Case-in-point: I appraised a flipped property in Elk Grove recently and my appraisal came back close to $10,000 below the contract price (but still above list price). While this is frustrating for the seller or listing agent, there was no ill-intent or agenda on my part. I could be blamed for bringing down the housing market and stalling a recovery, but I simply interpreted the market in this case. The lender’s appraisal department actually agreed with my appraisal too as we talked in-depth about why the appraised value was reasonable. Recent sales in the neighborhood did not support the contract price, current listings did not support the contract price, I did not use distressed sales for comparables (those were far lower than equity sales) and even offers on the subject property supported a lower value. The seller ended up accepting the highest offer – an FHA offer asking for closing costs back. All other offers were conventional or asked for no closing costs, and they all came in near or lower than the appraised value. The type of financing is not a definitive point for establishing value, but buyers not using their own money tend to make higher offers, don’t they?

Don’t forget to point the finger at the market: It’s interesting to me that appraisers are often blamed for a lack of recovery in the housing market. I wrote two days ago about the increase in the percentage of short sales in the 95757 zip code of Elk Grove. While this is encouraging news on some levels (less foreclosures), short sales also tend to sell lower than traditional sales, which means the housing market is ultimately weighed down if short sales represent 39% of all sales in a given zip code. Short sales usually have to be priced more aggressively to generate interest and/or close quickly before foreclosure. Some banks are not easy to work with either, which can also impact pricing too. I’m not saying at all that appraisers are not to face blame for shoddy work, but when the market has a total of 66% of all sales being foreclosures or short sales (as in the case above), it’s important to keep in perspective just how much the market is driving property values.

My points: 1) Give blame when it is due; 2) Market > Appraisers.

What do you think? Does this seem reasonable or am I off my rocker? What are the factors helping and hurting our housing market right now? What role do you see flipped properties playing in the housing market?

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

Download “How to develop blog content” and start writing down some ideas. I hope this is helpful, whether you have a real estate blog or write about something else.

By the way, if you’re in the real estate industry and looking for some general blogging tips, check out Quick Tips for Real Estate Blogging.

How do you plan posts? Could you see yourself using a resource like this?

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

What do you think this means?

The following graph was added as a result of a great question by Jeff in the comments section. “What were property values doing during this time?” was the question asked. It looks like the 95757 zip code has seen a clear decline in property value over the past three years. Yet at the same time it’s important to note the rate of decline has slowed down from previous years.

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

Chris Little was appointed to the American River Parkway Advisory Committee in 2007 by the Sacramento County Board of Supervisors, and was also appointed to the 65th Street Redevelopment Advisory Committee in 2008. He received the Civic Affairs Award from the Sacramento Association of Realtors for community service, and he has been a Director through the Sacramento Association of Realtors since 2009 (and he’s the current 2012 President-Elect). I mention these things because community service is extremely important to me, and Chris is a great example. Catch up with Chris Little at 916-698-1961, www.ChrisLittleSells.com or Twitter.

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

Green Pool Water: Yes, this is deemed a health issue. The water shouldn’t be green, right? Besides, if you cannot see the bottom of the pool, you never know if there is damage at the bottom anyway.

Empty Pool: An empty pool might be a skateboarder’s paradise, but it’s an obstacle to obtain financing due to being considered a safety issue. A pool like this one (covered, but empty) typically has to be filled up before the close of escrow. The lender will most likely ask the appraiser to go back out to the property to verify the pool has been filled (not verify whether it is actually working like it should since most appraisers aren’t pool experts).

Paint Cans Hiding in the Crawl Space: There is no rule from FHA saying paint cans cannot be in a crawl space, but when I see something like this, it’s a red flag because chemicals should not have the opportunity to seep into the soil. Since calling out potential health or safety issues is sometimes a subjective decision for the appraiser to make, it’s important to contact HUD on occasion as well as reach out to fellow local appraisers to say, “would you call this out too?” In this case, all that needs to happen is for the containers to be removed from the crawl space. That’s easy enough, right? By the way, regarding the attic and crawl space, a bit of debris is fine, but anything excessive could likely be an issue requiring repair.

Security Bars without Safety Release: If there is no safety release mechanism on a set of security bars, that’s an obvious safety issue that’ll need to be corrected before FHA can guarantee the loan. Usually the bars are removed and then the appraiser will go snap a photo to show the lender the bars were removed.

Dangling Wires: Electrical wires hanging from the ceiling or walls is a big deal since even small wires can cause a huge jolt and be life-threatening too. If you see wires like this in a house heading toward FHA financing, expect to have to solve the problem by installing a new fixture (or doing electrical work if need be).

I hope this was helpful. Let me know if you have any questions. I’ve written quite a few FHA appraisal articles in case you wish to learn more about what to expect during the appraisal process.

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

In a situation like this the appraiser has to disclose all he knows about the roof and cannot simply ignore the situation – whether the appraisal is for a private party or a loan. A property like this would not quality for conventional or FHA financing unless the roof was repaired or replaced. On top of the cost to replace the roof, I would be most curious about any other damage on the interior from water intrusion.

Do you have any real estate roof stories?

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

According to the Sacramento County Assessor, “An “escape assessment” is a correction to a property’s assessed value on the local property tax roll. The correction is made because the Assessor’s Office discovered a property or a taxable event that should have been assessed but was not. Current and/or prior year tax rolls may be affected. The most common reasons for an escape assessment are overlooked or unreported new construction, a missed change of ownership… or the removal of an exemption.”

Why am I talking about escape assessments? I just finished up some property tax consulting work for an East Sacramento home owner who needed research for his property’s value over the past four years. I love this type of work because it’s exciting to analyze the market for a number of years to establish a value over time. In this situation the owner inherited the property in 2008 from a friend, but the Assessor’s Office was not informed at the time of the death of the original owner, which should have triggered a reassessment. When the Assessor discovered the death and change of ownership, they sent the new owner a “Notice of Proposed Escape Assessment”, which basically means the Assessor’s Office enrolled new assessments for the property for the past four years. The home owner can appeal the values within 60 days of the issuance of the notice. Since the owner disagreed with the value put on the tax roll by the Assessor for 2008-2011, he hired me to show what market value was during each of these respective years.

NOTE: In situations like this the owner can appeal property taxes for multiple years in the past, but that’s not the case in typical “decline in value” situations. If you have been overtaxed for the past several years, for example, but you did not formally dispute your property taxes at the time, then there is nothing you can do once the appeals deadline passes on November 30 of the given year. All you can do is wait until the next year to appeal your property taxes.

Does that make sense? Let me know if you have any questions.

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

NOTE: In quite a few cases the “comps” provided by real estate agents are really not all that “comparable” to the subject property. It can be valuable when agents share their market insight with appraisers, but my advice to agents is to make sure the sales really are comparable and located in the same market area. This comes back to the difference between a property that is truly competitive / comparable (“comp”) to the subject and a sale that meets a certain price level.

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

Eric Peterson with Praxis Capital: We remove the chain link fences 100% of the time. We do the same to a house with bars on the windows. When buyers see this stuff they immediately think about safety concerns. It’s not the mindset you want to instill in a prospective buyer. If the houses around our target property have chain link fences, we likely will pass on the house. It’s just all about perception and no one wants to make a huge purchase decision while worrying about the safety of the street. 

Jeff Grenz with Erik Berry & Associates 916-425-3228: When I am evaluating homes for investor purchases… If the only home on the street with a chain link front yard fence is the home I’m evaluating, I include a cost to remove the fence, a few hundred dollars…but you can’t remove it from adjacent homes. Landscape and presentation of the subject and adjoining homes impacts the speed of the sale, and ultimately the price. Chain link yells “DISTRESSED”

When I see chain link in the front yard, I start looking for why… where is the big dog? Is there a high crime problem? Is there loitering? Will a potential buyer be asking the same thing and how many will pass by without even looking? I will lose prospective buyers.

It’s an economic decision…. as you lose prospective buyers and narrow your field, it costs more time to sell and you have to discount, both of which devalue the property.

Dennis Lanni with Housing Group Fund: It would not matter to me, but the chain link fence represents what kind of neighborhood it is. It tells me that safety is a concern, sort of like security doors but worse.

Kaleena Amuchastegui with Capri Property Real Estate: Automatically what comes to mind when you mention a front yard chain link fence is a home in an undesirable neighborhood, there is just something about chain link that screams it’s needed to be there to protect a home, not to mention it’s a huge eye sore in my opinion. I think of older neighborhoods that are run-down, I think of areas with higher crime rates… I know that if we acquired a property with a chain link fence around from auction there is a 90% chance we would remove it. I also know we would never add a chain link fence to a property.

Max Boyko with Team Hybrid Real Estate Services: Of course what I think and my investors think can be a different thing, but I would say chain link fences are definitely one of the most unappealing items in a neighborhood. It varies case by case, but primarily my investors would take them out, which I agree with. I wouldn’t say they would pass on a property if it was a good deal, but it takes away the appealing factor and creates a sense of poor security in the neighborhood, which may turn off potential buyers

Please note if you have a chain link fence, nobody is targeting you or saying you’re bringing down the neighborhood. These are simply the opinions of experienced real estate agents and investors. Of course, it may be worth considering what they are saying since they are constantly buying properties to fix and sell on the open market. Clearly they’re in touch with the perceptions of buyers, what makes a difference in property value and the reality of how important impressions are for a neighborhood. If certain elements of fence design give off a negative impression for the community, what can be done about it? What options exist?

If you want further information, I wrote a series last year called “Blight Week” that might provide some more insight into this important conversation. I wrote a previous post that shows a variety of different types of fences and considers the influence a front fence can have on a property. I firmly believe any neighborhood that is experiencing signs of decay has the potential to see better days with a little intention. There is always hope and we can find and experience that together too.

What do you think about chain link fences? Do you agree with the specialists above?

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

What do you think? Have you seen something similar? Why do you think inventory has been down?

By the way, this video marks the debut of my beardless look for 2012. I suppose it’s a resolution of sorts, but I decided it was time for my “distinguished” beard color to go away – at least for this year. Since shaving the gray, not one person has said, “Ryan, you really shouldn’t have done that,” so I know it was the right season to let the razor win. I know you don’t come here to hear about my face, but I just wanted to put this out there publicly so there is some internet accountability in case you see a beard creep back into my life this year.  Anyone make a similar resolution?

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

1) Timeline: If your loved one passed away recently and you need to file your taxes very soon, it makes good sense to obtain an appraisal in a timely manner so you can communicate well with the IRS. In other words, if your loved one passed away within six months before you file your taxes, it would likely be prudent to order the “Date of Death” (DOD) appraisal within that timeframe. This is the most common scenario I encounter for the bulk of my estate appraisal workload.

2) Alternative Valuation Date: I mentioned the Date of Death (DOD) appraisal already, but the IRS has also made allowances for a home owner to obtain an Alternative Valuation Date (AVD) six months after the date of death of the owner. Basically, if the market has declined in value after six months since the date of death, you can use the appraised value six months later to show your estate has decreased in value over time due to market circumstances. In this option you would need two appraisals, both a DOD and AVD. If the market has been hit hard, this could be a huge advantage for you for tax purposes. Granted, you would pay for two appraisals (use the same appaiser), but the savings in light of a large decline should far outweigh the cost of the appraisals.

3) CPA / Attorney Advice: Make sure to carefully weigh your options and the implications of using a DOD or AVD appraisal. You should definitely consult with your CPA and/or attorney to talk through which options would be most beneficial for you depending on your plans for the property and the implications for taxation based on using a DOD or AVD.

I am familiar with the estate planning appraisal process, IRS guidelines for appraisals, and I also run an estate appraisal website. Please contact me with any questions. I am always very glad to help answer questions and meet a need for property owners in what is often a difficult time of life.

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

Two reasons to AVOID paying someone to reduce your property taxes before July:

1) Assessments are Published in June or July: The Assessor historically doesn’t publish their assessed values until the second quarter of 2012. Every year tax companies send mailers in the early part of the year promising to reduce property taxes, but how can they offer to reduce your property taxes in February or March if they don’t even know your assessed value? Moreover, the Assessor does actually review property taxes and they might catch your overassessed value and correct that before their assessments are posted. Again, why pay someone if the Assessor could potentially get it right anyway? Ultimately a company can easily claim they “helped” you when in fact the Assessor simply got your value right and would have adjusted it regardless of the “help” you received.

2) The Appeals Period is July to November: The formal period to dispute your property taxes is between July 2 to November 30 of any given year for most counties surrounding Sacramento (besides Placer, which is July 2 to mid-September). Why hire a company in March when the company cannot formally dispute your taxes until July? First see what the Assessor says your property is worth and then make a decision about whether to appeal or not once you see your property’s value. The value should be based on January 1, by the way.

Here is a video with the same information above if you wish to listen instead:

I know a post like this sounds very self-serving since I run a property tax appeal company, but this is truly about honest business and providing good tips to save money. I sincerely want property owners to not be taken advantage of as I mentioned above.

What should you do? The best case scenario is for you to wait to see how the Assessor values your property for 2012. If the value looks too high come June or July 2012, and you don’t know how to provide support to show a realistic value, then hire a reputable company to handle it for you. If you want an email reminder when property assessments in Sacramento County are released, click here to fill out the form on the sidebar and I’ll send you an email reminder so you can remember to check your property taxes come July 2012.

Was that helpful? I hope so.

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

How have you seen buyers respond to a location near a power tower? What do you think is the main turn-off in the minds of buyers? Visual pollution or a potential for health risks due to electromagnetic fields?

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

What do you think of the view?

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

Improved Site – Cost to Demo = Market Value

In a valuation like this I would not just consider the raw land, but also the contribution of value for any other improvements too – namely water and sewer on the site (hence the term “improved site”). But the cost to demolish the property also must be considered in a case like this because a buyer in his right mind wouldn’t pay money for an inhabitable house that is well beyond a reasonable cost-to-cure.

The moral of the story? Just because a house exists does not mean it has value. In so many cases a house can be salvaged, but in some cases a house just needs to meet a bulldozer instead.

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.