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tcope
Premium
join:2003-05-07
Sandy, UT
kudos:2
reply to SwedishRider

Re: Appraisals and Finished Basements

said by SwedishRider:

I can disagree... If one has a fully finished walkout basement with finishes of equal or greater quality, then I do think that should be factored into the square footage calculation. Maybe not at full value, but to disregard it or to blindly give it a "pennies on the dollar" valuation seems unconscionable to me.

If it's finished space where one can live and use... it should be counted substantially and not just valued as an afterthought by an appraiser...


That is not at all what I was commenting on. My comment was about the need for the appraisal and why.

Also, keep in mind that the way an appraiser writes up a home is different then the way a Realtor would list it. As in my example, I've been told that the appraiser won't count rooms below grade as bedrooms but a Realtor listing would.


chris
Poor Impulse Control
Premium
join:2000-08-13
Middletown, CT
reply to cableties

said by cableties:

said by ropeguru:

I call it a scam. That is all it has been since day one with appraisers. They do want they want for whom they work for.

Scam is an understatement. Talking with a title guy and a realtor, because of the mortgage/housing fiasco, appraisers now base it on sqft, not amenities/improvements. Take all the pictures you want, show all the receipts, etc... doesn't mean squat anymore to appraiser.

The appraisal is a funny thing. Say you're selling a house and it appraises for 200,000. If someone wants to give you 220,000 for it (for whatever reason - say there's a bidding war) that's great - they just need to put enough down because the bank isn't going to loan more than say, 90% of the appraised value. At that point the appraisal isn't as important. It's happened and still does. People get emotional about homes for a lot of reasons. Maybe they love the school system or they want to be close to relatives. There are lots of ways to justify paying a premium to live somewhere. As they say, money talks.

Now say you're looking to sell your house and the appraisal comes in at 200,000 but all the comps in your neighborhood are in the 185,000 range. You keep the house on the market, have showings and get offers but they're all right around the comps. In this situation the appraisal isn't going to force someone to pay more for the house if everything else is selling 15,000 or even 20,000 below your appraised value. This hurts even more if there are houses for sale in your neighborhood (even close surrounding neighborhoods) that are very similar to yours and priced in that lower range. You'll find yourself forced into lowering the price to what the market is willing to bear in order to sell.

When you're buying and selling yeah, the appraisal is important BUT - what's MOST important is what someone is willing to give you for the house.

If you're refinancing, the appraisal is everything, especially if your loan to value ratio is up there in the 90th - 95th percentile. I am in the process of re financing and the appraiser told me that as far as the house value is concerned, the bank is most interested in what they can get for it if they have to take it. And my expectation in that statement was that they would look for a quick sale. To pin a value on my place there are certain things that are expected for a house of my size and it's age. For example a two car garage. If my house is expected to have one because it was built in 2008 and is a certain size (2600 sqft) and doesn't, it's a 20,000 hit in the value (attached or detached). My house is expected to have 2 full and 1 half bath. If I were missing the half bath it's a 5,000 hit on the value. It all felt very clinical and cold


SwedishRider
Rider on the Storm
Premium
join:2006-01-11
not Sweden
kudos:1
reply to tcope

said by tcope:

said by SwedishRider:

I can disagree... If one has a fully finished walkout basement with finishes of equal or greater quality, then I do think that should be factored into the square footage calculation. Maybe not at full value, but to disregard it or to blindly give it a "pennies on the dollar" valuation seems unconscionable to me.

If it's finished space where one can live and use... it should be counted substantially and not just valued as an afterthought by an appraiser...


That is not at all what I was commenting on. My comment was about the need for the appraisal and why.

Also, keep in mind that the way an appraiser writes up a home is different then the way a Realtor would list it. As in my example, I've been told that the appraiser won't count rooms below grade as bedrooms but a Realtor listing would.

Oh, then I agree that the appraisal is needed... but I disagree with the current methodology used in determining valuation.

I didn't interpret your post the way you meant it...


Appraiser007

@sbcglobal.net
reply to cableties

Click for full size
said by cableties:

said by ropeguru:

I call it a scam. That is all it has been since day one with appraisers. They do want they want for whom they work for.

Scam is an understatement. Talking with a title guy and a realtor, because of the mortgage/housing fiasco, appraisers now base it on sqft, not amenities/improvements. Take all the pictures you want, show all the receipts, etc... doesn't mean squat anymore to appraiser.

It still works the same. It's based on comps in your area. They compare your amenities/improvements to other houses in your area. They rate you worse, same, or better then those comps. That changes the appraise price some. It was always based on the sq. ft. of the house. Look at an appraisal from 2002 then look at one from 2012. They do stuff pretty much the same they are just rounding everything down. If an appraiser use to give a $10,000 credit for a 1 car garage in 2002 they give a $5,000 credit in 2012 for that same 1 car garage. If they use to give $25/sq. ft. for finished basement they now give $15/sq. ft. for finished basement. All the other properties that have sold in the last year or are currently for sale in our area impact you directly. You can see in the picture all the features can impact the property based on comps.


disconnected

@snet.net
reply to SwedishRider

It's funny how tax appraisers seem to be exempt from this rule. Our home's only partially finished basement is being counted as part of the appraisal and has significantly increased our tax bill.

Expand your moderator at work


KrK
Heavy Artillery For The Little Guy
Premium
join:2000-01-17
Tulsa, OK
reply to SandShark

Re: Appraisals and Finished Basements

May I ask, which bank?



KrK
Heavy Artillery For The Little Guy
Premium
join:2000-01-17
Tulsa, OK
reply to alkizmo

And this is why the house flippers do everything to cheaply and shoddily add sq.footage to a home (Such as converting the garage, etc) and who cares about the quality, just so the numbers on paper look bigger.
--
"Fascism should more properly be called corporatism because it is the merger of state and corporate power." -- Benito Mussolini



Msradell
P.E.
Premium
join:2008-12-25
Louisville, KY
reply to dennismurphy

said by dennismurphy:

The only upside is that it also isn't included in the tax calculations, so we catch a break and only pay $10k/yr

!! Yet another reason people are bailing out of the northeast. Here in Louisville we have 3400sq/ft, 4 bed, 3.5 bath, $400,000+/-and to our taxes are $3000! Prior to this we were in SC where the taxes were even lower. I really don't understand why anybody stays in the northeast with their ridiculous taxes.


alkizmo

join:2007-06-25
Pierrefonds, QC
kudos:1
reply to KrK

said by KrK:

And this is why the house flippers do everything to cheaply and shoddily add sq.footage to a home (Such as converting the garage, etc) and who cares about the quality, just so the numbers on paper look bigger.

It's a "buyer beware" situation really.

It's more like that evaluators assess on the cheap end because of in case someone put up drywall directly on concrete, glue carpet to the slab and call it a "finished basement".


Sennheizer

join:2012-05-14
reply to SandShark

said by SandShark:

said by A non :

Hey, enjoy your lower property tax bill due to the lowered appraisal.

All the fees on a refinance are the real scam. I had to pay for an appraisal when I refinanced, even though the value of the land alone exceeded the amount I was borrowing. It didn't matter what the value of the house was, I could have a tarpaper shack there, the bank would still get its money back. But, no, I had to pay for an unnecessary appraisal.

I just refinanced and the bank didn't require an appraisal. Of course, by not having an appraisal done, I didn't get the lowest rate I could otherwise have gotten. Then again, also I didn't have to supply as much extraneous documentation to get the loan.

The technical terms are: Streamline (which you did) and Fully Documented. There are advantages and disadvantages to each.


A non

@optonline.net
reply to tcope

said by tcope:

I suppose it would be better that banks just loaned any amount of money on any property without really looking into the value? I seem to recall that this got the entire market into a little bit of trouble several years ago.

While all of the feels are hard to swallow, I can't disagree with an appraisal. First, it's cheap (around $300) and it's there to make sure loans don't exceed values. How do you know the current value of your land and home?

I was borrowing $150k. Anyone with half a brain knows the land+improvements are worth $500+k. So that's a loan-to-value ratio of 30% or less!

So we need to pay good money for a professional appraiser to tell us what any dummy already knows? The bank doesn't care, they're not paying for the appraisal!


alkizmo

join:2007-06-25
Pierrefonds, QC
kudos:1

said by A non :

I was borrowing $150k. Anyone with half a brain knows the land+improvements are worth $500+k. So that's a loan-to-value ratio of 30% or less!

So we need to pay good money for a professional appraiser to tell us what any dummy already knows? The bank doesn't care, they're not paying for the appraisal!

How are they supposed to know what your land was worth?


SwedishRider
Rider on the Storm
Premium
join:2006-01-11
not Sweden
kudos:1
reply to Msradell

said by Msradell:

said by dennismurphy:

The only upside is that it also isn't included in the tax calculations, so we catch a break and only pay $10k/yr

!! Yet another reason people are bailing out of the northeast. Here in Louisville we have 3400sq/ft, 4 bed, 3.5 bath, $400,000+/-and to our taxes are
And even in the northeast it depends on where you are... I though CT was high until I considered building over the border in RI. If CT's taxes are indecent... RI's are just obscene!


Jack_in_VA
Premium
join:2007-11-26
North, VA
kudos:1
Reviews:
·Millenicom
reply to Msradell

said by Msradell:

said by dennismurphy:

The only upside is that it also isn't included in the tax calculations, so we catch a break and only pay $10k/yr

!! Yet another reason people are bailing out of the northeast. Here in Louisville we have 3400sq/ft, 4 bed, 3.5 bath, $400,000+/-and to our taxes are
I think I'm very happy with my tax rate of 0.47/100
Expand your moderator at work


SwedishRider
Rider on the Storm
Premium
join:2006-01-11
not Sweden
kudos:1
reply to Jack_in_VA

Re: Appraisals and Finished Basements

said by Jack_in_VA:

said by Msradell:

said by dennismurphy:

The only upside is that it also isn't included in the tax calculations, so we catch a break and only pay $10k/yr

!! Yet another reason people are bailing out of the northeast. Here in Louisville we have 3400sq/ft, 4 bed, 3.5 bath, $400,000+/-and to our taxes are
I think I'm very happy with my tax rate of 0.47/100

Tax rate here is $22.38/1000 but only on 70% of assessed value. Cars are taxed at that rate as well.


Jack_in_VA
Premium
join:2007-11-26
North, VA
kudos:1
Reviews:
·Millenicom

said by SwedishRider:

Tax rate here is $22.38/1000 but only on 70% of assessed value. Cars are taxed at that rate as well.

Homes here by state law must be taxed at 100 percent of assessed value.

Cars are $3.60/100 here in my county.

A $300,000 house here would pay $1410


KrK
Heavy Artillery For The Little Guy
Premium
join:2000-01-17
Tulsa, OK
reply to alkizmo

The thing that bugs me is I did check into it before buying a home. I looked into what was supposed to count as sq. footage, ceiling height requirements, finished basement, etc, even things like egress windows and so on for if you want to add a bedroom in a below grade basement, etc and everything checked out or seemed fine.

Now to find out afterwards that "None of it counts" just feels like... well, like fraud or plain being ripped off or stolen from, actually. We're not talking a small amount, either. 900 sq.ft + bathroom disappearing would mean instead of having plenty of equity in the home, I'd now be upside down in the mortgage and not able to refinance or sell for fair price if the need arose.

You shouldn't be able to change the rules in mid-game. I have plans for the basement but now it seems like any money invested would be just thrown away because it really wouldn't add any value to the home and no matter how nice it would be a potential buyer still wouldn't be able to get traditional financing on it.

Feels wrong on every level.

--
"Fascism should more properly be called corporatism because it is the merger of state and corporate power." -- Benito Mussolini



SwedishRider
Rider on the Storm
Premium
join:2006-01-11
not Sweden
kudos:1

said by KrK:

The thing that bugs me is I did check into it before buying a home. I looked into what was supposed to count as sq. footage, ceiling height requirements, finished basement, etc, even things like egress windows and so on for if you want to add a bedroom in a below grade basement, etc and everything checked out or seemed fine.

Now to find out afterwards that "None of it counts" just feels like... well, like fraud or plain being ripped off or stolen from, actually. We're not talking a small amount, either. 900 sq.ft + bathroom disappearing would mean instead of having plenty of equity in the home, I'd now be upside down in the mortgage and not able to refinance or sell for fair price if the need arose.

You shouldn't be able to change the rules in mid-game. I have plans for the basement but now it seems like any money invested would be just thrown away because it really wouldn't add any value to the home and no matter how nice it would be a potential buyer still wouldn't be able to get traditional financing on it.

Feels wrong on every level.

Yep.


aannoonn

@optonline.net
reply to KrK

said by KrK:

I have plans for the basement but now it seems like any money invested would be just thrown away because it really wouldn't add any value to the home and no matter how nice it would be a potential buyer still wouldn't be able to get traditional financing on it.

I don't understand why this is a problem. People will pay extra for a house with a finished basement. And if the taxes don't go up because of it, it's a win-win-win situation. (Win for you [gets more money], double win for the buyer [gets a basement, pays the same taxes].)


KrK
Heavy Artillery For The Little Guy
Premium
join:2000-01-17
Tulsa, OK

1 recommendation

And when the bank won't finance them because the bogus loan-to-value ratio says they are overpaying for the under-counted sq.footage home? This seems to be the issue. Even if you and a buyer agree it's worth $285,000 won't do you much good if the bank will only loan out $210k max because of the low appraisal.

It's true someone may love it and have a large down-payment to cover the difference, but you're cutting your potential buyer pool substantially if you only can sell to a select few. Uggg.

--
"Fascism should more properly be called corporatism because it is the merger of state and corporate power." -- Benito Mussolini



SwedishRider
Rider on the Storm
Premium
join:2006-01-11
not Sweden
kudos:1

said by KrK:

And when the bank won't finance them because the bogus loan-to-value ratio says they are overpaying for the under-counted sq.footage home? This seems to be the issue. Even if you and a buyer agree it's worth $285,000 won't do you much good if the bank will only loan out $210k max because of the low appraisal.

It's true someone may love it and have a large down-payment to cover the difference, but you're cutting your potential buyer pool substantially if you only can sell to a select few. Uggg.

+1 Your analysis is dead on the money.


aannoonn

@optonline.net
reply to KrK

You're better off dealing with buyers who do not have marginal financial resources to buy your house.

Bottom line is that your house is easier to sell (it's more attractive) with the finished basement, and you'll get more money. You could lower the asking price due to all the money you've saved by paying lower taxes.



SwedishRider
Rider on the Storm
Premium
join:2006-01-11
not Sweden
kudos:1

said by aannoonn :

You're better off dealing with buyers who do not have marginal financial resources to buy your house.

That limits the pool of buyers to about a handful of people. For better or worse, most people need to finance substantial portions of their home purchases.

And appraisals factor heavily in that financing process...


dennismurphy
Put me on hold? I'll put YOU on hold
Premium
join:2002-11-19
Parsippany, NJ
kudos:2
Reviews:
·Verizon FiOS
reply to aannoonn

said by aannoonn :

You're better off dealing with buyers who do not have marginal financial resources to buy your house.

Not wanting to float a substantial chunk of change and 'marginal resources' are two very different things.

We bought our house last year - it was $520,000. We put $104,000 (20%) down in cash, leaving the financed portion at 416,000.

If the appraisal had come in for less than $520k, we probably would have walked away. Putting down even more cash would've been more of a stretch than I wanted, and I was right at 80% LTV (not to mention the limit for a conventional FM loan). I didn't want to pay PMI nor did I want to put out even more cash.

I wasn't in a 'marginal' position, but had several lines in the sand I didn't want to trip over.

Thankfully, the appraisal went well, we closed on the house, and are living happily ever after... Or something like that.


aannoonn

@optonline.net
reply to SwedishRider

said by SwedishRider:

said by aannoonn :

You're better off dealing with buyers who do not have marginal financial resources to buy your house.

That limits the pool of buyers to about a handful of people.

In that case, the real problem is that you have the most expensive house in the neighborhood.


SwedishRider
Rider on the Storm
Premium
join:2006-01-11
not Sweden
kudos:1

1 edit

said by aannoonn :

said by SwedishRider:

said by aannoonn :

You're better off dealing with buyers who do not have marginal financial resources to buy your house.

That limits the pool of buyers to about a handful of people.

In that case, the real problem is that you have the most expensive house in the neighborhood.

Hardly. I am on the upper middle end of the neighborhood. The home a few houses up from me has me by about 6 figures... literally.

The real problem is that most people have a hard time getting together a down payment in modern times, never mind paying all cash for a property. Banks are reluctant to keep putting money into homes that people may walk from and they take the hit for. Banks have become property wholesalers at this point... in many ways, they are in direct competition with both traditional sellers and builders. Many builders feel like pariahs when walking into a bank looking for project financing.

To the original point: The fact is that MOST people finance MOST of their home's purchase price MOST of the time. That applies to homes in a wide range of prices from the fixer-uppers to the McMansions. All cash deals are not the norm for the vast majority of purchases. The market is very competitive and financing is one of (if not the) major consideration of both the buyer's offer and to a lesser extent, the seller's asking price.

It is naive not to realize that where you appraise will have a direct impact on the potential pool of buyers and the selling price of the home given that most banks are reluctant to loan out more than 80% of appraised value. Yes, there are programs if more needs to be loaned out, but those are outside the bounds of a conventional 15 or 30 year fixed. Sheer square footage matters most and it seems that finished basements or "lower split levels" matter relatively little in the grand scheme of an appraisal. Why? Because no matter how nice the workmanship... finished basements won't add to livable square footage.

Until the appraisal rules are modified to allow for total square footage to include finished basements when valuing comps, folks who invest generous amounts of cash in their basements should enjoy the use of the space... but expect to get a fraction of that back in a sale (if anything).
Expand your moderator at work


KrK
Heavy Artillery For The Little Guy
Premium
join:2000-01-17
Tulsa, OK
reply to aannoonn

Re: Appraisals and Finished Basements

That's not really the bottom line. The bottom line is what buyers will pay for it, and that comes how or if they can finance it.

Unless they have cash to just pay up, and how often does THAT happen.
--
"Fascism should more properly be called corporatism because it is the merger of state and corporate power." -- Benito Mussolini