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Understanding Your Home's Appraised Value: An Interview with Corina D. Rollins of Corina D. Rollins Appraisers

By Corina Rollins

Tell us a little bit about your company and the services you offer.

I have been appraising since 1977 and have had my own independent company since 1983. I am a certified residential appraiser. There are three levels of federally recognized licensing: Certified General can appraise any and all types of real property; Certified Residential can appraise any and all residential properties plus 2-4 unit properties and some limited commercial; and Licensed Residential can appraise basic residential properties that are non-complex and where the aggregate transaction value is under $1 million. There are other criteria as well but those are the most basic categories of work relating to each level of licensing.

I am also a licensed real estate broker but I do not sell real estate because I am the senior real estate instructor at the College of Marin and there are only so many things you can do if you want to do them well. I teach two classes each semester and am in my 28th year of teaching. Having said that, I am also an assessment appeals officer on Appeals Panel 1 for the county of Marin. This means I am a hearing officer for disputes between the assessor and the taxpayer.

Finally I am a certified instructor of the Uniform Standards of Professional Appraisal Practice. There are approximately 550 to 600 instructors nationwide who are certified to teach standards of practice to appraisers, a class all appraisers must take every two years.

What is the basic approach that an appraiser uses to determine the value of residential properties?

In most residential appraisals appraisers rely primarily on the sales comparison approach. This is because residential home sales are driven not by cash flow (the income approach) or by the cost to construct (the cost approach) but are driven by the need for shelter, prestige - think address and school district, and by proximity to work locations.

Can you briefly talk about replacement cost and what that means for a home's appraised value?

Replacement cost, if accurately calculated, takes into consideration what it would cost to replace a home with a home of like quality in the same condition. However most owners think of replacement cost as meaning "new furnace" or "new roof" or "new carpeting." Things like this may or may not return their cost in the marketplace. To gauge the return on any improvement the appraiser must first understand the market factors in play as of the appraisal date. If the market has few buyers and lots of sellers that is called a buyer's market. In a buyer's market, buyers have the upper hand in negotiations.

If there are many buyers and few sellers, that is called a seller's market. In a seller's market the seller gets the upper hand in negotiation. In a buyer's market even if a new roof cost the seller $8,000 the market might only return 50% of the cost in a sale; conversely in a seller's market a new roof might add all of its cost to the home or even above the cost. In both cases, the replacement cost is $8,000 but in each market scenario the cost is perceived and valued differently by the parties in the transaction.

How does an appraiser typically analyze comparable house sales?

Comparable sales are analyzed as to how they compare to the property being appraised. Ideally you want the most recent sales of homes that are similar to the home you are appraising in terms of major factors: date of sale, bedroom and bath count, square footage, design, and, of course, location. But that isn't always possible. Regardless of how similar a comparable is to the subject, adjustments are made to the comparable to make it more like the subject property. If the comparable has a pool and the subject doesn't, the appraiser would deduct the value the market gives a pool from the sale price of the comparable. But in reality the market doesn't tell us that a pool adds $15,000 to the price of a home. What it really tells us is that it might add $10,000 to say $20,000 to the price of a home - or a pool may be a detriment (think drought) and people buying homes with pools are demolishing them and returning the area to patios, decks or gardens. An appraiser's knowledge of a particular neighborhood will help the appraiser to decide where that adjustment lies within the range of likely adjustments.

This is why it is said that appraising is as much art as science. In fact there are logical critical components that can be identified in all marketplaces as affecting value and as having a range of impact on value. The appraiser must use their knowledge and experience to recognize where best the comparables and the subject fit within that market range.

What might account for a difference between a home's estimated market value and its final selling price?

The appraiser values a property as of a particular date, say February 1 of X year. The home is listed in April of X year and sells 10% above its list price and 15% above its appraised value. The market value the appraiser concluded by definition assumes a close of escrow as of the effective date of the report, February 1 of X year. The day the home closes is say May 15 of X date. This means that perhaps the market has moved from the slow winter marketing months to the much busier spring. It may also mean that there were few homes listed on April 1 and with little competition there was a bidding war between potential buyers. Or maybe the homeowner cleaned up the house, painted it, and put in new carpets. In other words there are many reasons why the appraised value differs from the final sale price. But, most often, it is simply that the market has changed. For this reason appraisers should be studying market conditions constantly to see how the market is trending and putting that information in their reports for the users to understand.

What advice do you have for people who aren't happy with the appraised value of a home?

First of all did the appraiser know the marketplace? Lenders unfortunately often hire the least expensive appraiser who will do the work the cheapest and the fastest. This may mean a less qualified and knowledgeable appraiser.

Did the appraiser go through the home? Lenders use drive by appraisals because they are generally less expensive but this also means they are less accurate as the appraiser does not have the direct knowledge of the home's interior as well as exterior condition.

Are there neighborhood sales of homes like their home that are recent (think last 90 days for lender appraisals) that the appraiser did not use? Sometimes the appraiser misses sales because they are trying to do everything fast and as easily as possible; sometimes the homeowner doesn't understand the requirements of lenders as to what constitutes a comparable sale.

Submit what sales the borrower thinks should have been used for a reconsideration of value if there really is good cause to object or ask for a full appraisal with an interior inspection so that the appraiser really knows what the home is like. Or, if neither the sales or the home's condition are the issue, ask for a field review of the appraisal by a local appraiser, particularly if geographic experience appears to be the issue.

What's the best way for people to contact you and your company?

I can be reached at my office by email corinarollins@comcast.net. Our real estate program at the college offers 5 or 6 classes every semester and while not everyone of our students wants to become an agent, we have many students who take courses every semester (and some who even retake particular classes) because they learn so much about the real estate marketplace.

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