Ann Arbor appraiser Archives - annarborappraisal

This article was originally posted in AppraisersBlogs (http://appraisersblogs.com/not-just-residential-appraiser) and I am resharing as it needs repeating. If you are searching for an appraiser to handle a residential assignment, look for someone with ample experience, who goes above and beyond the minimums related to education. There are countless appraisers out there who fit that bill, all you need to do is interview the appraiser about their education and experience related to the property, location, and intended use of the assignment.

I am not “JUST” a residential appraiser!

There is no doubt that moving to obtaining a certified general appraisal license opens doors to varied and interesting work. If it is in one’s capacity to obtain this level, it is a great idea. That said, the idea of being “just” a residential appraiser has got to stop. A good professional residential appraiser who studies the market, knows how to analyze and solve a problem, and can communicate effectively and succinctly, is a very valuable appraiser at that!

As professional residential appraisers, we constantly work at honing skills. We work at becoming better appraisers every day, realizing that learning never ceases if one is open to it. As professional residential appraisers, we exceed minimum qualifications and minimum education requirements. Many of us have earned designations that take significant study and testing. Many of us spend a lot of time, money, and resources honing our skills and trying to improve every day. We work with most people’s largest single assets, and we are aware of that. We must be aware of nuances in buyer preferences, and how they change and evolve. We must be very aware of what is happening in our markets and pay close attention to changes as they start to occur.

Homeowners hire us because they have a real need. They need to have someone who is independent, impartial, and objective help answer questions they have. They need someone who knows the market, knows how to analyze segments of the market, and who can present their findings in a way that makes sense and is usable, regardless of the opinion of value. Homeowners hire us to answer questions as varied as “what will this proposed addition add in terms of value” or “what will my value be after I split off five acres from my seven-acre tract of land” or “will it be cost effective for me to complete the list of improvements recommended by my REALTOR prior to listing my house for sale”? There is a myriad of reasons a homeowner would want to hire us directly to answer questions.

Attorneys hire us to answer questions as well. They might need to know what the value of a property was as of the date of a marriage in 1992, and what the current value is. They may need to hire us to address what a property would be worth if there was no construction defect, as well as with the defect indicated. They need someone who is not only independent, impartial and objective, but someone who is knowledgeable about retrospective valuation, or understands construction properly, and can complete a report based on both the as if value, and as is value.

As residential appraisers, we often come under extreme pressure. Pressure to ignore issues with a property, pressure to turn in assignments too quickly and to cut corners, pressure to meet sales prices that are too high, pressure to appraise lower than market value to accommodate some interest or another. For someone who is proud of their work ethic and quality, and is independent, impartial, objective and knowledgeable about the work they do and how to support it, we will never be “just” a residential appraiser. We will forever be standing up for doing our work the right way and not bending to pressures. This is the mark of a professional. This is the mark of someone who takes the profession seriously and understands how important our work is.

For those of us who treat being a residential appraiser seriously, and as a significant responsibility, we will never be “just” a residential appraiser. Think about that next time the word “just” crosses your mind. We must change this narrative from within. Be professional, be the best you can be. Be proud of being a residential appraiser. I know I am!

So many ways to measure (part 2)

Yesterday I wrote about two different parts of the analysis of market conditions and today I will finish my story.

There are a number of different ways to measure the market, but what I am doing now (and I do change things up as I learn of new techniques) is taking one years’ worth of data at a time, run on a monthly basis and compare and measure how markets change. The data is run as one year periods because it neutralizes the seasonality that you see happening in this area. It is almost clock-work to see our local market start to slow after Labor Day, and to start to pick up in February or March, depending on the weather. In addition to measuring year to year, I have also eliminated from the data below distress sales and “to-be-built” properties because including them skews data. This is addressed in a previous blog post. Depending on the market, it might make sense to include the distress sales but Ann Arbor hasn’t had a lot in general (Thank You University of Michigan) and if they are included the market actually looks like it is picked up more steam than it truly has. Apples-to-Apples with the data below.

My findings are in graphic formats below with a small explanation underneath the graph.

The amount of negotiation that takes place as a whole in a market is also a good indication of how the market is doing. The more negotiation, the wider the disparity between list price and eventual sales price; the less negotiation, the stronger the market in general. As seen above, there has been some fluctuation with this ratio, but that it is tightening over time and in the macro market (all of Ann Arbor) have had sales price at 100% of list price, or above for the past five months. This is the median price but is still very meaningful as it means there is excitement and optimism in this market and much less negotiation than is expected.

In area 82 there is more negotiation occurring but still at a very high level of consistency between list price and sales price, from a low of 99.40% to 99.78% in this five month period. In short, the past five months has seen very little price negotiation in the market.

The median sales price in all of Ann Arbor shows a slight decline in early 2012, stability in mid to early 2013 then steady increases in price up through late 2013. A small decline is showing in the last few months of 2013, and an increase back to same level at the end of 2013 for the most recent two months (the last five months have waffled between $280,000 and $285,000 as median price).

Area 82 generally mirrors the market as a whole up to July 2013, after which the prices have stayed fairly steady on the median between $245,000 and $250,000 but with the past four months at the same even median price of $247,500.

Looking at the median sales price the conclusion would be that area 82 sells for less than the market as a whole, however this would be an erroneous conclusion if only the median sales price were considered. Take the next graph into consideration.

In both market segments there is a trend upward in price over time but the price per square foot in area 82 is much higher than it is in the market in general. If you look solely at price per square foot, it would appear that area 82 is higher priced than the market as a whole; which is contrary to the information posted above. Why is this?

It is higher in area 82 primarily due to size. The median size in area 82 is smaller than the overall market running from a low of 1,328 sqft to a high of 1,374 sqft in the past five months, compared to 1,834 to 1,882 in the same period in the market as a whole. Why does the smaller size equal a higher price per square foot? It relates to the underlying value of the land. It is most common that a smaller house will have a higher price per square foot than a larger house, all things being equal.

As an appraiser, the way I currently look at price appreciation (or depreciation) is to look at both median price and median price per square foot and blend the two for any change. For Ann Arbor as a whole, from February 2013 to February 2014 the median price increased 10.89% and the median price per square foot increased 9.58%, reconciled to 10%. For area 82 in the same time frame it increased 5.32% in price and 8.81% in price per square foot, or 7% blended.

On an appraisal, the appraiser would narrow the area down to what is actually competitive with the subject property, and there might be completely different results, because markets do not move at the same rate. This is evident above where the entire area moved at about 10% whereas area 82 moved at 7% for the same period. If there is this much difference within a school district, just think how much difference there could be from national statistics? Add in distress sales, and the gap could be even greater. This is why it is so important to look to the neighborhood experts as opposed to national statistics when trying to make a decision about your real estate needs.

My final observation for market trends relates to the contract-to-listing ratio. This ratio takes all properties exposed in the MLS at a time and compares the number under contract to the whole. As of 2/9/14, in the entire Ann Arbor market there were 237 houses on the market, of which 98 were reported to be under contract. This represents 41.35% of the market under contract which is indicative of a strong and active market at this time. In area 82, there were 55 houses on the market, of which 19 were under contract, or 34.55%, not as strong as the market as a whole, but still very active and indicative of a market favoring sellers. I pay a lot of attention to this trend because it is a leading indicator of where the market is going before these houses start to close and sales prices are known. I can’t base my value opinion on what I don’t know (what these houses are going to close for) but it does help me understand market forces in action, and what the Realtors are dealing with on a daily basis.

Tie all of these data points addressed above in with yesterday’s blog post and you have a good read on the market.

Hope you enjoy this information and find it useful. As always, if you have questions about the market from the perspective of the local appraisal expert, call or write. I am always happy to field whatever calls or emails that I can.

Rachel Massey, SRA, AI-RRS www.annarborappraisal.com

Data above is culled from the Ann Arbor Board of Realtors MLS

Tag: Ann Arbor appraiser

I am not “just” a residential appraiser

Measuring the market (part 2)