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The Price/Square Foot Debate

June 6, 2013 by Leave a Comment

Yesterday, I received a feed from a blog I follow written by fellow appraiser, Tom Horn, SRA, who works down in the Birmingham, Alabama market.  Tom’s a great writer who always has some wonderful insights on the real estate market and appraisal.

I’m sharing his most recent post with you.  It hits on a topic that I’ve written about before, that is the ongoing debate on value derived from using Price/Square Foot.  As you may know, I’m not a big fan of using Price/Square Foot as a way to determine value.  It just doesn’t hold water.  Well, Tom does a nice job of tackling the debate and lays out some very solid arguments as to why P/SF is monkey-math.

Here’s a screen shot and link to the full post.  I’ve also copied the entire post below:

PAB - BAB-TOMHORN

“A few days ago I had a real estate agent friend ask me how much homes were appraising for per square foot in a local neighborhood. It was a very good question, especially for anyone who wants to get an idea of their home’s value. And because I get asked this question a lot I thought I would take this time to explain how appraisers look at this familiar method of comparison.

The price per square foot is the most familiar method of comparison that many people are aware of. It is such a common method of measuring a properties value that it is listed right below the sales price on the sales comparison adjustment grid on the appraisal report. What you must realize is that everything about the property is summed up in the price per square foot. It’s size, condition, features and overall appeal is reduced to this one number. Because of this it is very important that if you want to find out what homes in your neighborhood are selling or appraising for per square foot in order to estimate your own home’s value you must only use houses that are very similar to your own.

If you have a home built on a slab, and you are using the price per square foot of a home with a basement, then that is going to reduce the accuracy of your estimate because the price per square of the other home includes the value of the basement. When you multiply what it sold for per square foot by your home’s square footage it will be over estimated. This is also true when you look at a home that is a lot bigger than your own. If everything else is similar, such as features and quality, but the comparable is bigger than yours, that can also be misleading because a larger home will usually sell for less on a square foot basis when everything else is the same. As the size goes up the price per square foot goes down. It is the law of diminishing returns at work, which states that the more square footage you add the less value you get per square foot for the larger size. If you multiply the price per square foot of the larger home by your own square footage then your home will be under estimated.

The bottom line is that you should make sure that the sales comps you are looking at are very similar to your own home. If your home is a one and a half story home with finished basement then try and find similar sales with like features. I wrote an article “What is bracketing and why should Realtors do it” that explains the process appraisers go through that goes hand in hand with what I am writing about here. So to finally answer the question asked about at the beginning I would say that the price per square foot can be a very good indicator of market value if the comparable sales are very similar to your own, and you are comparing apples to apples. If the property you are getting the price per square foot from has a pool, when yours doesn’t, or is on 5 acres when yours is on a half acre lot, then you are comparing apples to oranges and the price per square foot IS NOT a good indicator of market value. Does this make sense? If you have any questions I would be happy to answer them for you, just leave a message at the bottom, I look forward to hearing from you.”

If you have any real estate appraisal related questions you can call me at 205.243.9304, email me, or connect with me on Facebook., Twitter, or Youtube.

When is price per square foot NOT a good indicator of market value?

About Tom Horn

Tom lives in the Birmingham, Alabama area with his wife and two children. He has been appraising residential real estate for over 20 years and holds the SRA designation from the Appraisal Institute. He concentrates in the area of single family, vacant land, 2-4 family, and condominium appraisals.

 

 

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Philly AVI Confusion

March 26, 2013 by Leave a Comment

TCG - City of Philadelphia

 Ever since the new assessments were released by the Philadelphia Office of Property Assessment (OPA) last month, our phones have been ringing off the hook with property owners wanting to engage our services.  Believe me, I’m not complaining.  It’s a great problem to have. 

However, more times than not, especially with residential callers, I suggest a “wait and see” approach.  The fact of the matter is that the OPA is trying something completely new this year…the First Level Review (FLR).  The FLR was established as a way for property owners to dispute the assessment without having to go through the appeal process.  In the FLR, the property owner can file documents (including photos and recent appraisals)  that state why they feel their property is improperly assessed.  That will initiate an informal review by the Office of Property Assessment (OPA).

Here’s where the confusion sets in.  Most homeowners that call us are under the impression that the FLR is an appeal, which it is not.  As stated above, it is an informal review conducted by an OPA Evaluator that could result in the assessment being lowered, increased or remaining the same.  

The most important part of initiating a First Level Review (along with any photos, additional documentation and appraisals) is to do so by March 31, 2013 or 30 days from when you received the Assessment Change Notice.  So, it is very important that you check your Notice and know when it was received.  That being said, it is not always necessary to submit an appraisal along with your FLR .  It may help your case, however, your case may be strong enough on its own merits without having to incur the expense of an appraisal.

The ”Wait and See”  Approach:  Don’t get me wrong.  I don’t like to turn away work.  But, what I suggest to property owners is that they file the FLR citing their reasons and rationales, and then “wait and see” what the results are.  If they get a reduction, great!  They did so without having to put out $350-450 for an appraisal.  If they didn’t get a reduction or maybe got an increase, then they can file for a formal appeal with the Board of Revision of Taxes.  This is when having a full appraisal of the property completed will be best investment.   Now, if a property owner is insistent upon having an appraisal to file along with their FLR paperwork, I’m more than happy to oblige. 

So be sure to get your First Level Review paperwork in by the deadline.  If you are not sure of your particular deadline, check your Notice or call the OPA at 215.686.9200. 

As a side note, if you decide to move ahead and get an appraisal to submit along with your FLR or appeal, I strongly recommend having a full appraisal with interior and exterior inspections. The main reason is that with a full inspection, the appraiser instantly has more accurate information about the subject property than the assessor, who rarely has the opportunity or time to inspect the interior of a property. Right off the bat, the appraiser has a superior understanding of the subject’s interior condition, actual size and knows if there is any damage. Why wouldn’t you want to have better information than your opponent (the assessor)?  In my opinion, Drive-by appraisals or BPOs don’t cut it when appealing your tax assessment.  You may save some money but, you get what you pay for.  If your appraiser and the assessor appear at the appeal hearing with the same information based on an exterior inspeciton and public record data, guess who’s going to lose?  Hint, not the assessor.

If you have any questions about your Assessment Notice or if you need an Residential or Commercial Appraisal to submit along with your Assessment Appeal, please feel free to contact The Coyle Group at 215.836.5500 or appraisals@coyleappraisals.com

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New Philly Tax Assessments

February 15, 2013 by Leave a Comment

The new assessment notices will be mailed out to property owners in Philadelphia beginning, today.  This will, no doubt, send many property owners into a state of shock when they see the new assessment value that has been place on their property by the Office of Property Assessment (OPA).  

My advice would be, don’t get upset just yet.  The reason being that despite the change in assessed value, no one is exactly sure how it will affect your taxes.  That’s because the new tax rate has not been established, yet.   So, when the new rates are voted on and set in place some property owners will see their taxes increase, while others may get out of this whole process relatively unscathed.

From what I was told in conversations I’ve had with folks at the OPA, is that property owners will have the opportunity to contest or disagree with their new assessments.

PhiladelphiaCityHallFirst, the property owner will have to submit a signed form to the OPA explaining why they feel their assessment is incorrect.  This will initiate a First Level Review, in which the OPA will look into the matter.  They will also send a letter of receipt to the property owner stating that a case has been opened.  Then, the property owner will be contacted by the OPA either with a phone call or a letter.  When their investigation is completed the OPA will notify the property owner of their findings/decision by mail.  Keep in mind that this is the first time this process will be used in Philadelphia.  So, you should be prepared for delays and lots of Philly-style red-tape.  The deadline for filing a First Level Review is March 31, 2013.

If the First Level Review is unfavorable for the property owner, the property owner can then file an appeal with the Board of Revision of Taxes (BRT).  This can be a very long process and will likely involve a hearing in front of the BRT.  If a property owner gets to this level, they should be prepared and have their documentation in order (appraisals, photos, floor plans, etc) and may even want to retain an attorney experienced with representing appeals in front of the BRT.

For more information on filing a Tax Assessment Appeal in Philadelphia or having an appraisal of your home completed to support your appeal please contact The Coyle Group at 215-836-5500 or appraisals@coyleappraisals.com

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Filed Under: Featured, Philadelphia, Tax Assessment Appeal

Main Line WOW!

February 13, 2013 by Leave a Comment

As an appraisers in the Philadelphia market, we often find ourselves looking at properties on the Main Line.  Every now and then we have an opportunity to visit a property that is truly exceptional.  Below are a couple of photos of a mansion that we were asked to appraise in Bryn Mawr.  The house, although it looks like it’s been there for 80 years or more, is only around 15 years old.  The family and architects that built this residence paid incredible attention to detail.  Every element of the house was perfectly executed, from the stone with elegent limestone accents right down to the slate and copper roofs; and even the courtyard.  The interior finishes and scale of the residence are just as impressive as the exterior.  This is easily on my Philadelphia/Main Line Top 10 List.

   The Coyle Group - ML MansionThe Coyle Group ML Mansion 2

 

For more information on the valuation of Unique & High Value homes and condominiums in Philadelphia and along the Main Line, please feel free to contact The Coyle Group at 215.836.5500 or by email appraisals@coyleappraisals.com

Be sure to Like The Coyle Group on FaceBook via the link below.

 

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Zillow vs Appraiser 2013

January 7, 2013 by 2 Comments

 Zillow vs TCG

“Zillow told me that my home is worth…”

Appraisers across the USA hear those words at least once a week from well-meaning homeowners.  What many homeowners don’t realize is that Zillow, while a very useful tool, is not always the best indicator of the actual value of their home.  A Zillow Zestimate is not an appraisal.  In fact, if homeowners use Zillow to help them price their home for sale, they could be leaving thousands of dollars on the table, as we will show you.

Below is a chart of 18 randomly selected appraisals that The Coyle Group completed in the past 3 months.  The houses are located throughout Philadelphia, Montgomery, Bucks, Delaware and Chester County.  The chart is a comparison of our appraised value and the Zestimates produced by Zillow.  Keep in mind that our appraisals have the benefit of a full property inspection by a human being and nuanced market knowledge.   Zillow’s Zestimates rely on public records, complex algorithms and no physical inspection of the property.  Here are the results: 

Maple Glen Colonial Appraisal: $430,000 Zillow: $351,050

22.48%
Conshohocken Single Appraisal: $370,000 Zillow: $329,924

12.14%
Collegeville Cape Cod Appraisal: $364,000 Zillow: $355,012

8.65%
Bryn Mawr Mansion Appraisal: $2,000,000 Zillow: $1,662,317

20.32%
Lafayette Hill Colonial Appraisal: $550,000 Zillow: $470,806

16.82%
Chestnut Hill Colonial Appraisal: $635,000 Zillow: $686,018

7.44%
Gladwyne Cape Cod Appraisal: $745,000 Zillow: $697,428

6.82%
Condo – The Murano Appraisal: $575,000 Zillow: $458,870

25.30%
Art Museum Condo Appraisal: $280,000 Zillow: $257,852

8.59%
Condo – The Dorchester Appraisal: $345,000 Zillow: $339,499

1.62%
South Philly Row Appraisal: $110,000 Zillow: $157,378

30.10%
Berwyn Colonial 1 Appraisal: $750,000 Zillow: $886,168

15.37%
Berwyn Colonial 2 Appraisal: $1,200,000 Zillow: $1,153,633

4.02%
Doylestown Townhouse Appraisal: $325,000 Zillow: $294,410

10.39%
Fishtown Row Appraisal: $225,000 Zillow: $211,700

6.28%
Villanova Mansion Appraisal: $2,450,000 Zillow: $2,544,935

3.73%
Mount Airy Twin Appraisal: $285,000 Zillow: $324,137

12.07%
Roxborough Row Appraisal: $245,000 Zillow: $235,076

4.22%

As you can see there are some pretty dramatic deviations between Zestimates and the appraisals.  Based on our appraised values Zillow under valued 13 of the properties.  In some instances Zillow was almost right on, take for instance the condo in The Dorchester.  They were only off by 1.62%…that’s pretty good if you ask me.  For the condo at The Murano, they were off by more than 25%…waaaay off!  On average, Zillow under-valued the properties by 12.39%.

In the case of the South Philly row, the Zestimate was over by more than 30%.  However, I can’t fault Zillow on this one.  The property was really dated and needed a great deal of work.  But this does illustrate how having a full interior inspection of a property can lead to more accurate values.  Also, the Mount Airy twin was over-valued by 12%…but this doesn’t surprise me, everyone in Mount Airy thinks their home is worth more than it is.  Just kidding.

Now imagine that you’re a homeowner getting ready to sell.  You hop on your computer, plug-in your address and Zillow says your home is worth $300,000.  Based on our findings, if Zillow under-values properties 12.39% on average, you (the homeowner) could potentially be leaving $37,170 on the table.  That’s serious money!

This illustration underscores the importance of consulting with a knowledgeable real estate agent or Certified Real Estate Appraiser.  Getting a Pre-Listing Appraisal prior to putting your home up for sale and knowing the true market value of your home can save you time, money and effort when it comes to selling. 

As for Zillow, keep in mind that it is a tool…a starting point.  It’s great for neighborhood data, graphs, general sales information or for seeing what your new neighbors paid for their house.  It’s probably not the best place if you’re looking for assistance with making definitive decision or properly pricing your home for sale.

If you want to know more about our Pre-Listing Appraisal services or have any real estate appraisal related questions, please feel free to contact us…215.836.5500 or appraisals@coyleappraisals.com

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Philadelphia Rowhouse Manual

December 11, 2012 by Leave a Comment

 Perhaps you’ve seen this already but I thought I would share it with you anyway.  Its a great little “manual” that was put out by the Philadelphia Planning Commission back in 2008.  It provides a short history of the Philadelphia rowhouse throughout the centuries and gives insights on how they can be maintained and altered to fit today’s urban lifestyles.

It’s an interesting read.  Enjoy.

Click on the link below and you will be directed to a website where the PDF of the manual can be found at the bottom.

Philadelphia Rowhouse Manual

 

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Disaster Inspections 101

November 1, 2012 by Leave a Comment

I hope that everyone is well and safe after our brush with Hurricane Sandy.  I know that as of the writing of this post many of you are still without power (my own house included).

In the next few days and weeks as things get back to normal, some of you will become familiar with the term “Disaster Inspection”.  If you recently refinanced, purchased a home or applied for a Home Equity Line of Credit where an appraisal was completed on your property, you will almost certainly come to know what a “Disaster Inspection” is.

Whenever there is a significant natural disaster or catastrophic event (such as Hurricane Sandy, Hurricane Irene and, yes, even 9/11), many lenders will require that Disaster Inspections be completed on loans that are in process, have recently settled and some that may have already been moved to the secondary market.  This is done so the lender is able to better assess the risk a particular disaster has on their loan and portfolio.  It also, in many cases, lets the lender know if the property is still standing or if it has been heavily damaged.  From there the lender can take the appropriate actions.

Having a Disaster Inspection done at your home is a painless process.  It involves a inspector (sometimes an appraiser) visiting your property.  Depending on the needs of the lender, an Exterior or Interior inspection will be necessary.

An Exterior inspection is just that, a visual inspection of the exterior of the property.  Photos are taken of the front, back and street.  If there is apparent damage, pictures will be taken of that, too.  Oftentimes, there is no need for an appointment to complete an Exterior inspection.

Interior inspections are just as painless as an exterior, with the exception that the inspector is required to view and photograph the interior of the property, as well.  The inspector will usually call to schedule an appointment to see the property.  The actual visit will take no more than 5-10 minutes, or as long as it takes the inspector to get the necessary photos of the property and any damage.

If you or one of your clients recently went through the refinance/lending process, chances are you will have a Disaster Inspection completed of your property.  So, if you see someone taking pictures of your home, it may just be a Disaster Inspection.

If you are in need of Disaster Inspections in Philadelphia, Montgomery, Bucks, Delaware, Chester, Berks, Lehigh and NorthamptonCounties, please feel free to call The Coyle Group at 215.836.5500 or email us at appraisals@coyleappraisals.com

 

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Fighting a “Low Appraisal”

September 28, 2012 by Leave a Comment

A friend of mine, who is an agent, called me the other day complaining about an appraisal that was completed on one of her listings. The appraiser (from a neighboring county) arrived at a value almost $45,000 under the contract price. She asked me if I could take a look at the appraisal and provide any insights that I might have.

It’s not unusual for values to come in lower than the contract price; and we all know that value and price are two separate things. However, there was such a large discrepancy, it warranted a closer look. After reviewing the appraisal, I did notice some issues that were of concern.

I recommended that the she ask for a Reconsideration of Value. A Reconsideration of Value is a formal request submitted to the lender asking their appraiser to consider additional information and/or sales data that might aid the appraiser and cause them to change their opinion of value.

Here are the steps that I suggested she take:

  • Go through proper channels.  The appraisal is the property of the Lender who ordered the appraisal.  You will have to submit your request for Reconsideration of Value to the Lender, usually in writing.  The Lender will then decide whether or not the request has merit.  If so, they will forward the request to the appraiser for review and response.  Do not contact the appraiser directly.  Remember that the appraiser’s client is the Lender; not the agent, the Seller or the Buyer.  The appraiser can’t act on your request or revise his report without permission from his client, the Lender.  Please note that the Lender can use their discretion and may deny your request without even presenting it to the appraiser.
  • Practice the 3 “Ps”.   Be Proactive – initiate the request promptly.  Be Professional – don’t get bogged down in personally attacking the appraiser or his skills, present your case in a professional, well-supported manner.  Be Polite – appraisers are people, too.  Really, we are.  You will get further with your request if you simple practice good manners and politeness.
  • Support your request with good sales information and insights.  Simply saying that “the value is not high enough” will not cut it.  Be prepared to provide additional comparables and explain why they are more appropriate that those used in the report.  If you have comments about the comparables used in the report, be specific and detail exactly why the comparable used in the report was not the best one available.  If you work frequently in a certain market and have intimate knowledge of sales in the area, use that information to support your point.  “Comp 3 was a nasty divorce situation and they needed to sell quickly.” Or “Comp 2 is actually 500sf larger due to a finished attic that is not noted in the public records.” Good, well-supported information will go a long way.  And, if you are going to provide additional sales, make sure that they are truly comparable.  Don’t just look for sales that will support your price. The appraiser and the Lender will see right through that. If your property is 3 bedroom Rancher, don’t include the 5 bedroom Colonial as a comp, even if it is located across the street. They’re just not comparable.
  • Be Specific. If you want to know why the appraiser made or did not make a certain adjustment or did or didn’t use a certain comparable, address it directly and specifically in your request. “Can the appraiser explain why he only made a $5,000 adjustment for the subject’s inground pool?” Or “Why did the appraiser elect not to use the sale at XXX Main Street, one block away?”
  • Keep it Short & Sweet. Don’t write a novel. Don’t get emotional. Get to your point, present your case coherently and concisely, provide supportive information and then, move on.

I hope these steps will help you if you ever find yourself in this kind of situation. Should you ever need any assistance with contesting an appraisal or submitting a Reconsideration of Value, please feel free to contact our office. We will gladly do what we can to advise you.

The Coyle Group, LLC is a Residential & Commercial Real Estate Appraisal firm serving the Greater Philadelphia Region and New Jersey.  215.836.5500

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Philadelphia Trends thru July 2012

August 28, 2012 by Leave a Comment

Now that Summer is coming to an end, we can begin to take a look back to see just how the Philadelphia Single Family and Condo market fared.  Below is a chart comparing year over year activity in Philadelphia for July 2011 and July 2012.  Based strictly on the numbers, the overall Philadelphia market appears to be improving, albeit in very small increments.  On a neighborhood by neighborhood basis, the trends may differ.

Let me know if this is what you see in your markets.

Click on the chart for an enlarged view (you may have to click on it twice).

 

 * Data provided by TReND MLS

 

 

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Tax Appeal Deadlines 2012

July 6, 2012 by 1 Comment

It’s Tax Appeal Season, again.  If you haven’t already started the process, you better hurry up! The deadlines are approaching quickly.  In some cases, the deadlines have even been bumped up.   If you miss the filing deadline you miss your opportunity to reduce your assessment for another year.   No excuses, no second chances.   In fact, not filing on time could cost a property owner thousands of dollars in unnecessary taxes.

The deadlines for the counties in the Philadelphia region are as follows:

  • Berks County, August 15, 2011
  • Bucks County, August 1, 2011
  • Chester County, August 1, 2012
  • Delaware County, August 1, 2012
  • Lehigh County, August 1, 2012
  • Montgomery County, August 1, 2012*
  • Philadelphia County, October 4, 2012

* Please note that Montgomery County moved the traditional September 1st deadline up a full month to August 1st, which is keeping in line with the other counties in the area.

If you not represented and are filing an appeal this year, we strongly recommend filing in person at the county assessor’s office. When delivering your documents be sure to request a receipt from the clerk. This creates a paper trail that shows when you filed and who took receipt of your documents. If you are mailing your documents send them certified mail, so that there is a record of them being received. The counties receive thousands of appeals each year and sometimes things fall through the cracks.

When filing be prepared to pay any necessary filing fees. The fees will vary from county to county. For any fees that pertain to your specific county we recommend visiting the Assessor’s website or calling their office.

You should also note that if the filing deadline falls on a weekend the assessor’s office may move the deadline to the following business day. Again, this is something you should verify with your county’s assessor’s office.

The appeal filing must be completed with appropriate documentation and fees no later than the end of business on the deadline date. However, that doesn’t mean that you can’t file days or weeks prior to the deadline.

If you have any questions about tax assessment appeals please contact our office. We will be glad to assist you.  Please feel free to call us at 215.836.5500 or email appraisals@coyleappraisals.com

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