Appraisal Articles 2019 Free Appraisal Articles for Appraisers and the Public
I recently got a call from some owners asking me about how much value their upgraded flooring and 2nd floor view added to their home, they could not understand why agents were indicating a much lower value for their home. The agents kept pointing to their lack of a swimming pool but they never took a second look at the $ 25,000 in upgraded flooring.
In my opinion amenities like a 2nd floor view or stone flooring are things that you can get buyers to pay for in an upward moving market. They know they will pay a certain price for a model-matched home down the street but they will pay extra to get special extras if your home has them. In a normal real estate market amenities can make a big difference and appraisers pay attention to the cost of those amenities.
The problem for owners is that post COVID-19 is a lot like post-2008. There is a lot of uncertainty in the market and buyers want those special amenities to be extras that motivate to which property they pick, they do not want to pay more for them. Buyers do not want to pay for things that you may have paid tens of thousands of dollars for and appraisers understand what is going on they have to stay within a falling sales price range. It is not going to be easy to point to a number of sales and say “there is my evidence” between those sales.
How useful are those Automated Valuation Models (AVMs) now? Where is their 70% to 90% accuracy claims? If you rely on one of those popular AVM models you are stepping into the twilight zone. Many were never really accurate and now they are nearly useless.
I am not saying that appraisers have all the answers to what will happen to your market, I’m just saying that they use our appraisal data to feed those models and appraisers will know what’s going on with values in your neighborhood before AVM models will have any basis for their forecasts. The score is now Appraiser’s 10, AVM models 0 and it will stay that way for a while, At least until appraisers have fed enough data into the system to bolster model accuracy.
It’s also more work for an appraiser to produce an appraisal report. Anything an appraiser says is subject to review based on what he or she should have known. It is not so easy to say that you as an appraiser can “put yourself in place of a buyer or seller” when there is little or no evidence of what a buyer can or will do. Many sellers are now motivated, they may have had relatively large two-earner family incomes and now they have been unemployed for weeks. Those big mortgage payments on their homes seem astronomical even with unemployment payments and those additional payments from the federal government.
Where will the values end up? Will it all just bounce back? When you think about the fact that some individuals previously employed may lose their jobs, the fact that time will weigh heavily on restarted business and if you consider the disruption to state in-migration you have to conclude that a resumption of normal business in Nevada will take several months. The return of the real estate market may take even longer. Nevada took a long time to come back from its past crash and even though this one is based on temporary business closures it will be intensive.
It’s my opinion that the impacts of this COVID-19 event on Las Vegas will dwarf the effects of the 2008 recession. This pandemic has not only brought real estate markets down, it has effectively closed the casinos (the #1 largest employer), suppliers, construction companies, airlines, airports, schools . . you name it. You do not just open the doors of a casino and expect that everything will be the same as it was before you closed. It is simply not realistic. Spacing customers in casinos will be expensive and some players may not have the funds to dump money into a slot or video poker machine.
UPDATE: Early reporting results appear to be saying that single-family home prices in Nevada are staying strong, with an average sales price near $ 310,000 in Las Vegas in May of 2020, which is good news for those of us who are homeowners. The number of new listings are however falling like a rock, the number of home sales is falling and closings are down to a 3 year low. You have to ask yourself what is bolstering home prices? Maybe the fact that fewer homeowners are looking to sell?
UPDATE 2: Read my most recent article, this one offers opinions that appear to be misplace because market prices remain at their highest.
For more appraisal information contact Glenn J. Rigdon MA, MRICS, IFAS, ASA who is a Las Vegas / Henderson Nevada based broker and appraiser who can be contacted via email or via his business website known as Appraiser Las Vegas (http://www.appraiserlasvegas.com), or http://www.horizonvillageappraisal.com, or you can also click on “Contact Us” on the home page of this website or visit my public profile at LinkedIn at http://www.linkedin.com/pub/glenn-rigdon-ma-mrics-asa/1a/30b/879/
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