Adjustment Misconceptions

by Mike Armentrout

I was recently perusing a social media page that caters to appraisers and came across a thread where a user had posted a grid from a peer report.  Aside from the fact that publicly displaying the work of others can be highly controversial, I reluctantly followed that inner desire to see the carnage that would be wrought in the comments.  It didn't take long before the knives came out, as is the case when online anonymity promotes a less than civil discussion.

Most of the comments centered around the adjustments that were made to the grid.  In the midst of numerous responses, someone had noted that the bath adjustments were "so 2007".  That particular phrase stayed with me for a few days.  Was this a passing quip meant to be humor, or was it a reflection of their real views on adjustments?

Market based adjustments are not commodities that are subject to simple inflationary rates through time.  They are instead typically tied proportionately to the value…

Sketching the Interior: Why I do

Completing a sketch for an appraisal assignment is something that can easily get glossed over as a mechanistic procedure.  Occasionally it is good to take a minute and consider why it is that we perform certain functions.

Providing a sketch within an appraisal can serve a few purposes. Obviously the biggest reason is to calculate gross living area (GLA) and the square footage of auxiliary use spaces such as basements, garages, outdoor living areas and outbuildings.  There is no shortage of posts regarding GLA calculation so I wanted to cover other factors that a quality sketch can provide.

Through time, I have noticed that the vast majority of appraisals I come across do not contain sketch details of interior spaces.  That's not to say that there always should be.  In fact, I have not even required my staff appraisers to indicate interior data unless it can communicate a special condition.

For myself however, I have always provided fairly detailed interior information such as wal…

Square Footage; Perception vs Reality

by Mike Armentrout
In a recent article that made the rounds on social media, a story was reported that should not be surprising to any appraiser.  A homeowner was seeking legal damages against the realtor who listed her home for the 2007 purchase. Pam Whelan contended "Had I been presented with the more accurate square footage, I could have made a more educated guess on whether or not I wanted to proceed in purchasing the home."  The concluding assumption was that she could not sell the home for as much currently.

We can discuss obvious questions about the listing sources and if an appraisal was done but this reveals something I have had concerns about for a long time.  Can buyers actually perceive how big a home is in real numbers simply from an inspection?  For that matter, can realtors or appraisers even perceive this?  Notice I used the term perceive and not calculate.

I would like to conduct a hypothetical semi-scientific study that consists of 50 typical buyers, 50 loc…

Gaining Perspective On Our Profession

by Mike Armentrout
I hold no particular pedigree or credential to speak for everyone in the real estate appraisal profession. All I can do is draw from nearly 26 years of being a part of it. In that time, I have heard almost every opinion on every issue that promises to be the next big challenge for our industry.
It’s true that like everything, change is inevitable. We adapt to new technologies and practices as well as learn new skill sets. From FIRREA to Dodd-Frank, appraisers have continued to evolve when swift moving currents require them to alter their course.
In the wake of the financial collapse, we had major impacts on what we do. A precipitous and prolonged drop in work volume resulted in a significant migration out of the industry and sped up retirements for others. For those of us that remained, we were left with a regulatory framework that now defined who our clients were supposed to be. The net result was the proliferation of appraisal management companies. While the use o…

Art or Science?

Is real estate appraisal an art or a science? It may not be as philosophical as the old question "does a tree make a sound when it falls in the forest?" but many appraisers are familiar with the art or science question.

I have routinely contended it is both, but not separately. Some may dismiss our opinions as just that and write off what we do as arbitrary and subject to mood. For others, nothing but pure statistics will suffice. The reality is that art and science must be blended and homogenized by experience. The more we know and understand about a particular market, the more we can utilize data and tangible factors to reconcile a supportable conclusion.

The Reality of Price Per Square Foot.

Thanks go out to Appraisal Scoop for posting our latest article. Would love our realtor friends to read and give us feedback.

Typical Buyer VS Informed Buyer

I recently appraised a manufactured home for a possible short sale. While performing my inspection, the home owner told me his story that has become all too common since the financial crisis and economic downturn. Lost jobs and mounting debt linked with a declining real estate market had brought forth another sadening statistic of an underwater mortgage.

The home owner was visibly frustrated with the manufactured housing lending process or lack thereof. He stated "it would have been nice if someone told us it was so difficult to get a mortgage on one". As I wrapped up and started my journey back to office, I began thinking about a larger question. If this home owner was a "typical" buyer in the market, did he meet the definition of a reasonably informed buyer?

This would likely garner several perspectives from appraisers but it seems the simple answer would be that it depends. It is possible that the majority of some buyers may not actually understand the nuances o…