on properties and knew the appraisals were way out of whack.

Maybe you should get your appraisal, your spouse should get hers and then split the difference.

Often, I`ve found that you can tell the appraiser what the property is worth and they can juggle the numbers easily with different comparables. It`s really just a guess what the property would sell for if it were put on the market.

I think it`s realistic that a property could value up to 20K or 40k difference with different comparables.

If you can get along with your spouse enough to agree on what the property is worth, you`ll likely be farther ahead.

That`s just my opinion, and it`s not necessarily correct.

 

[dwb]

QUOTE (investmart @ Feb 27 2008, 12:04 AM) How accurate is a property appraisal done by a certified appraiser supposed to be?

I find that when its for a property purchase, it nearly always comes in line with the agreed purchase price. But when its for a refinance, it nearly always is incredibly conservative. Why, I don`t know.

 

[DonCampbell]

Appraisers are also very busy right now. What many sophisticated investors are doing now is assisting the appraiser by putting a package together of comparables, comparable rents etc. Don`t be forceful, be helpful.

They will still do their own homework, of course, however it gives them somewhere to start. With re-finance, have the discussion with the apprasier to ensure they know what your expectations are.

 

[PeterKinchMortgageTeam]

QUOTE (DonCampbell @ Feb 27 2008, 11:13 AM) Appraisers are also very busy right now. What many sophisticated investors are doing now is assisting the appraiser by putting a package together of comparables, comparable rents etc. Don`t be forceful, be helpful.

They will still do their own homework, of course, however it gives them somewhere to start. With re-finance, have the discussion with the apprasier to ensure they know what your expectations are.


Well said Don! As a broker, i`ve had my share of disagreements with appraisers as far as values are concerned but it`s important to remember that like many professionals, they also have licenses and guidelines that they have to follow as dictated by their regulatory agencies which state how appraisals must be done, and most importantly, what can be considered a comparable.

If you have a package of properties that you think are comparable it helps them out alot - in most cases, if they can use that comparable, they will and if not, they should be able to tell your broker or banker why.

 

[TIMWEMBLEY]

I have also found that appraisers just go with purchase price. Even when I KNOW I got a great deal on a property when the bank requires an appraisal the appraisal comes back at exactly what I bought it for what a coincidence! I have also found with refi`s that the appraiser will appraise for the value I told the lender it was worth. Maybe thats because when I let the appraiser into the property I mention what i`m "hoping" it would appraise for. I have found this with several appraisers from several different companies. So with this in mind if you ever have a seller tell you my property was appraised for X$ take it with a grain of salt and come to your own value on the property cause like Rebecca said $20k - $40k swing not uncommon as I find the person paying for the appraisal can place their own value on it (within reason) and the appraiser can find comps to support that position.
Tim Blake

 

[Nir]

Thank you everyone for the great advice!
Neil

 

[RedlineBrett]

QUOTE (investmart @ Feb 27 2008, 01:44 PM) Thank you everyone for the great advice!
Neil

Neil,

If you want the real truth - the `what could I get for my property today` number you need to ask a realtor (or two, preferably) to do a comparative market analysis for you (CMA).

This is a process of looking at what`s sold in the area and they do a +/- on features (say like 20k for a garage, 10k for a nice finished deck etc, x $/ft new flooring etc)

They`ll then couple that with their actual market and sales experience to tell you if buyers are willing to pay that price for your property.

Unlike appraisers realtors actually have to HIT those numbers and find a real honest to goodness buyer to PAY IT or they don`t get their cheque.

All appraisers really do is let the banks check off another item so they can get yet another loan out the door. No motivation for accuracy, in my opinion.

 

[RedlineBrett]

QUOTE (RedlineBrett @ Feb 27 2008, 03:12 PM) Neil,

If you want the real truth - the `what could I get for my property today` number you need to ask a realtor (or two, preferably) to do a comparative market analysis for you (CMA).

This is a process of looking at what`s sold in the area and they do a +/- on features (say like 20k for a garage, 10k for a nice finished deck etc, x $/ft new flooring etc)

They`ll then couple that with their actual market and sales experience to tell you if buyers are willing to pay that price for your property.

Unlike appraisers realtors actually have to HIT those numbers and find a real honest to goodness buyer to PAY IT or they don`t get their cheque.

All appraisers really do is let the banks check off another item so they can get yet another loan out the door. No motivation for accuracy, in my opinion.

Futher to this - if it`s for seperation purposes I bet you could get a better result for cheaper too. In calgary an appraisal can run to like 3-400. If you went and called up any joe realtor and asked for a CMA and told them you`d pay $100 for their best number on what your home is worth you`d be pretty close.

My lawyer has used me for this before when he had a client that wanted to sue someone and they wanted a quick, cheap estimate on what a property was worth. I`d put the evaluation skills of a good agent ahead of those of an appraiser any day of the week.

 

[Thomas Beyer]

some appraisers are know for being "aggressive" .. others are known for being "conservative" .. at least in the apartment building space we operate in ..

many new areas we buy in and where we don;t know appraisers we find that they are reasonably close to purchase price even if they don`t know it ..

an appraisal is an OPINION on market value considering many factors such as CAP rates, rental increase rates, sales from 12 months ago, vacancy rates, utility cost, interest rates, assumptions about future upgrade costs ... and as such it cannot be accurate .. if you don`t like appraisal X .. you can always find appraisal Y and/or appraisal Z .. and then use the one you like .. assuming they are are slightly different .. but usually in the right ball park .. and yes, many appraisers are busy and as such information form you about past sales that you deem relevant can be sent to them ...

Also, a phonce call ahead of time surmising about "I think it is at least XXX $s .." or "I bought it for YYY $s and I hope it comes in at least this high ..." or "let`s be conservative and not overly aggressive given the recent vacancy increases and past condo conversion based prices .." may have some influence on some appraisers (but not on all of them ..)

 

[JeffSmith]

In the years before I became a residential real estate appraiser I was a Realtor and I would always endeavour to provide as much info as possible to the appraiser related to the property being sold. It was always about developing relationships. One of the pillars of real estate investing.

Now as an appraiser I find it interesting to hear that the real truth about value can only come from a realtor and that realtors actually have to hit the #`s. That would suggest that there are no overpriced listings and that the real estate boards have no expired listings reported.


Realtors offer Free Market Evaluations with the hope that the owner will list their property with them at some point in the future.
An appraiser has no anticipation of compensation from the owner which allows them to provide an unbiased opinion of value.

I don`t believe that all appraisals may be accurate nor do I believe all realtors` opinions of value are accurate either. I have developed business reltionships with many realtors and respect there opinoins, which more often than not are correct.

I have done many appraisals for REIN mebers and continue to receive referrals. As with any profession, most practitioners receive compliments and critiques, all we can do is the best of our abilities and learn from our experiences.



Jeff Smith

Candidate Member
Appraisal Institute of Canada

 

[terri]

Not to scare you but an interesting note:

I recently had 2 appraisals done on the same property by 2 different appraisal companies and the difference in value was $200,000 between one appraisal and the other. I did my own research in advance, gave both appraisers the same info package showing renovations, rental income and comparable sales in the area. Now, it was a unique property, no very obvious direct comparisons, therefore a little more difficult to analyze, but when I went over the appraisals thoroughly after the fact and asked a lot of questions to better understand how each appraisers came up with their valuation, I was quite surprised by some things that I heard.

I would suggest doing your own research first, talk to a realestate agent who knows that area and go over comparable solds, look at these properties and decide for yourself how they compare to your property. Once you have an idea of what you think the value is, then bring in an appraiser who knows the area really well. Each party should probably have their own appraisal ,unless of course you can amicably agree on value, which would be the best course of action.

Even though it`s not a realestate agent`s job to valuate property, their opinion is beneficial because there`s a good chance that they have actually been inside and seen some the recent comparable sales and can give you feedback as to how your property compares. The appraiser has probably not seen these properties himself, his valuation is on more tangible things like square footage, #of bathrooms, parking spaces, and has to rely on the fact that the information he is getting from mpac and the mls listing is accurate. One of the comparables used by both appraisers said "renovated" but failed to say what decade. I had looked at this property when it was for sale and it hadn`t been updated since the mid `80s. It`s not an appraisers job to go and look at these comparables in person, just to analyze the info given. Another comparable was attached to a halfway house for schizophrenics but that information isn`t on the listing. Do your due diligence, use the help of a realtor to figure out what you think a fair market value is, get a professional appraisal (or two). And make sure you really look at the appraisal and keep it handy for future. When a bank gets an appraisal done on your house, you generally won`t have access to it, but when I`ve paid for it myself I find it`s worth it`s weight in gold. I learn so much.

Hope this helps

Terri

 

[RedlineBrett]

QUOTE (JeffSmith @ Feb 28 2008, 01:50 PM) Realtors offer Free Market Evaluations with the hope that the owner will list their property with them at some point in the future.
An appraiser has no anticipation of compensation from the owner which allows them to provide an unbiased opinion of value.


Real estate sales is an `all or nothing` game. If the agent gets the right listing price they get paid in a timely manner. If they don`t they work for free. They have motivation on both fronts to get the number right.

I would argue that appraisers don`t have that same motivation - they get paid regardless of the accuracy of their work so long as their number is within reason. So they`re off one way or the other by 20k - Who`s going to check? So long as the number they go back with is higher than the purchase price on the contract everyone is happy and its off to the next deal.

 

[bmittlefehldt]

QUOTE (investmart @ Feb 26 2008, 10:04 PM) Hi Everyone,

How accurate is a property appraisal done by a certified appraiser supposed to be? Is it usually underestimating the real property value, overestimating or just about right? Is it supposed to be more accurate than the free estimates real estate agents provide?

I need it for separation purposes.

THANK YOU!


The kind of answer you get depends on what you ask for.
A real estate agent will try to tell you what you want to hear.
A bank appraiser is supposed to give a "forced sale" price, which is generally a bit lower than market.
A certified appraiser can give you current market value, forced sale or replacement cost (for your insurance). If you expect a downturn in the market, you may want to request both market value and forced sale, then make an offer somewhere in the middle.
Bev

 

[KimFranz]

I just had to put my two cents into this since my father is an appraiser and has been for many years. Yes, an appraisal is an OPINION on market value considering many factors. All CERTIFIED appraisers have to take courses and pass tests in order to get their CRA designation. Having said that, I know from working in an appraisal office for a year, as well as discussions with my dad, that there are some appraisers that will just give the number that is asked for. In any industry you have to find the person that will be honest and do a good job, once you find an appraiser that fits that description... hold onto them tight!! I always show my dad and his partner the appraisals that I get from properties I purchase in Alberta and they tear them apart, it`s like hungry wolves attacking (really funny too, sorry dad!) But the bottom line is at the end of the day an appraisal is an OPINION, based on many factors. Opinions can differ and that`s why appraisals do too.

Cheers,
Kim

 

[RebeccaBryan]

Investmart,

If I were you I would just go to someone you trust.

My suggestion to do two comparables, one from your side, and one from hers, isn`t such a bad idea.

I think that`s why when so many couples break up they sell their property. That`s too bad really because it tends to be lose-lose.

It would be good if you come to an agreement so that in the emotional situation that you are in, something positive can come from it and you don`t end up selling the property to someone else so they can win instead.