If you were an appraiser....

weedyacresFebruary 10, 2011

Okay, you guys may throw some rotten tomatoes at me for requesting an armchair valuation, because "it depends" is the safest answer, but even directional opinions would be welcome.

The short version of the question is: are the north end homes (and the new neighborhood mansion) comps for my south end home?

The neighborhood:

-50 acre lake

-south end has 9 lots that are 3-7 acres with 6 houses on them, all built in the 90's. Part of subdivision A. Most houses have their original owners, none have updated, none have sold since we bought in 2007.

-north end has 20 lots, 2/3 with houses on them, 1 to 1.5-acre lots that are long and skinny, so close together like most subdivisions. All built post-2000. Part of subdivision B, which has an HOA.

Our house is on the south end. We've completely remodeled and updated it in the past 4 years. It has everything the houses on the north end have except a walkout basement.

Other factors:

-On the north end, about 1 new house per year is going up. Don't know the prices.

-On the south end, no new construction in 10 years until a few months ago, when someone paid an outrageous $225K (market price probably $80-ish, but the seller was reluctant) for a lot and is building a $2 million home.

-On the north end, 2 homes sold about a year ago, in the $550 range. Original prices on the north side homes, as best I can glean, is $500-$800K (most $5-600).

-On the south end, original prices were high-200's in the 90s. Last 2 comps were 2006 ($430 for newer end) and ours in 2007 ($350K for outdated but extra lot).

How would an appraiser process all this? Are the north end homes comps for the south end homes due to proximity? Or not, due to age? Is the McMansion considered a neighborhood aberration or does it pull up all the values of everyone around? By how much?

Thanks for any insight.

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The first thing I'd need would be the general location, i.e. state, city, etc. as there are huge diffs throughout the country.

    Bookmark   February 11, 2011 at 4:34AM
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50 acre lake, so how far in miles are these neighborhoods apart?

Sounds to me like these 2 are separate and distinct neighborhoods ... but you don't mention if the homes are similar square footage, design, appeal ... besides age and acreage.

    Bookmark   February 11, 2011 at 12:18PM
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If you end has only 6 houses and none have sold recently, then an appraiser will be forced to use other homes. Exactly how much weight is given to specific differences between homes is incredibly location specific.

    Bookmark   February 11, 2011 at 1:10PM
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Our appraiser went outside our our subdivision to get comps because he said not one home in the neighborhood was comparable to ours (large custom home) vs. many small semi-custom almost tract looking houses. I don't know if appraisers generally do this, but ours did. Comps were within 2-5 miles away. (Country acreage)

    Bookmark   February 11, 2011 at 1:18PM
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Appraisers very rarely stick to just a few block radius when trying to determine value. They plug in the info on your house to a computer and it spits back data based on what it's been fed AND houses sold in the last year.
If houses haven't been selling in your area then he might have to adjust his search for houses with in not just x number of miles from your house but for the entire county.
I know since the housing collaspe they've gotten much more ridgid in their comparisons.
I wouldn't count on them looking just within your subdivision.

    Bookmark   February 11, 2011 at 2:28PM
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Small (The south end and north end are all right in a row, on the same street for maybe a mile total (length of the lake). There's a ~20-foot finger of the lake that cuts in and goes under the road and that's the only dividing line. As you're driving north, it just changes from houses set back from the road on large tracts to houses near the road closer together.

South end houses 3-4000 square feet, no basements. North end houses are 5-6000 square feet including the basement square footage. For example 3000 ft2 on main level, 3000 ft2 basement.

The differences in design and appeal are basically those that come with the age difference. South end homes were top-of-the-line 15 years ago, so they have less trimwork, granite, stone and the like. Ours being the exception, of course with the remodel/updates.

When we bought our house (and when we refi-ed 2 years ago) they used comps from other neighborhoods and bumped us up for the land and lake, though not as much as I would have thought. There weren't any along our stretch of the lake that could be used, as none had sold (north end all new construction custom builds).

Now there have been 2 after-market sales on the north side, but they're closing on 18 months old now.

    Bookmark   February 11, 2011 at 2:31PM
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I'm sorry I couldn't get past 50 acres. That makes our 52,000 feel like an ocean.

Are you planning on selling?

    Bookmark   February 12, 2011 at 11:52AM
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Yeah, yeah, rub it in with the 52,000 acre lake. ;-p Around here they call little ponds lakes. Ours is definitely one of the biggest in the area.

Yes, we are looking at likely selling later this year, as I bought a business 100 miles away and the commute is getting old. I'm trying to do some homework early on in the process to see what will be considered comps, for pricing and marketing purposes. I'd like to think that our house, updated, on 3.5 acres, would be valued higher than a newer house up the street on 1.5 acres. But I don't know if age trumps lot size.

    Bookmark   February 14, 2011 at 3:39PM
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With many waterfront properties, there is a lot of value in the land (much more so than non-waterfront homes). And the older homes are sitting on much larger lots. The owner of the new mansion probably wanted a larger lot, so chose the older area. Future large homes will likely choose the larger lot if they can find a vacant one. Maybe they choose to tear down one of the 1990s home if they love the large lot. In other words, the value of the south side and north side properties might be similar, with the lot size spiking the value for the old side, and the newer/larger homes spiking the value for the new side.

Personally, I would choose the larger lot with over the smaller one any day and the 1990s homes are really not that old anyway.

I think your home will appraise well. Me thinks the appraiser will use the entire street (south and north) for comps, but will add/subtract for age of home, basement, difference in lot size, granite/trim, etc.

50 acres is a small enough lake to use all the homes on same lake as comps.

I think these newer homes are going to pull up your comps a lot and you will probably do very well when you sell.

    Bookmark   February 15, 2011 at 9:49PM
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We just had our home appraised for a refi and here's how that went:
Appraiser chose comps that were similar in size and age, canal homes with similar lot sizes. Disregarded distressed sales, even recent short sale that actually would have helped us. Disregarded recent sale that was inexplicably higher than "normal" (!?! maybe th market correcting, you dufus).
Used sales that were 9-15 months old and subtracted 5% per month for a "downward market". Comps were fair otherwise.
Did not make any correction for 2007 $25k dock and boat lift or 1-month old $20k seawall (in a neighborhood of 30+ year old seawalls that will need to be fixed or replaced anytime now). Slight correction for $27k kitchen remodel.
Comp came out exactly 1/2 of our 2007 purchase price.

    Bookmark   February 17, 2011 at 5:47PM
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I mean the appraisal came out 1/2 of our purchase price, before spending all that money on upgrades.

Just trying to point out what factored and what didn't, thought processes of the appraiser.

Fortunately, the underwriter didn't make any additional adjustments like during another sale 2 years ago. Especially after two police officers were shot and killed less than a mile from my house right after the appraisal came in.

    Bookmark   February 17, 2011 at 5:52PM
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Age of the structures involved would rule out the northern homes as comps to your older home. Lot size would also rule them out. Comps are exactly that. Similar in age, lot size and neighborhood. If there are no exact comps in the exact neighborhood, you look to adjacent neighborhoods with similar homes. You can adjust upwards or downwards because of square feet, but unless the property is subdivisible, the acreage isn't going to make that big of a difference in the overall appraisal. In many markets, older homes on larger lots are much less valued than smaller lots with newer homes. Many people today don't want the upkeep that a larger property entails, and thus the lower valuation in a "mixed" neighborhood of differing sized properties. If the area is all estate sized lots with estate style homes on them, then that's a completely different animal. But, what you're describing is a mixed bag of older and newer homes with varying sizes of property, none of which will be comps to your particular home.

    Bookmark   February 17, 2011 at 6:11PM
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