Chief Appraiser Blog
In most reports completed for QVS, the appraiser is asked to provide a 1004MC (Market Conditions Addendum). The 1004MC is designed to communicate a clear and accurate understanding of the market trends and conditions prevalent in the subject neighborhood – the subject’s neighborhood as it is defined in the Neighborhood section of the appraisal report form. However, there is some confusion as to what data should be included in this analysis. Some appraisers include data for every sale in the defined neighborhood – regardless of sale price or the physical characteristics of the various homes. While this certainly increases the pool of available data, it works against the spirit of the 1004MC itself.
As the implementation of UAD prepares for its second birthday, it seems appropriate to revisit the intentions of this method of reporting. UAD exists in order to bring some uniformity to the appraisal process by taking some of the ambiguity out of certain ratings. It’s also designed to promote the collection of electronic appraisal data. But let’s focus on the ratings as we really can’t control the other stuff.
Let’s start today’s discussion with a simple example. For an appraisal of a waterfront property that you are working on, you’re gridding the recent sales of two similar size, similar quality homes across the street from one another. One is situated on a waterfront lot, the other is not. The waterfront home sold for $600,000 and the non-view home sold for $500,000. Assuming all other things are equal, what is the value of the waterfront amenity? Unfortunately, the answer I see quite often is “$50,000” leaving us with an adjusted range of $550,000 to $600,000. How can that be? The market-derived adjustment should be $100,000, shouldn’t it? Yet it seems that many appraisers do not want to exceed that all-important 10% line-item adjustment guideline or the 15% net adjustment guideline. Folks, they’re just GUIDELINES. Our job as appraisers is to reflect the market reaction to differing variables through market-derived adjustments. Sometimes those adjustments are going to exceed these guidelines. In such cases, some well-developed commentary can alleviate all concerns moving forward. Commentary is the great cure-all.
You’re appraising a typical single family detached residence in a typical suburban tract neighborhood filled with lush lawns, picket fences and abundant sunshine. It MUST be zoned R1, right? Well… maybe, maybe not. “But Mike,” you might be asking yourself, “HOW can I find the actual zoning designation without visiting city hall and having a discussion with the Zoning Department?” I’m glad you asked! As it turns out, the vast majority of cities now have all of their zoning maps and corresponding zoning designations online. A quick search of “city of ___ zoning map” in your favorite search engine will typically locate all of the information you’ll need to make an informed reporting decision. Maybe it really IS R1, but maybe it’s RS-7 or LDR or RPD or some other designation which makes them unique… everyone wants to be different these days! Keep in mind, it is YOUR responsibility to provide an accurate reporting of all aspects of the subject property. Zoning is a very important component of the report. So please do the research.
in this space which I hope you’ll find valuable. Topics may include hot-button issues, what’s going on
in the market, new regulations, or just random thoughts that swirl through this head of mine (I’ll try to
keep those to a minimum).