What do Dominos and an appraiser have in common?
Four tips to value your home
I recently reviewed an appraisal (we don’t require them, but the borrower had gotten one prior) and out of curiosity I looked at the appraiser's resume that was attached to the appraisal. Their most recent experience was a manager at Dominos pizza (currently employed there) and they got their appraisal license online.
I have nothing against Domino’s pizza, but I am less than convinced that delivering pizzas provides real estate expertise. Does this background provide the necessary experience to accurately assess a property’s value? This leads me to a recent Wall Street Journal article: Are dodgy appraisals making a comeback?
According to the Wall Street Journal, “An estimated one in seven appraisals conducted from 2011 through early 2014 inflated home values by 20 percent or more” Ironically on the domino’s appraiser, the value was off substantially (over 20 percent) from what the true market value was (I personally looked at the property and comparables).
With the statistic above in mind, and personally valuing thousands of residential properties for our loan portfolio, I put together four quick tips to accurately value a residential property without an appraisal.
- Pull your own comps (don’t use Zillow, the MLS, etc), pull them from the county. The county (or a service that pulls directly from the county) is the only reliable source of data to ensure you are comparing apples to apples. Make sure you are looking at actual sold properties and comparing above grade square footage (basements are nice, but considerably less valuable than above grade square footage).
- Physically look at the property you are interested in and also look at the comparables (how is their curb appeal, have they been updated, how is the lot, what are they looking at?); make sure they are actually comparables. For example I recently looked at a property that was located near a golf course, many of the comparables backed up to the golf course, but the subject property had an interior lot. The golf course view properties are superior to the subject as a result of their location (even though one was directly across from the subject)
- Stay in a close radius: in many areas a block could be the difference in a very nice property and an iffy property. In an urban area, try to find a sale on the same street within the last 18 months or so. If there is not a recent sale, ensure you stay within a similar section in a neighborhood.
- Do not give into the hype: There is considerable market momentum driving up home prices. Ensure you take the emotion out of the process and focus on the facts (aka comparables)
By following the four tips above you should be able to get an accurate assessment of a properties true value and not be part of the statistic with an inflated home price