How to get an appraisal in a rising market? Episode #290
Todd: Hello. Welcome to Todd Miller TV joined here today with Mark Gonzales who Signature Appraisals here in Las Vegas. Thanks for being on the show today.
Mark: Thank you.
Todd: OK. So, we’re in a hot market in Vegas. You’re probably aware of that.
Todd: OK. Getting a lot of offers on the properties and sometimes they’re cash and sometimes they’re financing. Of course you know when it’s financing, appraisal has to be done pretty much all the time, right?
Todd: OK. So how does – here’s a scenario. There was a sale six months ago and it was a $100,000. In the same subdivision [indiscernible] [0:00:35] two months later, there was one for $105,000. Two months later, another [indiscernible] in the same subdivision for $110,000. Now two months later, we’ve got a property under contract for $115,000. So we just went $100,000, $105,000, $110,000, $115,000. How would you appraise that knowing that two months ago the last sale was only at $110,000? How do we bridge that gap so this person that’s getting a loan can get the house?
Mark: That would be called a time adjustment. We make a time adjustment if we can support that the market is increasing. You can use time adjustments for decreasing market as well. And then once you support that value with documentation, we can make, as I said, the time adjustment for the extra additional $5,000.
Todd: OK. Are you given – are there like any standard limits you can use for percent increase or for time or whatever?
Mark: Not necessarily. It just needs to be supported.
Todd: So if you can prove that every month – every two months, it increased five grand that this is kind of in line?
Mark: Right. And we also look at current listings and we usually generally called the realtors at our listing and discuss what, maybe they have their properties under contract for.
Todd: Do they ever tell you? Because I call them all time and they’re like, “I am not telling. You will find out when we close.” That’s what they tell me.
Mark: I generally find they tend to open to – up to appraisers a little bit more than other realtors.
Mark: And they usually don’t have a problem talking about it with us.
Todd: OK. Because they call me and I tell them. When they say appraiser and I verified who they are, I don’t have a problem letting them know just because they are trying to get their work done and everything. But like another agent, I’m not going to tell him. Because then the seller, they maybe the person writing the offer next time with their person.
Todd: OK. So with – you said listings, using listings, how do you deal right now in this market when you have the short sale listings? And we’ll use that same scenario, a $100,000, $105,000, $110,000, $115,000, right? But then you see this $95,000 short sale listings that eight months ago were listed. They were in under contract status. How do you deal with that, with the short sale listing that’s really old and really low, artificially low value?
Mark: Well, you have to understand what a short sale is and what the typical buyer is going to have to spend a lot more time waiting to move into that property.
Mark: And so, they generally tend to be lower sales, lower listing. And that’s the benefit of waiting for that sale to close, a short sale to close, is that you’re going to get a lower price.
Todd: OK. Does that hurt the – do you think that hurts the values that all of a sudden the short sale closed at $95,000 and somebody else is maybe paying $115,000?
Mark: No. As an appraiser, you want to generally look at the entire market, not just one sale.
Mark: So you look at maybe some of the areas [Phonetic] [0:03:50]. Another thing that you look at is if the sale on the property is a [indiscernible] transaction. Maybe they had purchased a property and renovated it.
Mark: And modernized it, new rugs, new landscaping, new appliances. That could be in itself an entirely different market.
Mark: And so, you take that into consideration.
Todd: With that being said for renovations, you could just basically go in the house and take pictures. You know what they look like on the inside.
Todd: How much – let’s say, you see granite and stainless steel appliances and really – like hardwood floors and stuff that’s really nice compared to what the neighborhood typically – you look at MLS pictures and see what other houses look like, right? How do you deal with that as far as making adjustments?
Mark: Well, first of all, we’re going to look for other properties in similar condition, maybe it’s an older neighborhood and people are revitalizing that area. And the market is willing to pay for that. So if we can demonstrate that with other sales, then absolutely, it’s a secondary market that’s looking for that in that neighborhood. And we appraise it with other similar properties.
Todd: OK, very good. You’ve done thousands of appraisals.
Todd: People can, they may not realize this but they can just call you and hire you to do an appraisal.
Todd: OK. That’s typically what, 300 bucks or so, 350?
Todd: OK. How do they get in touch with you if they want to hire you?
Mark: They can reach me at 702-278-8840 and that’s my direct number. They can reach me seven days a week.
Todd: Awesome. OK. Thanks a lot.
Mark: Thank you Todd.
Todd: So, that’s my update for today and hope to see you on another video. Thanks.