Appraisal Adjustments - Feel free to send me an email regarding any questions about how appraisal adjustments are calculated or dollar values given for various amenities in an appraisal. email@example.com
Sales Comparison and Adjusting values in an appraisal
The best appraisals need to have the CORRECT comps in order to come up with the right value. The best criteria is: within a few hundred sq ft from the subject size, within 10 years age +/- from the subject
property, within 1 mile, and of course within the past 6 months sale date. Values depend on the upgrades, and upon receiving a real order, I'll ask about the property regarding the items that add value over other sales.
Condition items that affect value are: Does it have a granite kitchen or updated kitchen, new appliances, updated bath, dual pane windows, a/c, fireplace(s), pool/spa, new flooring (hardwood laminate or new carpeting are all "new flooring"), view, permitted sunroom or permitted sq ft, number of garage spaces, and fresh paint inside and out?
Items that dont increase value as much: New roof, new furnace, landscaping, closet organizers,
non permitted additions, non permitted studios on the same lot, outbuildings such as sheds. A buyer amenity such as a new roof or furnace is not an item that can be directly matched with the MLS on comparables and therefore do not generally get a line item adjustment. A buyer however may choose one house over another because of that new roof or new furnace if it was offered for sale. An appraisal itemizes as many Identifiable items as possible, differences between comparables and places a dollar figure on the line showing what the market might pay for having that feature.
The sq ft of the property might have been increased from what is stated in the public records as it is shown.
In that case, I will have to know if its a city permitted room addition in order to count it as true square
footage value. A typical situation is a guest house or artist studio building, permits are the way to count value.
Appraisers rely on the sales comparison approach to value these types of items. Appraisers get to know the neighborhoods in which they work. They understand the value of certain features to the residents of that area. They know the traffic patterns, the school zones, the busy throughways; and they use this information to determine which attributes of a property will make a difference in the value. Then, the appraiser researches recent sales in the vicinity and finds properties which are ''comparable'' to the subject being appraised. The sales prices of these properties are used as a basis to begin the sales comparison approach.
Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), the appraiser adjusts the comparable properties to more accurately portray the subject property. For example, if the comparable property has a fireplace and the subject does not, the appraiser may deduct the value of a fireplace from the sales price of the comparable home. If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.
In the case of income producing properties - rental houses for example - the appraiser may use a third approach to valuing the property. In this case, the amount of income the property produces is used to arrive at the current value of those revenues over the foreseeable future.