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Considering Important Property Features

by Administrator on Sep 23, 2018 Residential Appraisal 224 Views

There are times when a standard analysis of real property characteristics is insufficient in an appraisal. As an example, most land appraisals consider things like topography and soils, but they done get into the slopes / grades of the comparable sales. When you get an appraisal assignment on a subject property with steep slopes it become important to know if the comparable sales are similar. If, for example, the subject has a 30% grade you don’t want to compare it to land that is flat.

Some properties with steep slopes have terraced areas, so you can cut and fill a road to get to the terraced areas and develop them. Appraisers are often tasked with making decisions about net usable area. A subject property may be 10 Acres in gross but after you consider the slopes, low lands (including washes and streams) and shape the net usable area may be only 1 Acre. Other factors like soils, zoning, planning, and offsite infrastructure including roadways are also important factors and considered in most vacant land appraisal reports.

Improved properties have their own important features and appraisal forms seek to address differences. The Uniform Residential Appraisal Report (URAR) forms do a reasonable job of listing residential property features most of the time but not always. Try comparing a dome home to other sales on a form, or properties with a dissimilar garage, garage finish, garage size differences, multiple garages or an added casita.  Appraisers recognize the differences in value that can occur when they see amenity differences and “filling out the form” to account for differences and adjustments for them becomes difficult.   

Residential appraisers use grids to make adjustments in their reports, but grids often need to be modified to consider important differences that affect market value. “Economic Characteristics” is one of those items used in a sales comparison approach grid to consider differences when things like, for example, an existing lease affect value. If the lease is at a market rate then no adjust may be needed, but leases above or below market rates may require one.

Simple comparisons of features like the number of garages sound straight-forward but some homeowners finish their garages. They build larger garages, finish the concrete floors, finish the attic, finish the walls, put in kitchens, bathrooms, they put in apartments and the list goes on and on. Appraisers consider all of the improvements made to the subject property, and all of those made to the comparable sales. Site size is important, a 0.16 Acre difference sounds insignificant but if the subject only has 0.16 Acres then the differences is basically twice that of the subject.

There is one way to deal with the form failures and that is to create your own adjustment grid in Excel or a similar worksheet program.  If you need more room than the form provides just mirror the form item in the worksheet and add or modify the adjustment rows that you need.  Then note “see attached” at the top of each sale and insert some blank page following the URAR to insert your new worksheet(s).  It’s one way that I use to not have to twist what’s going on in the form.  Everyone who reads it can go to the new grid and understand your adjustment. 

I’m sure that there are banks and government agencies who would take exception to making things clear and understandable.  Those who are stripping data from your forms may also squeal.  If it makes my report better to create a new grid I just do it, but then again much of my work is done for acquisition / disposition, probate, divorce, bankruptcy, civil litigation related purposes so I’m not dealing with AMC’s, banks, ERC companies or others who care more about the form being used than the clarity of the adjustments. 

There are times, with multimillion dollar homes for example, when I will shift from a simple URAR form to a narrative report.  Yes, a narrative report on a home.  When the assignment becomes so complex that it was never really appropriate to complete it on a form why try to add many Addenda pages to explain it all?  Just put the form that you complete in the Addenda and make the report a narrative.

I have completed several quasi-form appraisals for litigation, the court understands that an appraiser is just trying to best describe and adjust for differences.  It’s not about “fitting every item in the box” like it is for those forcing the use of the URAR form.

It becomes difficult for appraisers to make adjustments to their selected comparable sales when differences between the comparable sales and the subject become obscure or questionable. Some differences, like brick trim or crown molding, have costs that can be estimated, but costs do not mean adjustment. Few improvements are applied on a cost basis or dollar spent basis. Other amenities like built-in BBQ’s, pool waterfalls, RV parking and others are relatively few and paired-sales doe not exist to estimate how much value market participants give to them (if any).

For more appraisal information contact Glenn J. Rigdon MA, MRICS, IFAS, ASA is a Las Vegas / Henderson Nevada based 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/

Article source: http://www.appraisalarticles.com/Real-Property-Appraisal/Real-Property-Appraisal/Residential-Appraisal//4712-Considering-Important-Property-Features.html

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