5 Ways to Get the Best Appraisal in a Strange Market
by Matthew Roberts, Certified General Real Estate Appraiser
July 2022
Market Trends Compressing
Time seems to have sped up over the past two and a half years. Market participants are noticing that changing trends that would have taken months or years to work out in the ‘before time’ are now being compressed into a matter of weeks. Whether this is due to astrological signs or to most every aspect of real estate going digital, markets seem to have the ability to clear quickly.
Recession and Higher Interest Rates Must Affect Real Estate
The cost of mortgages and economic circumstances affect both buyers and sellers. It affects how they behave in the real estate market and affects real estate values. Sellers could be expected to pay more attention to listing prices of competing properties, and buyers may give more consideration to what other buyers are paying for similar properties. If inventory increases, it could become a buyer’s market.
5 Ways We Strengthen Your Appraisal
(1) Using the Most Recent Sale Data
In a stable market, the age of the sales used in the Sales Comparison Approach by the real estate appraiser may be less important. But in a dynamic market, using the most recent comparable sales is crucial to property value. This ensures that the price of your property is in line with what other buyers have recently paid.
(2) Finding Relevant Data & Using the Right Comparable Sales
When there is limited inventory (properties available for sale), there may also be limited sales data. That has been the case in recent years where there seems to have been more demand than available property. When few transactions occur on a regular basis, more care must be taken by the real estate appraiser to select relevant comparable sales that are most similar to the subject property.
Sellers and selling agents can also suffer from the same mistake. Using the wrong sales data to price a property could skew its value away from its true value by thousands of dollars. Comparable sales should be selected not by their price but based on their relevance and similarity to the subject.
(3) Using the Correct Square Footage
Believe it or not, many sellers use price per square foot as a rule-of-thumb when determining their list price. But the stated size of the home or buildings may not be accurate. Assessor records are often accepted without being confirmed. The right appraiser visits the home and measures it with laser precision.
(4) Recognizing Unique Features
Conformity is an important principle in real estate. Having a property that is like other properties makes it more easily marketable. Some over-improvements may be overlooked by the market. But some features can solidify the overall quality of the home. This kind of analysis takes daily attention of the market and correct completion of the appraisal process.
(5) Paying Attention to Market Conditions
Keeping an expansive and ever-growing database of sales data allows the appraiser to spot changes in the market fast. Comparable sales aren’t the only tool. Appraisers can also consider current listing data. If there are many similar properties on the market that have been for sale for some time, it may limit the pricing strength of the subject. However, if there are limited to no competing properties available, yet strong demand from potential buyers, you may be looking at a bidding war. Our market has suffered from limited inventory for some time. Despite higher interest rates, there does not yet seem to be an over supply of available homes.
At Spurgeon Appraisals, we regularly practice all five of these methods to make sure your appraisal report is always accurate and helpful to you, whether you’re buying or selling. Email us today for a quote.
