How does the age of a house affect appraisal

22 Replies

I have a 2 family I bought for $232k in Sept. research shows with no work it would appraise at $260k. I’ve done $27k worth of work for $17k ( tenant is licensed insured electrician and my boyfriend d is licensed and insured carpenter )

For refi appraisal came back at $260k despite both units getting new kitchens, new floors through out, paint. In my unit we also needed new ceiling and dry wall hung and installation done.

When reading the comps the houses it’s being comped to are 99,119 and 97 years old. They list the age of my house as 129 but it’s 62 years old with an effective age of 15.

How much can age improve an appraisal?

Also I live in the nicest neighborhood in town across the street the state’s largest lake near a boat launch two minutes away. There’s only 2 multi families here my two family and a 4 plex.

They compared had to comp me to some of the worst parts of town.

First time home buyer, property manager by profession for commercial real estate first time as a landlord for a residential property or property I own , any fees back would be helpful

@Jenna Williams I would challenge the appraisal and give them all the feedback you displayed here (and all you have in your arsenal)! You're in a challenging MFR sector where comps are sometimes difficult due to the lack of volume of like properties.

Connect directly with the appraising party, professionally challenging their quotes and see what you can come to an agreement on. You’ll be surprised at the results you can unveil by challenging the outcome and being a voice of reason.

Good luck! Nice job identifying the opportunity and taking action! Hope it works out in your favor

@Jenna Williams No problem. They should be open to speak with you. You’re the customer. I’d start by clarifying the measures they used so that you can compare them to your own. Have your notes ready and it would just look at it as a healthy debate.

Don’t demean anyone however and give accolades where due. You’re setting the stage for a healthy relationship and perhaps, things will go in your favor!

@Ben F. For sure. I was unable to be there due to work so my partner walked the appraiser around, the appraiser and I had several friendly toned convos about it leading up to it and right after it, so no need to change the tone.

@Jenna Williams you should actually be thankful that you will likely have zero success in getting the appraiser to change their mind. If you did, that’s more like how it was pre-great recession and we all saw how that turned out.

Appraisers are unbiased third parties, so that you, the bank, the agent etc shouldn’t influence them.

It sounds like you paid 232k, expecting appraisal after work at 260k and that’s what you got.

Certain things, like hanging drywall, don’t really affect the value of a house. I could spend 20k fixing a foundation, for example, and it wouldn’t improve the value of my property from an appraisal standpoint.

@Caleb Heimsoth

Hi Caleb,

I did Reno both units. From the data I had read it looked as it would $260k with out any work. With two new kitchens and a new bathroom and over head lights wired in (u had to use lamps in every room) I was expecting closer to $280k

And without any data , it seems a house being marked as 129 years old vs. 62 seems like a big deal. The effective age is 15 according to the appraisal. And the ge difference is enough that I think they would comp to different buildings, no?

Originally posted by @Jenna Williams :

@Caleb Heimsoth

Hi Caleb,

I did Reno both units. From the data I had read it looked as it would $260k with out any work. With two new kitchens and a new bathroom and over head lights wired in (u had to use lamps in every room) I was expecting closer to $280k

And without any data , it seems a house being marked as 129 years old vs. 62 seems like a big deal. The effective age is 15 according to the appraisal. And the ge difference is enough that I think they would comp to different buildings, no?

I am not an appraiser and I don’t have any comments to your question, because I don’t know. 

My main point was the odds of getting this specific appraiser to change it from 260 to 280 is basically zero.  

You can have another appraisal done but this may happen all over again.  

 

It’s possible to over-improve also. Even in a high end area.

The nicest neighborhood can be hard to comp correctly since...it’s the nicest neighborhood. Add in being a MF and that makes it even more difficult.

I would investigate why the age is not accurate. But I don’t think that matters that much since homes ~100 years old have a certain charm you can’t get anymore and they can go for more than you’d think just based on age alone, assuming they’ve been kept up or updated.

An appraisal is an opinion of value, same as your Realtor's. And it's a snapshot in time, not an ongoing reflection of value that will last for years. It is based on market conditions so if you have an opinion of value from 6 months ago and your local market tanked in that time, that will certainly change your ARV. I'm not saying that's what happened here, but it could factor in.

As far as the age of the house, it does affect value but not to much extent. I think the appraisal you got was probably in the ballpark. Keep in mind everyone's on a different "team" and the appraiser is protecting the lender's interests.

@Jenna Williams appraisers compare ages of property by effective age and from the improvements you have described, 15 sounds right and is the go to designation for propeties in above average condition. Ask for a reconsideration of value: 1. do not contact the appraiser directly, theyre not allowed to discuss the appraisal with you at all unless you ordered it directly from them but i assume you went through a bank. 2. not all appraisrs are great but theyre human and make mistakes, i work for the largest appraisal firm here and have for several appraisers, all i know WILL reconsider your value as long as you dont provide stupid comps meaning they fit criteria and arent outlandish. If the appraiser doesnt use the provided comps, he will explain why in a revision.

Originally posted by @Jenna Williams :

I have a 2 family I bought for $232k in Sept. research shows with no work it would appraise at $260k. I’ve done $27k worth of work for $17k ( tenant is licensed insured electrician and my boyfriend d is licensed and insured carpenter )

For refi appraisal came back at $260k despite both units getting new kitchens, new floors through out, paint. In my unit we also needed new ceiling and dry wall hung and installation done.

When reading the comps the houses it’s being comped to are 99,119 and 97 years old. They list the age of my house as 129 but it’s 62 years old with an effective age of 15.

How much can age improve an appraisal?

Also I live in the nicest neighborhood in town across the street the state’s largest lake near a boat launch two minutes away. There’s only 2 multi families here my two family and a 4 plex.

They compared had to comp me to some of the worst parts of town.

First time home buyer, property manager by profession for commercial real estate first time as a landlord for a residential property or property I own , any fees back would be helpful

Being I am a state certified appraiser and investor i can tell you that:

1. Appraisals are an estimated opinion of market value as per USPAP

2. The banks have STRICT BRACKETING guidelines which could skew values

3. How did you know what the ARV actually was before hand?

4. "When reading the comps the houses it’s being comped to are 99,119 and 97 years old. They list the age of my house as 129 but it’s 62 years old with an effective age of 15" I have no idea where you are located but here in my market in NJ when I appraise a home of that age, the bank is very strict on bracketing. The majority of homes in my home town were developed during the 1950's and 60's. I was once hired to do an appraisal on a home built in 1850 which is RARE in this town. The house also had an effective age of 15 Years (this is typical effective age if the home was renovated like your home). The bank had strict directive to BRACKET the age with comparable sales. They did not car that I had homes even on that street that sold. It seems that your appraiser has selected homes which were close in age which he or she was probably directed by the bank. The lender can still argue the appraisal with the appraiser that he has not provided a sale which BRACKETS the age "older than" the subject. Strict lender guidelines are a nightmare for appraisers. Some banks ask us to go into different neighborhoods and even back more than 12 months and then apply an adjustment to that comparable. The problem is the adjustments applied to such a comparable still does not support the value. 

5. Due to the lack of comparable sales within your immediate area the appraiser had no other option but to extend the guidelines into other neighborhoods for comparable sales. Just hope that he applies a market adjustment. In addition, a market location adjustment has to be supported by data analysis. You can ask to see if they have applied adjustment for difference in market area.

6. Before I purchase a rehab property i pull EVERY sale in the area. That way i have proof without any doubt what the ARV will be. Investors have to be very careful with the AS IS value to buy in at / Cost to Cure / True ARV

7. Send some comparable sales to the lender to dispute the value


HOPE THIS HELPS


 

@Angelo Mart

It does, I’m in the Worcester Massachusetts market, the second largest market in Massachusetts. I’m not sure if you’re able to speak to this I have a second lot of land next to my house and I’m considering putting a garage with a 1,000 square foot 2 bedroom apartment, eventually turning my 2 family to a 3 unit property.

Anyway for me to find out how much value that type of addition could add?

Jenna, First off Worcester has lots of weird rules in terms of zoning.  Eg. If your extra lot is 5000SF in a Rg5  zoning section you might be able to build a SF on it.  There is a whole grid with frontage requirements etc.  Splitting the lot would give you the most $ in the short term, and if you were the builder or built a spec house you can do really well right now.  Adding a garage with a unit done right could make you money, so would the garages and renting those out.  You can do a cost benefit analysis of this.  Glad to help.  But it all depends on location.  Extra units in Burncoat, West Side and lets call it Umass Med/ Lake ave, give you the most bang for the buck.  Let me know if i can help.

Originally posted by @Jenna Williams :

@Angelo Mart

It does, I’m in the Worcester Massachusetts market, the second largest market in Massachusetts. I’m not sure if you’re able to speak to this I have a second lot of land next to my house and I’m considering putting a garage with a 1,000 square foot 2 bedroom apartment, eventually turning my 2 family to a 3 unit property.

Anyway for me to find out how much value that type of addition could add?

Great question. Is this lot on the same Block / Lot as the subject property or it a separate lot that is deeded and taxed separately. If it is in fact a part of your lot just be sure that it meets the 4 Principles of Highest & Best Use:

1) Is it legally permissible 

2) Physically possible

3) Financially feasible 

4) Most profitable

Cash flow is King but keep in mind that the appraisal will be based on sold comparable sales in your market and written on the FNMA 1025 Form. This means that the actual Cash Flow will mean nothing to the appraiser as the value is structured solely on sales. Cash Flow is your benefit all in all but not to be relied upon for a higher value necessarily. This is only the case in commercial properties which are 5+ more units or mixed use. When rent increases, thus, value increases in apartment buildings. Now back to the 3-Family, if it was me in my market I would definitely do it. However, if you are taking out any money loans etc, please make sure you have valid SOLD 3-Family homes in your market to support whichever value you think or need. Believe it or not 3-Families in my city at one time were selling less than 2 families. This is due to the fact that in the state of NJ has a law which states that any property with 3 or more units is subject to NJ GREEN CARD INSPECTIONS. 3-FAMILY homes being sold without the Green Card or failed inspections could result in lower sales price. My point being just pull every 3-Family comparable in the town and examine them thoroughly 

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