Episode 027 - Are Appraisers the Devil? PART 2
Episode 027 - Are Appraisers the Devil? PART 2
Are you a Netflix binge-watcher? Then, we have a 3-part binge-worthy listening opportunity for you! Welcome to our 3-part series all about how to more effectively price properties. In this series, we "deep dive" into understanding the appraisal process.
In today's episode--PART 2--we show you how to write a better CMA and what an appraiser is thinking about when they're evaluating the data. We discuss items like comp selection, gridding comparables, and adjustments to give you a better handle on the valuation process.
Be sure to watch our accompanying breakout video as B explains the difference between "Qualitative" and "Quantitative" adjusting. Sometimes, it's the little things that can make the difference between a good and a great CMA.
No, appraisers aren’t the devil! They provide a service. If you can understand how the appraisal process works and what is expected, then you'll get better results in your next appraisal.
SHOW NOTES
- 01:10 – B represents the appraisers and Cate the “angel” is here to represent the agents.
- 01:40 – Song of the week: Devil Went Down to Georgia, Charlie Daniels Band
- 02:40 – Christian: name one other Charlie Daniels Band song? “In America.”
- 04:15 – How to create a CMA: comp selection, gridding comparables, adjustments and reconciling.
- 04:38 – Cate: CMA is a comparative market analysis; not an appraisal.
- 05:22 – Christian: how close is the appraised value to a CMA value.
- 06:18 – CMA is “rudimentary” or as detailed as an appraisal. CMA doesn’t have much regulation. Appraisal will have more detail.
- 07:40 – CMA should look “more” like an appraisal report in the steps.
- 08:00 – Appraiser may not choose the same comparables as the agent due to appraisal requirements and guidelines that the agent is bound by.
- 08:30 – B’s example of ranch home being appraised and what comp might be needed for value AND for underwriting.
- 09:45 – Cate: doesn’t make sense to use the 2-story comp, but appraiser has to make the underwriter happy.
- 10:08 – Comparable searches should start with the major variable such as size, bedroom count, design, lot size. Realize you are not going to always find the most ideal comparable properties.
- 10:55 – Complicated property or an area without a lot of comparable sales: use the “floor” and “ceiling” method. Find a comp that is better overall than your property that sets the ceiling (high number), my home is NOT worth more than that property. Find comp that is inferior overall that sets the floor (low number), my home is worth MORE than that property. Sets a range to work within.
- 12:22 – Cate: as a newer agent, floors and ceilings is a great way to practice. Helps when presenting to seller and buyer.
- 13:03 – Helping people understand and see the numbers. Searching for comparables is tough.
- 13:27 – Consider using pending, listings and expired listings to help. They are not ideal but can be helpful.
- 13:47 – Cate’s Side Note Tangent: fiddles (aka violins) appeared about 1,100 years ago. Fiddle is more for dancing and violin is more for the classical music playing.
- 14:55 – Cate: did you play an instrument? B – bass guitar; Christian – played drums his whole life; family played in a house band and got to meet many famous country music singers. Super B did not sign his autograph book.
- 17:40 – Properly grid comparables is HUGE! B is right every single time! You’re right B.
- 18:40 – Having the comps on a grid allows you to see all the element of comparison so you make a more critical look at the properties.
- 19:05 – Excel spreadsheet that agents can use. Email B if you would like a copy of that grid.
- 19:30 – Apply the adjustments. What is a fireplace worth? The adjustment is the LAST thing you need to worry about. The adjustments will make little difference comparables to the property you select as comps and how you grid them.
- 20:05 – Adjustments are extremely hard to argue for or against and hard to make a claim on the adjustment number. Look at the other parts of the value to make the stronger appeal.
- 20:30 – Cate: start off with baby steps; pros and cons to each property.
- 21:10 – Qualitative versus Quantitative adjusting. Qualitative is must more effective: is the element in the comparable (ex. fireplace, garage, basement) better, worse or the same as the subject. That is an excellent place to start.
- 21:38 – Cate: the adjustments are always made on the comparables, not the subject.
- 22:00 – Foreshadowing: CBS and CIA. A good memory tip to keep your adjustments in line.
- 22:13 – Last part: Reconcile your value. EXPLAIN what you did. Why do you like your comparables? Why did you do what you did? What is your rationale?
- 23:06 – Cate: describe things the appraiser may not know. Home next door sold but had a flooded basement. Similar property in the subdivision had high motivation.
- 23:20 – Example: comp across the street that was, on paper, a similar property. However, the sellers were divorcing, and the condition was not the best. None of that known by the public.
- 24:08 – Cate: appraisers are human! They must follow certain guidelines. Communicate with your client to set expectations. Offer as much information as you can to the appraiser to make their job easier.
- 24:48 – Quote of episode: “Value what you bring to the table. It may not be everything, but your anything is better than other people’s nothing.” Do not let your lack of knowledge keep you from being legendary. We all started somewhere.
- 25:37 – Focus on comparable selection with floors and ceilings; properly grid those comparables to prove to yourself the numbers; know that adjustments are required but are not the be all, end all; lastly, RECONCILE your number; explain what you did.
- 26:10 – Closing, part 3 is next week. Make your day legendary!
SHOW LINKS
- "Devil Went Down to Georgia" – https://www.youtube.com/watch?v=wBjPAqmnvGA
- "In America" – https://www.youtube.com/watch?v=Hm4_rXQAyLM
- What is a CMA? (realtor definition) – https://www.realtor.com/advice/sell/understanding-the-comparative-market-analysis/
- What is the CMA? (Country Music Awards) – https://cmaawards.com/
- What is CMT? – http://www.cmt.com/
- Violin vs. Fiddle – https://www.zaretandsonsviolins.com/blog/what-is-a-violin-and-what-is-a-fiddle-25312
- Step Brothers movie: “Did you touch my drum set?” – https://www.youtube.com/watch?v=Fpa5ReX0QFA
- Sing Kumbaya - https://www.youtube.com/watch?v=IAIq9fGGDfc
BETWEEN THE LINES LINKS
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https://www.facebook.com/groups/realestatebetweenthelines/
https://www.facebook.com/Brian-C-Lee-111822417027919/?
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