Appraisals: Working Together – Part 3
At the 2017 Arizona REALTOR® Convention, veteran appraiser Jay Josephs spoke candidly about the love-hate relationship between agents and appraisers. Here is the third and final part of an abridged transcription.
Jay Josephs: Let’s have a very rapid conversation about leased solar systems. Guess how much value an appraiser going to give them…
Jay Josephs: Right, NO value and that’s partly because the mortgage industry has told us they don’t want appraisers giving any value to leased solar.
Appraisers have no lobby influence in Washington. We are at the mercy of the lending industry. If the lending industry says, “We don’t want you to add any value to a leased system” even if it’s pre-paid, then we don’t give any value to a leased system. It’s just that simple.
On an owned solar system, the right way to value it is the right way to value any component really. Look at your market, compare sales-with-solar to sales-without-solar and try and extract an adjustment.
The good news about solar is there are a couple secondary formulas, if you just don’t have good market data. If your listing has solar, try to provide documentation to show the annualized energy savings associated with that system. Appraisers have a mathematical formula for equating savings and utility streams over “x” amount of years to present-day value.
There are studies which support that consumers will pay more for a house that saves them monthly utilities.
Comps, Multiple Offers & Concessions
REALTOR®: We were told that we are no longer allowed to give the appraiser any kind of comps.
Jay Josephs: When the full Valuation Code of Conduct came into effect in 2009 and then subsequent regulations, it became a common misnomer that you weren’t allowed to talk to the appraisers; a common misnomer that you weren’t allowed to provide comps. That was never, ever true and it’s not true today.
There are guidelines about pressure and if an appraiser feels like you are pressuring them, there is some chance that you could get in trouble or the appraiser could walk away from the assignment. There is a difference between saying, “Here are some good comps and here’s why they’re good comps” and saying “You better use this one…or I will follow you home tonight.” That’s pressure.
I want to talk about how you can maximize your interactions with the appraiser. It starts by me saying, please don’t give me 50 comps because I’ll look at zero. I value my time too much to look at all 50 of your comps.
Don’t give me one comp because you know that means to me? You couldn’t find a second comp that supported your contract. The sweet spot is somewhere between three and 10 comps. My typical appraisal includes seven or eight comps on the grid; usually two of those are listings or pendings.
Remember, this is your opportunity to have the most impact in this transaction. The best way to do it, is print the one-page plano. Put notes on each one of them; it shows that you’ve really done your homework. You might give some insight that an appraiser can’t find by himself.
I don’t think it’s the best idea to just say, “Hey, I’ll email you.” Even if you send a link to get notified that the appraiser clicked it, you don’t know if he actually looked at the comps. If this deal closes escrow, you are going to make a lot of money to get the appraisal you want. Take five minutes and say, “Here’s a comp. Here’s why I think it’s a good comp.” Don’t just leave it to the comps that support your contract price.
My search always starts in the immediate location, by subdivision. If a metes and bounds, it’s a really tight area, maybe look at that because the most important aspect in almost every single case is location.
I go a year back in the subdivision. My first search is actives, your 12 categories, pending and closed within the last year in the subdivision. That’s my starting point. If I’ve got hundreds of comps, then my next search after that may be more recent sales. I like to have two comps that are in within the last three months to go with all of the comps that I am going to use in the subdivision.
When you are sitting in this listing, weigh the important characteristics in your head. Let’s put location number one. What’s the next most important thing about the house? Is it a fix and flip remodel? If so, the condition of that house is the next most important thing. Go find other remodel houses. Rank the importance and do searches that way.
REALTOR®: When I get a house that’s maybe $50,000 less than the model next door, I ask why is it that much different? I’ll call the listing agent and find out if they were getting a divorce and had to sell it fast. That’s information I want you to know.
Jay Josephs: Absolutely and you should put it in red at the top right corner of that plano. Go over it with the appraiser.
REALTOR®: I always give a package with the contract, with all of the addendums and highlighted sections.
Jay Josephs: Of things that you give to the appraiser, put the last counter offer and final purchase price highlighted on top of the contract. It’s not okay for an appraiser to just try and appraise on the contract price. If they had the counter, they might have come in higher.
REALTOR®: What about multiple offers?
Jay Josephs: If you have multiple offers, include copies of those and any disclosure agreements. That shows a positive market reaction to a list price. It doesn’t mean it’s going to appraise it at what that final offer is, but the market reacting very favorably to the list price is a consideration.
REALTOR®: What about concessions?
Jay Josephs: Concessions only lead to bad things on the appraisal side. If a comp sold with seller concessions, there is a greater than 50-percent chance that the appraiser will make a minus adjustment. If it sold for $200,000 with $5,000 in concessions, most likely the appraiser will really net that out at $195,000.
By the way, we teach a three-hour continuing education class for credit. If you send me an email, I will get you added to a list.
Appraisals: Working Together Part 1 – Agent Angst | Unlicensed Appraisers | Geographical Competence
Appraisals: Working Together Part 2 – Appraiser Questions | Requesting Another AppraiserTags: appraisals, appraiser, comparisons, comps, concessions, Jay Josephs, multiple offers, solar, solar lease