annarborappraisal - Page 4 of 9 - Pulse of the Ann Arbor real estate market

What is a comparable sale?

You have been working with your buyer now for five months. They have written six offers and have lost out on each in a bidding war. A new house comes on the market which meets their needs, and frankly, they are tired of making offers and losing out on the deal. This time they decide to come in with an offer substantially above asking price in order to beat out the myriad other offers they expect are coming. The strategy works and they win the deal. Trouble is, they still have to obtain financing. The offer does include a three percent concession for closing costs, which the seller was happy to agree to considering they accepted an offer that was twelve percent higher than asking price. They were particularly happy as the only other offer they received was slightly less than asking. This happens. The seller’s agent is not under any obligation to say how many offers were received nor what the offer prices were. The weary buyer offered in good faith to secure the property. They simply did not want to lose out on yet another property.

Along comes the appraiser for the buyer’s mortgage lender. The appraiser studies the market, notices that the market has started to cool, and that instead of houses receiving ten or more offers at a time, now they are receiving only one or two, if any. Houses are starting to remain on the market a bit longer than they were. The sales the appraiser analyzes are good comparable properties, but they all sold slightly lower than the asking price for the property, and 12-14% lower than the agreed upon sales price. After analyzing the market and the sales, the appraised value falls short of the sales price by 12%, in line with the asking price. The question is, do you try to renegotiate the contract immediately, or do you take the route of requesting a reconsideration of value claiming the appraisal was inaccurate and submit several sales that you say are better than those included in the report?

How are they better? Is it just that they sold higher than any of the sales the appraiser used, or are they actually comparable properties? Are they already addressed in the appraisal report? Sometimes there is a narrative section which addresses sales that were considered and were not included in the comparable sales grid for one reason or another. If you have the opportunity, read the appraisal report in its entirety first, as you may find the report had a compelling discussion related to why the sales included were the best available and how the value was arrived at.

A comparable property is one that is a substitute for another property. It is uncommon to have properties that are directly comparable since every house has something unique about it. A car analogy might help you in choosing comparable properties for your market analysis, or to provide appraisers on your sales when you meet them at the property (and no, we do not mind having sales offered as long as there is no expectation that we are going to use them, just consider them).

Most people will want to buy as much as they can for as little as possible. If you have a budget for a new car of $25,000, it is unlikely you would be out looking at BMW’s or Mercedes, whereas if you have a budget of $60,000 and want a German car, you are unlikely to be looking at VW Bugs. Is the VW Bug comparable with a BMW 5-Series? Not likely. Are they both German Cars? Of course. Would the buyer of a VW Bug choose a BMW 5-Series if they were the same price? Most likely. Would the buyer of the BMW 5-Series buy the VW Bug if they were the same price? Highly unlikely. You get the picture.

This is the same idea with comparable properties. While a buyer of a good basic 1,500 square foot tract house would likely jump at the chance to buy a 2,500 square foot semi-custom house if they were the same price, in equal locations, the converse would not be the case. The reason for these basic terms is that we have all seen agents provide appraisers “comparable” properties that are anything but. To be comparable, the likely buyers of one would have to consider the other, so it is not only that the buyer for the subject will consider a far superior property, but the buyer of that far superior property would want to be reasonably considering the subject.

What does this mean when you provide sales to an appraiser? First, look for what the typical buyer for your property would truly look at as a substitution. When you do that, look at those sales in the same vein, as whether your property would be a reasonable substitution. Sometimes there is nothing even approaching comparable to your property. In this instance, look to what else has sold that has some element of comparison, such as location, or quality and size, and then try to find something that is obviously not as good as your property as well as something that is better. In that manner, at least you will know that the property should be worth more than something and less than something. Appraisers will do this on those unique circumstances when there is truly no comparable property to chose from.

This bit of wisdom will help you choose the comparable properties for your market analysis, and give you a good basis of comparable properties for the appraiser should you wish to share them.

Saline MI market trends

While the market appears to be moving at breakneck speed in parts of the country, even in some of the most popular markets, it is not exactly so. Changes occur constantly, with submarkets having different appeal at different times.

The data below is that of my community, Saline MI, just south of Ann Arbor. Although the data presented does not break out submarkets within Saline, what it does is break out by price range. I could have expanded the price range above the $501,000 mark, but chose to keep it at this level for simplicities sake. The way the data reads is as follows:

The chart shows the number of total active listings, then those under contract, one years’ worth of sales, and supply compared to the past year. Finally, it shows the Contract-to-listing ratio (CTLR) of percent of properties on the market that are under contract. This is relevant as it gives an overall pulse of what is happening in the market, with 20% or less being a buyers’ market based on my experience, and over 35% a seller’s market. I have run these in price ranges as shown below, and have been tracking occasionally to see any changes. This particular grouping is interesting because what we are seeing is the early spring market, the height of the market, the early fall market, and now the late fall market. I will keep running these types of studies throughout the year to see if we have changes that start to happen, but what I am seeing from this is the expected slow-down as we head into winter.

Comparing March to June, the rate of absorption overall has increased and inventory in general has increased. The price range between $201,000 and $300,000 showed a slight slow down in absorption, while anything over $301,000 showed an increase in activity.

Compare early fall to late fall and the market again is changing, with the CTLR dropping and showing more balance. The greatest absorption has generally been in the $401,000-$500,000 range based on this information, with the exception of the current activity in the under $200,000 range. In both of these cases, over $501,000 is much lighter absorption in general.

We have gone from 34.58% CTLR in March, to 41.29% in June, then 29.35% in September and 28.88% as of today. That is for the entire Saline market, with different price ranges showing different absorption rates depending on when the data was run.

What does this all mean? Long and short is that it shows how the markets change as far as activity based on the time of year, as well as in what particular price ranges the market is hottest at each one of these periods. It shows that although the market may be “hot” in one segment, another may be quite cool. Of course, this is by price range as opposed to an actual submarket, but the logic behind it remains the same.

Hope everyone finds this interesting. If you have any questions about appraisals in the Washtenaw County market and beyond, please let me know. Feel free to visit my website at https://annarborappraisals.com for the types of services provided and the coverage area.

Data culled from the Ann Arbor Area Board of Realtors MLS

Dissolution appraisal reports

Appraisals for marital dissolution

There are many reasons to obtain a professional valuation on your property. One of the most difficult and sensitive reasons is for marital dissolution. Since the marital home is normally one of the most valuable jointly held assets, taking on an appraiser to do the work should never be done lightly.

As in all appraisal reports that are completed, utmost care should be taken in considering factors that influence the value of the property. Knowledge of the local market, including understanding supply and demand, absorption into the market, and pulse within the subject’s submarket is very important. Equally important is an understanding of buyer preferences in the submarket which the property operates within. For example, if the market expects two full bathrooms but the property has only one, how does that affect the value as well as the marketability of the property? If buyers expect a three-car garage in newer homes, but the subject has only two, does it change the buyer pool altogether? Is the market slowing; is it increasing; are buyers out in droves looking at properties or are they pulling back and waiting? These are some of the types of questions appraisers examine as they study the market related to the appraisal report.

The written communication, the appraisal report.

When we think of the word “Appraisal”, we often think of the communication of the appraisal. The appraisal is actually the act or process of developing that opinion of value. What you, the consumer, will see, is the “Report”. The report is the communication of the appraisal (or appraisal review), which is transmitted at the completion of the assignment. As a party who is not typically reading appraisal reports on a daily basis, the communication should be addressed in a manner that is clear, understandable and not misleading. This means that jargon should be minimized, or if used, explained. It means that there may be no need to provide a mile-high analysis of the nation’s economy, but stick with specifics that relate to the property itself. Of course, it is important to discuss what is happening with the market, but for a single-unit residence, what is happening in California will not be relevant to what is happening in Ann Arbor, in most cases.

The report should contain enough information that, you the client, can understand completely how the appraiser arrived at their opinion of value, whether or not you agree with that conclusion. Sometimes clients will not agree with the conclusion, but it is critical that they understand the logic and reasoning behind it.

There are many steps that are taken to arrive at an opinion of value, and to communicate that opinion in a manner that is clear and understandable. Choosing an appraiser to handle this very important piece of the dissolution problem should be done with care. Your attorney should have suggestions for whom to use. If you are not working with an attorney, consult those who do see appraisal reports with regularity such as REALTORS, loan personnel, and other appraisers. In fact, one of the best ways to hire a competent professional to handle this sensitive need, is to ask other appraisers whom they would recommend. Time and again, a couple names will surface. Interview those appraisers and go with whom you feel most comfortable. Other avenues of finding competent appraisers is to search appraiser databases from different appraisal organizations. The Appraisal Institute has the Find an Appraiser search function found here The Relocation Appraisers and Consultants has a directory search found here , and the American Society of Appraisers has a search section here.

Fees and turn times.

Every appraiser sets their own fee schedule and turn time for completing assignments. Considering the time that is involved in properly identifying the problem to be solved (which includes the different factors that influence value), determining what is necessary to solve the problem, implementing those processes, and then communicating the findings, do not expect the appraisal report to be an inexpensive part of the dissolution process. Given the hourly rate of most attorneys, expect to pay somewhere between two and five hours of your attorney’s fee for the appraisal report itself, and an hourly rate for any testimony that is needed in the event of a court or deposition appearance. If the marital home is the greatest asset that is jointly owned, this is a small price to pay for peace of mind of a job well done.

Competency in Relocation

Am I competent to complete this relocation assignment? Who on earth wants to ask themselves that question? Who on earth thinks they may be incompetent? We have to remember to ask ourselves whether we have the competence to complete an assignment, or whether we can gain the competency to do so by the time we deliver our appraisal report.

The Uniform Standards of Professional Appraisal Practice addresses competency as its own rule, which stresses how important this rule is. The appraiser has to be competent to perform the assignment, or if lacking, acquire the necessary competency to perform the assignment. The appraiser must inform the potential client before accepting the assignment about any lack of competency as well as address it in the report and what they did to become competent. If the appraiser will not be able to perform in a competent manner, they have to decline or even withdraw from the assignment. It does happen occasionally that in the midst of an appraisal, a problem arises that the appraiser will not be able to solve. At that point, they will either need to get assistance or withdraw.

What happens when the property type and location are something that we have familiarity with, but there are assignment elements that we do not? How about accepting a relocation assignment without understanding that the definition of Anticipated Sales Price is not Market Value, and that there are steps that are involved in this type of assignment that are not found in a mortgage report?

Relocation work is fascinating, and allows the appraiser to apply their knowledge of the market, and what drives value in a very detailed manner.

Being in touch with trends within your own community related to what buyers want in various market segments is key, as well as understanding supply and demand, and the fact that the past may not dictate the future is important. Understanding and being able to measure what is happening in the market, right now, as well as what is likely to happen in the very near future related to the listings that are on the market and competing with your property are critical. At the very least, an appraiser who takes on relocation work who has not taken classes or learned the process, needs to disclose this to their potential client. Let the client decide if they want to use the appraiser, or chose someone who does understand this work and has the experience to do it properly. Relocation work does allow the appraiser to gain competency while working on the assignment, as long as the report is competently completed by delivery.

There are appraisers who have made this type of work one of their primary specialty, and most are happy to help someone who sincerely desires to learn and understand the vagaries of the product type. The first place to start if you have not completed this type of work, is to visit the Worldwide ERC website and sign up for the Relocation Appraisal Training Program https://academy.worldwideerc.org/relocation-appraiser-resources/the-relocation-appraisal-training-program/. There is a cost for this program, but if the desire is there to take on a different type of assignment, this is a small price to pay, and a good foundation of knowledge. In addition to the training above, WERC sells the guide for relocation appraisal, found at https://erc.org/Resources/USRealEstate/Pages/Relocation-Appraisal-Guide.aspx. The cost for the guide is $95 for members and $195 for non-members, but is a “must-have” for the new relocation appraiser. Another option is to go to the ERC 2010 form report itself, and study the first page. This first page lays out the requirements of the form and helps the appraiser understand the process.

Asking relocation appraisers for help is another great way to learn, but please be respectful of their time as well, as they are likely helping without any compensation. Much of what we need to become competent in this type of work is readily accessible, and there are articles written addressing the differences between Market Value and Anticipated Sales Price, and elements that may be important in a relocation assignment. Some things to watch for related to this work is that we do not use UAD language; condition and quality is relative, not absolute; floor plans are cross-examined by a peer appraiser’s work; and colors, modernization and property oddities might be extremely important here, as well as general upkeep. Anticipated Sales Price does require the analysis of forecasting, and listings and pending sales are very important in the relocation process. Where the subject property is positioned in relation to the listings is something to consider and address, and the appraisal report WILL be compared to another appraisal report (or two).

Relocation work is rewarding and interesting work, but the appraiser has got to be competent in the product, not just the property type and location. If a call comes in to complete a relocation assignment, and you have never done one, let the potential client know. It is possible that they will be fine with someone new to this field, but will want to ensure that the work was completed in a manner that meets the needs of the client. Although it is uncomfortable to admit that we may lack competency in a type of assignment, this is one where we can actually gain it during the process. That is, if we are open to learning.

Thanks to Chip Wagner for the assist on this. Originally posted at the RAC website here

Bromley Park updated

Bromley Park is a subdivision developed and built by Pulte Homes from 2002 through 2004, south of Geddes, north of Clark and east of Harris in Superior Township in the Willow Run Public school district. It encompasses the streets East and West Avondale Circle, Ravenshire, High Meadow, Wexford and Glenhill Drives. The subdivision has open green spaces to the west and to the north up to Geddes Road, and along the south and east there are many wooded views. Along the interior streets there are some areas with woods and walking paths. The development has a shared pool with the condominium development to the west. There are 266 homesites within this detached single-family development.

Further information about Bromley Park can be located by accessing the development website at
http://www.bromleypark.org/

In 2015, dues were $425 for the year.

On 1/13/14 I ran statistics related to changes in the market from 2011 through 2013 in Bromley itself, showing a decline in short sales and foreclosure properties and an increase in arm’s length sales, as well as an increase in sales overall. Sales prices also showed as on the increase, rising from a median price of $135,500 to $169,500 over that three-year period. That information is found on an earlier blog post found here.

So how is this development faring in todays’ market? Recent sales are higher than the previous peak around 2005 (or statistics do not go back adequately that far and I ran 12-years’ worth of sales). The low part of the market in this development is between late 2009 and late 2012, and prices reached previous peaks around 2015-16, rising since then as shown by this chart.

Over the past two years, the increase has been strong as well, rising from an average sales price of $229,315 to an average of $254,167 from one year to the next (10.84% increase). The median price has increased from $225,000 to $250,000 (11.11%) with the same information, with similar average and median gross living area.

Currently there are three houses offered for sale in the development with a median asking price of $279,900 and an additional one house under contract, which has an asking price of $244,900. The gross living area for the house under contract is 1,795 sqft, which is in line with the median and average sizes of the sales in the 2-year study. The median size of the active properties is higher, at 2,156 sqft, which may account for the higher asking prices. With only one out of four houses under contract, the market shows 25% absorption, which is not robust and could indicate a shift, in particular as the one listing under contract points to a lower price than average and medians.

As there were 12 sales in the past 12-months, the current inventory indicates a 3-month supply. These factors point to a stable market, to possible pressure downward due to the one pending sale. This means, that although the trend lines show increasing, the market could be changing. Looking deeper into the sales that sold last year and the current contracted property, shows similar style houses in the same price range overall, indicating stable. An appraiser would not be faulted for calling the market either stable or increasing based on all of this information.

For any questions related to this, or other information on this website, please contact me at rachmass@comcast.net

Who are you going to call?

…Ghost busters!

Social media can be rife with misinformation, such as when the information presented is well intentioned, but of a national scope. National studies are not local studies, and blanket statements presented as fact are potentially misleading. Real estate agents are professionals who are involved in selling houses on a daily basis and know their markets — as well as what drives interest with the buyers and sellers they are working with. Their job is difficult; often rewarding, and they make lasting relationships with the people they have worked with. Most agents are “people persons” who thrive on human interactions, and on being able to make a difference in the lives they touch. Agents do know what their buyers are willing to pay for certain features in certain markets and price ranges, but often do not approach the valuation process in the manner that appraisers do.

Take this ad for example. The agent had a great talking point related to how various remodeling projects can add to the appeal of a property and perhaps the eventual sales price, but the talking points were incorrectly presented. There are a few issues with this ad, one is that there are very specific percentages expressed, and another that there is no source citation for these percentages. The main issue however is, if a real estate agent is the right individual to state what adds value on a home appraisal?

While advertising is critical in today’s market, advertising specific percentages or numbers about specific remodeling projects gleaned from national sources, can be misleading. Stating that these features add value to an appraisal, and that the reader should ask a real estate agent about what adds value to an appraisal, is illogical. Instead, simply go to a source, such as your local appraiser and get an appraisal completed.

For the percentages above, we have no idea where this hypothetical property is located; what price range or market segment it is in, or what the source for information is. In addition, the numbers are so precise that they are not logical. If one were to replace a garage door for $3,000, would it truly add a return of 98.3% or $2,949? Would that manufactured stone you put on the house, that some buyers will like and others hate, truly add 97.1% return? Do buyers even look at a property and say that they will pay $50.47 more per square foot than another house that was 95-sqft smaller? These types of advertisements are catchy, but they could also be misleading. In addition, the ad clearly points the reader to contact a real estate agent to tell you how much value a renovation adds to a home appraisal. This too is illogical, since an agent is not an appraiser and the job functions are not the same.

A professional appraiser, who knows the local market, has the ability to both provide a current value, and a value “subject to” the proposed changes. Appraisers approach each problem to be solved in a competent, independent, impartial and objective manner. There is significant training and experience required to become a certified appraiser. Real estate agents have a lot of specific training and education as well, but their roles are different and agents work on helping buyers and sellers achieve their goals of purchasing/selling real property. They are often functioning in multiple roles, such as acting as mediator, stager, chauffeur, diplomat and therapist. While they deal with sales prices, and know what buyers are willing to pay for properties, their view on the properties is much more “larger picture” than an appraiser specific, researched and analyzed determination.

When considering buying or selling a property, the agent is the first to call. When considering a remodel or addition and the effect on the value on the property, the appraiser is the first to call.

Contemplating a Remodel?

You love your location, but you are growing to hate your home. It is simply too small, awkward and out of date, so you consider moving.

After looking at what is available, and the hassle of picking up to ready your house for sale, let alone finding a suitable house in the price range you are comfortable with, you start entertaining the idea of having your home remodeled and expanded. Who wouldn’t? Of course, before undertaking a large project, getting an idea of where you currently stand in terms of your properties value, and where you will stand after the project is completed, is a good idea. The following is a brief discussion of what to consider.

Renovating and/or expanding your existing residence can be a great idea. You already own the property so do not need to worry about competing with others for another one; you know your neighbors and get along; your taxes won’t go sky-high by moving and uncapping the current rate; you don’t have to get a new mortgage other than perhaps an equity or renovation loan, so you can keep the lower underlying rate. Other than the mess and disruption of living through a construction project, are there other downsides?

The downsides on taking on a large construction project (or even a smaller scale one) are that it is very easy to spend more than you will recoup in the market. In fact, it is good to go into the project with the expectation that you will NOT recoup your costs, but that you are contemplating the project to take a home that you are beginning to hate and turn it into one that you absolutely love.

Do not go into a project expecting it to give you a high return on investment. Logically it makes sense to take a look at the value of your property before the renovations and what it would be worth at the same time with the proposed renovations. This is where a professional appraiser can be your best option in terms of possibly scaling back the plans, or going forward understanding where you stand.

A professional appraiser who knows your market has the ability to both provide a current value, and a value “subject to” the proposed changes. Appraisers approach each problem to be solved in a competent, independent, impartial and objective manner. The appraisal process itself is designed to conclude to an opinion that is logical, and factors in identifying what the problem is the client (you) are trying to solve. There is significant training and experience required to become a certified appraiser. In fact, experience and qualifications for anyone who you hire should be considered as critical, including the architects, designers, and building contractors. Professionals will be eager to provide their qualifications and experience upon request. If you are contemplating any remodeling, approach hiring the professionals with as much care as you would the actual remodel.

Pre-listing appraisals

There is a lot of negative commentary in social media and in the press related to what appraisals are and what appraisers do. Much of it seems to stem from a misunderstanding of the appraisal process. I just saw a YouTube video an agent put together disparaging appraisals from the pre-listing perspective, and instead advocating for the use of agent’s market analysis. Both appraisal and CMAs are valid, as they have different functions, and it makes no sense to disparage one to try and sell the other.

In order to help dispel some myths that cause this type of misunderstanding, consider what an appraisal is, and what a CMA is, and how both are useful in the prelisting process.

From the Uniform Standards of Professional Appraisal Practice (USPAP) definitions section:

APPRAISAL: (noun) the act or process of developing an opinion of value; an opinion of value. (adjective) of or pertaining to appraising and related functions such as appraisal practice or appraisal services.

Comment: An appraisal must be numerically expressed as a specific amount, as a range of numbers, or as a relationship (e.g., not more than, not less than) to a previous value opinion or numerical benchmark (e.g., assessed value, collateral value).

REPORT: any communication, written or oral, of an appraisal or appraisal review that is transmitted to the client or a party authorized by the client upon completion of an assignment.

APPRAISER: one who is expected to perform valuation services competently and in a manner that is independent, impartial, and objective.

Comment: Such expectation occurs when individuals, either by choice or by requirement placed upon them or upon the service they provide by law, regulation, or agreement with the client or intended users, represent that they comply.

Looking at these definitions, an appraisal relates to the development of the opinion of value, while the report is the communication of that opinion. Most of what the public sees is the report, not the act of development.

The definition of appraiser is particularly important as this is one who is expected to perform competently, independently, impartially and objectively. Why would there be any objection at all to someone who is performing this work in such a manner as the definition of an appraiser implies? The appraisal report should, by its very definition, end up being an unbiased opinion. I will add that the opinion is based on factual data that is observed, analyzed, and reported in a competent manner. Because of that, it is very important that data that is provided to the MLS and public records be reported accurately, as both agents and appraisers will need to rely on what is reported to a large extent.

A competitive market analysis (CMA) is the REALTORs study of the market and the subject properties position in the market. Most agents use similar data sources that the appraisers use, but tend to focus more on the active properties as compared to the sold properties in establishing an asking price. This makes sense because the buyer is not going to have the opportunity to buy one of the comparable sales that are used in an appraisal report, since they already sold. They could buy one of the active alternatives. In that manner, this is a logical approach. One concern with it however, is that the appraisal will need to at least meet the sales price once the property goes to contract, therefore studying the past sales is paramount as well.

Ideally both appraisals and CMAs consider both the past and the present, as well as the current market tone and activity. Appraisers look to most probable sales price, while agents will try and focus on the highest possible price for their client. Often sellers will have two or more CMAs for their property completed as part of the various listing presentations, as agents vie for a listing. Sometimes the agent’s CMAs are not close together at all, and the owner needs an independent opinion, which is where many appraisals for pre-listing information come into play. Sometimes sellers are simply more comfortable hiring an appraiser to provide them an opinion outside of the listing process, to ensure they do not significantly overprice their property. This too makes sense. Spending a little bit of money prior to listing, could save substantial time and heartache if the property does not sell and is marketed an extended time. Or it could do the same if it does sell, but cannot be supported by closed sales in the market. Many sellers look at the appraisal report as an ounce of protection being worth more than a pound of cure.

Both appraisals and CMAs have a place in the process of listing a property for sale. Homeowners should carefully review an appraiser’s experience, qualifications and knowledge of the market, as well as that of any agent they hire. After all, both appraisers and agents will work a market extensively, whereas a seller (or buyer) will only occasionally participate in the real estate market.

Get by with a little help from our friends

The appraisal field is challenging, difficult to get involved with, difficult to succeed at many times, and ever changing.

As appraisers we are often micromanaged, critiqued and criticized. We are often marginalized and put down by others. Sometimes appraisers are more critical of other appraisers than the public or our clients are, and this short piece is about stepping out of that mind-set and trying to help each other out. Not only helping each other out, but actually helping each other grow and succeed.

I was honored to be invited to the Valuation Expo this past week in Las Vegas. At the Expo, I was the recipient of others reaching their hands out to try and help me grow. Chief appraisers and management alike at various entities, all were generous with their time, and the contacts I made will likely benefit me going forward. Being invited to attend itself was a helping hand, and one very kind chief appraiser volunteered me to present a segment that a group worked on together, giving me some exposure that I might not otherwise have had. This is a great example of what we can do to give a little, and possibly make a huge difference in someone’s career. The offer to attend the Expo was the first offer of help, and the nudge to present was another. Just the friendly conversations with many appraisers in and of itself was helpful and I am grateful.

On a daily basis we have opportunities to accept help, as well as provide help. When the review comes back asking for more detail about the sales comparison approach and how the final value opinion was concluded, we can get angry, or we can look at it as an opportunity to grow. If our client does not understand our conclusion, then perhaps we were not as clear as we thought we were. We have to be open to understanding others in order to understand where our weaknesses may be. Discussions on Facebook or LinkedIn, or other networking sites also provide an opportunity to learn new ways of approaching problems, as do reading articles and blogs. Everyone has something to teach us, and everyone of us has something to learn.

So how can we help each other? We can engage in conversations in a non-judgmental manner in efforts to help. We can write articles, we can teach courses, we can take someone under our wing and help bring them along. We can recommend others for jobs, because these personal connections matter very much. We can attend conferences and be generous with our time and be kind to others. We can encourage as opposed to discourage. We can nudge someone along to get out of a comfort zone and speak. There are many more ways to help each other than to discourage or criticize each other.

My hope is that we think of these ways, and pay it forward.

National data, does not local data make

Marketing is a great idea. Agents and appraisers alike need to be in the public eye as individuals on a regular basis, otherwise we are easily forgotten. Cautious marketing however; could be a better idea. We really do not want to impart information that could lead our audience astray, even if it does spark conversation and gets our name out to those whom we wish to reach.

This morning I read a post on social media, citing a 2017 Zillow study about the effects of paint color on property sales prices. The post provided exact prices where a color increased the “value” of a property based on this study. However, and this is a very big however, the source does not cite how exactly this study was conducted; whether it encompasses houses in the entire country; every price range conceivable; any variables related to overall condition of each property, or how these numbers were extracted with confidence from the market. While we want to provide meaningful content, we have to be careful about painting a picture of what something may, or may not be. A study that encompasses an entire nation would unlikely accurately encompass a smaller market segment in a smaller local community. Even though most people reading the post would understand that the data provided was national in scope, some might not. Perhaps a link to the article would be a wise approach, in particular if the information is offering advice on increases in sales price based on some improvement or another.

For instance, if we have two identical houses with identical remodeling in the $200,000 price range in Chelsea, will the house with a blue front door truly sell for $1,514 more than the house with the brown front door? What happens if this house is in the $1,000,000 price range in Ann Arbor? Will it truly sell for that same $1,514 premium? What about a 1900’s Farm House with a blue dining room, compared to a 1950’s contemporary; will they see the same effect? See the problem?

caution

Searching for the source of this information, I believe it is the Zillow article linked below. The methodology is discussed in that article, but it does not account for location, price ranges, sizes, or condition and quality of the properties, and focuses on colors only. Although it states that the properties had similarity, this is based on photographs, not detail, and photographs do not always portray properties accurately. My question is whether you can pair identical or virtually identical properties with the one variable being a colored wall or door, and extract this type of precise sales price difference? Do homeowners typically paint walls white as addressed below, or when painting interior walls, is the trend towards some type of color? If homeowners/investors are not using white as the current trend, are we even comparing new paint to new paint? In my opinion, so much of the differences come down to the overall condition and levels of upgrades of the properties involved, not as much the paint colors. So much of what we see is local, not national, which is important to remember.

Is using this type of marketing tool wise given the precise numbers expressed, or is it better to simply say that currently, the color blue is popular for front doors, bathrooms and dining rooms, and point to the recent study? Is it also possible that in our local community, the color choices may not be popular?

“Methodology

The Zillow Paint Colors Analysis measured how different paint colors in various room types may affect the sale price of a home compared to its Zestimate. We analyzed more than 135,000 photos from listings around that country that sold between January 2010 and May 2018 to identify which paint colors were associated with a home selling for more or less than its Zestimate when compared to similar homes with white walls. The analysis controlled for other wall colors within each room type, square footage, home age, and ZIP code Zillow Home Value Index in the listing month. Price effects for different room-color combinations are estimates of the average premium or discount but may not reflect a causal difference in value compared to white walls.”

Found https://www.zillow.com/research/paint-colors-help-sell-20240/

Appraisers try to measure market reaction to various elements of comparison, but a paint color choice would rarely result in any effect on the opinion of value, unless the paint color was so bold that it was a detractor from the value of the property. Even so, this type of subtle and easily cured element, would be exceedingly difficult to measure with any type of precision. It would be very dependent on the market segment and market activity. Most appraisers would factor in the cost to cure plus a small entrepreneurial profit for the buyer’s time and efforts involved in the cure. Or they would consider it under the overall condition of the property. It also depends on inventory and how the rest of the home shows, as there may be no penalty or benefit from it. If it was just one room, and the market was undersupplied, it might have no effect on the marketability of the house, but if there was ample supply and houses were taking 6-months to sell, and the house needed paint throughout, then there would be a different situation. It is unlikely an appraiser is going to measure to this granular a level, just as it is unlikely that a buyer is going to pay a precise $1,514 extra for that blue front door. At least in our local market.

If you need an opinion of value for your property in Washtenaw County, please contact me through email at rachmass@comcast.net.