Are all appraisals equal?
Related article: How to Select a Real Estate Appraiser
Too many appraisers just “go thru the motions” using the same adjustments, estimates, or figures to produce appraisals as they have done for years. It is easy to recognize a mediocre appraisal because there is usually little explanation regarding where numbers like depreciation, economic life, or adjustments come from. Sloppy appraisers rely on, “Because I said so” rather than, “this data shows.” Reconciliation is often based on appraisal software recommendations rather than an accounting of data reliability and reasonableness.
Times change, each property is different, and each location is different. Adjustments and estimates should also change. A quality appraiser keeps their eyes open, is hungry for information, talks to players in the market, and constantly adapts their perception of what the market is doing. Order an appraisal from AQualityAppraisal.com and you can be certain that you will receive a fully explained, supported, and reliable valuation from a truly professional appraiser.
An example of the inaccurate way that many appraisers think is evident in questions that I often receive from highly experienced appraisers. On a regular basis, I’m asked, “What adjustment do you use for _______?” The blank could be time, square footage, quality, or anything. My answer is always, “That depends on the subject property.” Any non appraiser can understand that it would not be reasonable to adjust $25 per sq. ft. for a new house that costs $100 per square foot to build unless that property or market had some sort of deficiency (appraisers would say externality, obsolescence, or depreciation). If an adjustment for 200 square feet is applied to a comparable at $25 when it should have been $75, the error is $10,000. On a $200,000 property, this is 5%. Appraisers need to develop a unique square footage adjustment that applies to the particular property that they are appraising.
Another common mistake I continue to see experienced appraisers make is with time adjustments. Appraisers will site a source like the Portland area RMLS that says, “Prices have fallen 12% over the past year.” They will then apply a negative 1% per month adjustment to their comparables. What the appraisers often do not understand is that the RMLS number is a year-over-year average. The price could have dropped all 12% in the first six months and could have been stable over the past six months. In this scenario, applying adjustments to comparables that contracted in the past six months would lead to value indicators that are up to 6% low. Additionally, the market numbers reported for the RMLS are for an entire area. Properties at the low end of the price range could have been stable and properties at the top end of the price range could have fallen dramatically. The 12% is just an average of the entire market and may not represent any particular property type. Another possibility is that one year ago, the market was selling more high end properties and this year the market is selling more low end properties. The RMLS could report a year-over-year decline of 12%, but in reality, prices have been stable. Appraisers need to develop an individual market analysis for each property type and location.
The point is that, all appraisals are not equal. When choosing an appraiser or an appraisal company, you do not just need to choose an appraiser with the most experience. You need to choose an appraiser who has learned to listen to the market and ask the tough questions. Order an appraisal from AQualityAppraisal.com and you can be certain that you will receive a fully explained, supported, and reliable valuation from a truly professional appraiser.
If you think you received a less than reliable appraisal from another company, contact us or read my article, "How to Challenge a Bad Home Appraisal". If you find this information interesting or useful please subscribe to my blog. Also, please support us by making Portland real estate appraisal related comments on our blogs and YouTube videos. If you need Portland, OR and residential real estate appraisal services for any reason, please contact us. We will do everything possible to assist you.