Folks, this is the crazy stuff we have to put up with. The buyer has a “cash like” offer, thus no financing and appraisal contingency. But they want to do an appraisal anyway. You see this takes all the value away from a “cash like” offer because we rarely see pre-qualified buyers fall out of escrow due to their ability to qualify. Since lenders are required to be licensed this issue has all but disappeared.
So, they do an appraisal and it comes in $7,500 short of the sales price. But wait, non of the comps have a pool! OK, not a problem. But the appraiser only gave a value of $8,000 in adjustment for these comps not having a Remodeled in January Pebble Tech Pool and Heated Spa with In Floor Cleaning System. This alone would cost over $35,000 to build new today.
Please see what I wrote and let me know your thoughts?????
Below is the email to the appraiser and buyer’s agent:
I have reviewed the appraisal and have the following comments. I also spoke in detail with Jay and another appraiser. The issue with appraisals is there are one person’s opinion based on fact.
My biggest contention is the value for a heated pebble tech pool and spa with in floor cleaning redone this January. From my experience, other appraisers commented on common use for this price range, and one randomly chosen appraisal for a property I have closing next next week; pool values for a property at this value are expected to be $10-12k and spa value $2-5k.
The other appraiser for my listing, closing next week, used $12k and $4k for the pool and spa. This one adjustment to all the non-pool properties would add enough value to take the appraised value over selling price.
Comp #4 should be completely removed as it is a Short Sale sold to the listing agent’s own buyer the same day it was listed. We see these sales every day, way below market to their own client. Shame shame on that agent. If it were on the market for a week or more and she sold it, that would be a different story.
Let’s first quickly Review each property, its adjusted value and contention with the value given:
Comp 1 Dreamy Draw #124 – Adjusted Value $315,000
- Condo Designation of property and no adjustment
- Being multi family the yard is a very small patio, no front yard
- Pool and spa adjustment low
- Yet, it still gives us the value
Comp 2 Dreamy Draw #116 – Adjusted Value of $279,800
- Same floor plan as comp #1
- This home had no upgrades, look at the picture. Therefore, age adjustment of $5k should be removed. It needs remodeling to have granite etc…
- Condo
- Small patio and no front yard
- Pool and spa adjustment, it can never have a pool or spa!
- Why is this exact same floor plan selling for $36k less than comp #1, for this reason alone I would dump or adjust this comp.
- Tax records show it recording at $238,500. $500 more than reported on MLS and appraisal.
- A condition/upgrade adjustment would give us value.
Comp 3 1302 E. Morton Ave Adjusted Value $272,228
- REO – no adjustment on appraisal.
- Across the street from apartments, lot adjustment should be higher.
- Sold January from contract 12/1. It actually sold and fell out a couple of times. It was off the market pending so long and then went back on market and sold. This really should be seen as an Oct/Nov sale and just way to old to use.
- Although I admire the fact the appraiser gave this home a 6% adjustment for the last 8 months, this market is measurably up much higher over that period. Using a comp this dated is inappropriate for the move this market has made. The average price per square foot for a SFR in the valley was $76.46 on December 1st and $93.15 for the month of July right now. That is a 21.8% increase.
- Pool and spa adjustment.
Comp 4 1402 E. El Camino – Adjusted value of $266,600
- This is the short sale sold to the listing agent’s own buyer. We are seeing these scams/inappropriate sales all over and thus should not be used as a comp.
Comp 5 21 E. Harmont Drive – Adjusted Value of $313,400
- I like this comp.
- Still should have appropriate pool and spa adjustment.
Comp 6 1001 E. Griswold #17 Adjusted value of $284,700
- Extremely old comp from contract 1/4 COE 2/8.
- Same subdivision, this is good.
- Home is more than 20% smaller than subject.
- Pool and spa adjustment.
- It still is $2,900 away from comping to the subject, the appreciation was 4% for said 7 months.
So in Review:
The appraiser used 6 sold comps and adjusted as follows:
1. $315,900
2. $279,800
3. $272,228
4. $266,600
5. $313,400
6. $284,700
Based on these comps the value was given of $280,000 for the Griswold property. If you took all 6 added them up and then divided by 6 you would get $288,771. However, I know from studying appraisal that this is not what you are suppose to do. However, I would like to use this demonstration.
I think we all would agree comp #4 should be thrown out. I think #2 should go also, since is sold for more than a 15% difference from the same floor plan in the same subdivision at the same time. But at a minimum it should be adjusted up $500 for the incorrect sale price. Thus using the same method as above, adding and dividing, we get $293,305. Therefore, by using only the 5 sales we have increased the value on average by $4,534.
Any bit of a mere adjustment for the Heated Pebble Tech Pool and Spa would get us to value with out a problem. If you look at the comps the appraiser definitely went on the low side of their adjustments in the first place. Of course his right, it is his opinion. If this was a $65-150k home, then I might agree with the $8,000 adjustment. I have seen that in John F Long homes.
I spent all day researching and writing this as I would prefer to close this sale. I want to qualify myself. I have a degree in finance with a minor in real estate. I have been selling homes since 1995, with over 1200 sales worth about $220 million. I have completed over 400 BPO’s, 250 for assignment and 150 for my REO’s in the past. My average price is about $300k and up to $1.5 million.
I can’t stress again how low I feel the pool and spa adjustment are in this appraisal. This alone would make up our value difference. I just looked through all the pool comps in the area. None that I found have Pebble Tech or in floor cleaning let alone a heated spa. I used my spa this morning on my sore body!
Thank you for taking the time to review my points.
Jeff Cameron
MRW Homes
480-652-2004