I am not “just” a residential appraiser

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.

View of Office Building

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!

Ann Arbor housing market as of 12/16/13

Pulse of the market as of 12/16/13

What is happening in the general Ann Arbor school district market? Below is a brief analysis of sales exposed through the Ann Arbor Area Board of Realtors MLS (A2BR for short), excluding any distress sales and excluding listings offered in Realcomp and the Great Lakes Repository. These are excluded because the other MLS tend to create a lot of duplicates and that skews the data, and also excluding distress sales compares apples to apples as far as pricing/activity statistics.

In each segment one years’ worth of data is included at a time. This is done so as to avoid seasonal changes as it is typical to slow-down during the winter months and increase in number of sales and prices in the peak spring and summer selling seasons.

A brief analysis of each of these charts is noted below.

Number of sales – in the year 2011 the exposure of arm’s length sales through the A2BR was 805, and by 12/1/13 had climbed to 1,067 sales. This is an increase of 32.55% in number of sales from 1/1/12 to the most recent period in 2013.

The increasing number of sales indicates market optimism as more sellers are able to market and sell their properties and more buyers move into the market.

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List price to sales price ratio – this is a good measure related to the degree of negotiating that occurs in the market over time. For the last three periods, the median sales price has exceeded the median list price slightly. In most of 2012 the sales price to list price ratio was in the 95.11% – 96.58% range, increasing to 96.23% to 100.72% in 2013 with the period from 10/1/13 to present showing slightly over 100% for the median sales price over list price. This provides an indication of less negotiation that is occurring in the market at present compared to recent historic data.

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Median Sales Price – relates specifically to the median sales price regardless of differences in size. Since there have been a large number of sales in this dataset, and no distress sales are included, the price increases appear to be mainly due to improving market conditions. A drop in median prices did occur from the beginning of the study up through mid-2012, but then a steady increase in prices is noted after 4/1/13. Comparing 1/1/13 data with a median price of $258,000 to 12/1/13 at $286,000 means that the non-distress sales, as a whole, have risen 10.85%.

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What about the change on price per square foot? What happens if median size increases or declines; does that affect the change in median price? Typically as size decreases, price per square foot increases for a property. The reason is that there is the underlying land value to a property, as well as the economy of scale of building a larger house. It is conceivable that a change in the median price can be tied to changes in size. As such, it is important to also look at the changing price per square foot. In this dataset prices show as almost steadily increasing, even during the period that the median price slipped somewhat. This is due to a decline in size on the median from 1,944 to 1,842 (5.25% smaller), which would logically equate to a drop in the median sales price.

From January 2013 to December 2013 the median price per square foot has increased from $141.60 to $152.13 or 7.44% compared to 10.85% if looking at median prices without regard to changing size.

 

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In addition to this information, what is currently on the market and currently under contract also plays a role in the tone of the market. As of 12/16/13 there were a total of 292 houses on the market in the Ann Arbor school district, as described above. Of these, 99 were under contract. That contract-to-listing ratio is 32.90% which is a moving number that changes every day depending on how many houses go to contract, close, or deals fall through. The current contract-to-listing ratio is significantly lower than in the summer months but is still fairly active, indicating there is still good demand. In addition, this data also suggests that there are 193 active listings that are not under contract, and with the most recent period showing 1,067 sales in a year (88.92 per month) indicates that there is just over a two month supply of active listings based on the most recent sales data.

This data relates to all of the Ann Arbor school district, and each submarket within the area could be different with some increasing in price at a greater rate while others remain stagnant, or possibly even declining in price.

Markets are also subject to change quite rapidly, and the data above is a snapshot of the market in time. Interest rate volatility; increased supply; change of jobs forecasting, etc. can all play into a rapidly changing real estate market. As such, my recommendation is always to use a local appraiser who knows the market well and is able to analyze the market whenever you have any valuation needs.

If you have any questions, please feel free to comment on my blog or send me a message. I will do my best to answer whatever questions you may have.