You can save on your Property Tax? Just ask!

Yesterday, a real estate agent-friend we work with asked us to take a look at her client’s potential for a tax appeal. Keep in mind that these were past clients of hers. They were paying over $22,000 a year in property tax.

The property was in Upper Dublin Township and was a typical 4 bedroom, 2.5 bath Colonial of around 4,600sf of above grade living space. The total assessment on the house was $477,000 which, after applying the current Common Level Ration for Montgomery County, equals an assessed market value of $1.2M.  This means that the house is being taxed as if it was worth $1,200,000.

This seemed a bit high at first glance. So, we did some research on sales in that market and here’s what we found. (This is a free service that we offer to prospective tax appeals)

What this basically means is that this property has a very good case for a tax assessment appeal. While the numbers above are not an appraisal of the property, they are a pretty strong indication that the homeowner might want to pursue an appeal.

Based on the Average Sale Price of $807,664 the homeowner could possibly reduce their assessment by roughly 32%.  That equates to a tax savings of $7,040!  While a disparity like this is not the norm, it is not uncommon either.

In this case, the agent was looking out for her client (a prior client who wasn’t even actively looking to sell or buy). Can you imagine how grateful that homeowner was to find out their agent was still looking out for them, long after they bought a house with her? The agent wins the loyalty and gratitude of a client.

The homeowner wins by saving thousands of dollars, now and into the future.

We win by being able to help another agent and homeowner who will hopefully tell their friends and colleagues.

If you or your clients live in Montgomery, Delaware, Bucks, Chester and Philadelphia Counties and think you may be paying too much in property taxes, give us a call. We are happy to look into your situation.

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The Signs Are All Around Us

The signs are all around us…on houses, on websites and social media.  The Philadelphia real estate market has shifted. This market surprised a lot of Agents and Sellers (and Appraisers).  The economy, rates and seasonality are all taking a toll.  Markets in the Philly Metro region are in one of three phases:

  1. The market is still showing signs of appreciation but, nothing like it was a year ago. It’s the last glowing embers of a hot market.
  2. The glow is gone. Things are cooling and are cooling fast. Homes are sitting longer. The showing lines are much shorter. Sales concessions and inspections are back in fashion. Sellers have lost their advantage and Buyers are in control.
  3. Yes, believe it or it or not, there are areas in our market that are in decline.  Not falling-off-a-cliff decline but, more like a slow-roll-down-a-hill decline. Sellers priced too high are getting lower offers or are being ignored. There are fewer buyers. Inventory is picking up as some Sellers try to catch the last bit of a wave that’s already passed. List prices are being “corrected” to align with the current reality.

What can you do as an Agent during this market shift?

  • Be aware of the shift and adjust your sellers’ expectations, accordingly
  • Look at listings. They are the best indicators of the current market sentiment and show you how the competition is reacting.
  • Learn to spot the declines, dig-down to understand your market.
  • Prepare to see declines reported in appraisals going forward.

Learn to drill down on your market. There are actually some great analytical tools available on Bright.  For instance, The Market Watch is a simple chart that you can set up to track the market as a whole or specific areas.

As of today, over the past 7 days, in the Philadelphia 5-county area, there were 1,046 Price Decreases, 1,082 New Listings, 166 Coming Soon, and 184 Back to Active. If you are a Listing Agent, Seller or have active listings, these numbers are telling you something.

They basically say that there are or will be some 1,432 new or renewed listings competing in the market. Trust me, these homes will be priced competitively for the current market.  The 1,046 Price Decreases should also grab your attention.  These are Sellers saying “we missed the mark with our original pricing and we are committed to pricing it more competitively, now.”

Proper pricing will be more important as we go forward. Buyers in the market will be funded (regardless of the rates), ready to buy and are not going to want to play games with unrealistic Sellers.

Another Bright report you should be looking at is the monthly Market Report.  The most recent September 2022 Market Report has some very interesting data that would indicate that things are entering the “decline” phase.  The report can be found at:

https://www.brightmls.com/article/market-insights-september-2022

Click on the Philadelphia Metro link and you will find a PDF of the report. There is a great summary of the findings on the first page labeled Philadelphia Market Key Findings:

My take away from these stats is that most of these numbers are heading in the wrong direction. Closed Sales are down, fewer sales.  Median Price is up but, these numbers are for September. It will be interesting to see what the October numbers look like. I have a feeling they will be lower.  Days on Market is growing, homes are taking longer to sell.  New Pending Sales are down, buying is slowing.  New Listings are down, fewer people are selling or have decided to wait-it-out.  Active listings are up, inventory is growing slightly (probably Sellers still trying to catch the wave). Months of Supply is up, more inventory accumulating due to fewer Buyers.

The last stat, Showings, is in my opinion the most telling.  This is a predictive number, measuring the activity of prospective Buyers. This number is way down. That suggest that there are fewer people actively looking at homes. Lack of interest, lack of money, fear of rates and the economy, regardless of the reason, prospective Buyers have pulled back.

Economics 101:  Decreased demand and increased supply equals lower prices.

So, sharpen your pencils and study your market. Get help pricing if you need it. As always, be aware of competing listings and be sure to confirm the GLA of your property.

If you need have any questions or need advice with pricing, measuring or any other appraisal related issue, please feel free to reach out.

appraisals@coyleappraisals.com

215-836-5500

 

 

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Feeling Frustrated!

Yesterday, a home in my neighborhood went up for sale.  I know it well.  When it hit the MLS, the agent cited the Square Footage as being “estimated” at 3,700SF.  Trust me.  On it’s biggest day, this is not 3,700SF.  Overnight, the house apparently shrunk.  Because, as of this morning, the house is now “estimated” to be 3,200SF.

While the SF in the MLS is closer to the actual square footage, it’s still not accurate.  Public Records indicate that this house is 2,577SF with an additional 525SF of below grade, finished basement.  If you look at the Assessor’s sketch on the Montgomery County site, the square footage calculates to 2,545SF.  For the sake of argument, let’s agree that the house is roughly 2,545 – 2,580SF.  These calculations are fairly accurate based on what I know of the house.

All real estate professionals have to be more careful.  We owe it to the public and our colleagues.  Estimating and guessing can be so misleading.  Lumping finished basement space into Above-Grade living space is also misleading.  Think about it.  Will your clients pay the same P/SF for the Rec Room in the basement with the drop ceiling and 1970’s paneling as they would for the Above-Grade space?  Probably not.  Take a look at how these numbers breakdown on a Price/SF basis based on a list price of $750,000.  (I know I preach against P/SF but, it’s an easily comparable metric that everyone seems to understand.)

Big difference, huh?  How would you like to be the person who buys what they think is a 3,200SF home for $750,000 (or $238/SF) only to find out that it’s actually 2,580SF at $238/SF?  That would indicate a value of $614,040.

Agents, as we begin 2020, please make it a habit of measuring your listings or having them measured.  Knowing the true Square Footage of your listings matters.  How you report that Square Footage matters.  Make it a business practice of separating Above-Grade living space from Below-Grade living space.

If you have any questions about measuring homes or what should or shouldn’t be included as living space, please feel free to contact me.

The Coyle Group’s team of Philadelphia appraisers are a leading provider of appraisals for Estate/Probate, Divorce, Bankruptcy, Tax Appeal and Pre-Listing. We also provide property measuring services.  If you need a guest speaker at your next sales meeting, please give us a call. We would welcome to opportunity to speak to your group and field any appraisal related questions you may have. For more information please visit our website at www.TheCoyleGroupLLC.com You can also contact The Coyle Group at 215-836-5500 or appraisals@coyleappraisals.com

 

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Getting Ready for the 2019 Spring Market in Philly

 

 

 

 

 

 

OK, maybe I’m jumping the gun but, the last couple of days in Philly with temperatures in the 50’s and 60’s have given me a case of early Spring Fever.  I know that Winter 2019 is not over, despite what the Groundhog may think.  But I’m an optimist!  I know Spring will come…and along with it the Spring Selling Season.  The question is, Are you ready for it?

Inventory levels are starting to accumulate.  This is a result of a few things.  First, seasonality, the Philadelphia RE markets tend to slow down around Thanksgiving, lag through the Holidays and into they new year.  Markets tend to wake-up a little around Valentines Day and usually are in full swing by March.

However, this past year was a little different.  Rising interest rates slowed the roll into the End-of-Year market.  As a result, Buyers pulled back and began to sit the sidelines.  At the same time, home prices were at an all-time high and in many areas were becoming unaffordable.  So, if you couple increasing rates with pie-in-the-sky pricing (and tentative Buyers) it’s a recipe for a “cool down”.  This put downward pressure on the pricing of existing listings and forced new listings to be razor-sharp with their pricing.

This Spring, new entrants to the market will have to be just as precise with their pricing in order to attract the Buyers.  Existing listings will also have to re-think pricing strategies in order to remain relevant.  Sellers will also have to be more flexible, especially those with listings already on the market.

Here are a few suggestions to help Agents and Sellers to prepare for the Spring Selling Season:

  • Price the home properly, the first time.  Know your market, know the comparable sales as well as the competing listings.  If necessary, get a Pre-listing Appraisal to help you in developing an effective pricing strategy.
  • Be Accurate.  Don’t rely on public records or Seller estimates to determine the Square Footage of your listings.  The public records are notoriously incorrect and Sellers tend to over-state the GLA.  The number one reason Agents get sued is for misrepresentation of the size of the house.  Have the property measured.  It’s an inexpensive investment that will help you more accurately price the house (and could save you in the event of a lawsuit).
  • Call it as it is.  Avoid getting creative with the description of the house or the design.  If the house is a “Split Level” don’t insist on calling it a “Colonial”.  If it’s an over-sized one car garage, please refrain from calling it a 1.5 car garage.  Who ever made half a car?  If you have no idea what to call it, contact an appraiser.
  • Above or Below Grade Living Space.  This is another area where accuracy in reporting the facts of a house is very important.  Given the high quality of below grade living space that we see in homes these days, I can understand the temptation to include finished basement space as part of the overall living space.  However, the areas of above and below grade space should be differentiated.  The MLS gives agents the ability to separate these spaces and correctly report the GLA of a property.  If you are not sure of what is above grade or below grade space, have it measured.  Many appraisers offer measuring and sketching services to agents and homeowners.
  • Photo the Front!  Always include at least one photo of the front of your listing.  So many listings these days have no picture of the house.  They have lovely shots of flowers on tables, shower heads, gardens, carved mantles and glass doorknobs but, not picture of the front of the house.  It’s like going to a dating website and all you see are pictures of a person’s body parts in their profile but, not one photo of their face.  Kind of makes you wonder what they’re hiding, huh?  The MLS allows up to 25 photos per listing, please use one for the front of the subject property.

Here’s to a strong Spring Selling Season in Philly!!  If you ever have any appraisal related questions or are interested in learning more about the other services we offer (Pre-listing Appraisals, Home Measurements or speaking engagements) please feel free to contact The Coyle Group at appraisal@coyleappraisals.com or 215-836-5500.

The Coyle Group’s team of Philadelphia appraisers are a leading provider of appraisals for Estate/Probate, Divorce, Bankruptcy, Tax Appeal and Pre-Listing. We also provide property measuring services.  If you need a guest speaker at your next sales meeting, please give us a call. We would welcome to opportunity to speak to your group and field any appraisal related questions you may have. For more information please visit our website at www.TheCoyleGroupLLC.com You can also contact The Coyle Group at 215-836-5500 or appraisals@coyleappraisals.com

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Why Knowing the Actual Square Footage is So Important

This past tax appeal season we got to see first-hand how important it is to know the true square footage of a house. In this case, it saved our client over $4,000 per year!

We were hired to do a tax appeal appraisal of a home in the Bryn Mawr section of Lower Merion Township. The homeowner was paying over $15,000 per year in property tax. It was a very straightforward assignment.

So, we inspected and measured the property. Our measurements showed that the house was 2,808 SF.  Not a big house by Main Line standards but, a good size.  The problem was that the assessor’s record and sketch of the house showed that the property was 4,438 SF.  That’s a huge disparity.

After talking with the assessor, we found out that the house had only been measured from the exterior and that the assessor never went inside the house. Had the assessor gained entry to the house they would have seen that a large part of the first floor had ceilings that were actually two stories high.  The assessor assumed that the second floor mirrored the foot print of the first floor.

In this case, knowing the true square footage got our client a 25% reduction in their assessment which translated into over $4,000 per year in savings going forward!

As an Agent, you can’t always rely on what is in the public records. If you ever find yourself questioning the square footage, it’s always best to have the property measured.  The most common lawsuit against real estate agents is for misrepresentation of a property’s square footage.  A simple “footprint” sketch can save you from all sorts of headaches and possibly a law suit.

Most appraisers can provide basic sketches that will give you a good idea of the actual square footage. If you need something more detailed and “professional” there are several services that will do architectural renderings of a property that are great for high-end marketing pieces.

 

The Coyle Group’s team of Philadelphia Real Estate Appraisers are a leading provider of appraisals for Estate/Probate, Divorce, Bankruptcy, Tax Appeal and Pre-Listing. We also provide “footprint” sketches for determining a more accurate square footage of a property.  If you need a guest speaker at your next sales meeting, please give us a call. We would welcome to opportunity to speak to your group and field any appraisal related questions you may have. For more information please visit our website at www.TheCoyleGroupLLC.com You can also contact The Coyle Group at 215-836-5500 or appraisals@coyleappraisals.com

 

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Conditionally Speaking…

Why do appraisers use alphanumeric Condition Ratings like C4 and C3?  Why not just say “Average” or “Good”?

Well, the long answer to that is there is now a thing called the Uniform Appraisal Dataset (UAD).  It’s been around since 2011. It standardized the way appraisers classify the appraisal data. It was basically implemented as a way for Freddie Mac and Fannie Mae to data-mine information from appraisal reports.  But that’s a discussion for another day.

One of the bi-products of the UAD is the Condition Rating system.  It consists of classes ranging from C1 – C6 that rate a property’s overall condition.  The thought being that a property will fit neatly into one of these categories and that condition is an absolute.  Prior to the UAD appraisers would classify condition using more subjective terms such as “Good”, “Average”, “Fair” and “Poor”.  Granted, the definition of these terms varied from appraiser to appraiser and report to report, which wasn’t always ideal.

The uniformity created by the UAD is a good thing.  It basically levels the playing field and has all appraisers speaking the same “language”.  Unfortunately, the rest of the real estate industry has not adopted the Condition Rating system developed by the UAD.  Real estate agents, homeowners and others involved in real estate still use the old “Good”, “Average”, “Fair” and “Poor” method of describing condition.

As a real estate professional, it’s worth getting to know the appraiser’s language when it comes to rating the condition of a property.  Imagine showing up at an appraisal appointment and saying to the appraiser, “Hey, I’ve pulled some sales for you and they are all in C3 condition, like the subject.”  From an appraiser’s point of view, your credibility just shot up and I’m going to look over your sales data more seriously.  You may even want to start using the UAD condition ratings in your property descriptions.

Understanding the UAD Condition Rating system isn’t hard.  Here is a rundown of the classifications and the criteria for each of those classes.  When you read through them you’ll see that they are pretty cut-and-dry, and that a property will typically fall nicely into one of these ratings.

C1 – The improvements have been very recently constructed and have not previously been occupied. The entire structure and all components are new and the dwelling features no physical depreciation.

Note: Newly constructed improvements that feature recycled materials and/or components can be considered new dwellings provided that the dwelling is placed on a 100 percent new foundation and the recycled materials and the recycled components have been rehabilitated/re-manufactured into like-new condition. Improvements that have not been previously occupied are not considered “new” if they have any significant physical depreciation (that is, newly constructed dwellings that have been vacant for an extended period of time without adequate maintenance or upkeep).

C2 – The improvements feature no deferred maintenance, little or no physical depreciation, and require no repairs. Virtually all building components are new or have been recently repaired, refinished, or rehabilitated. All outdated components and finishes have been updated and/or replaced with components that meet current standards. Dwellings in this category either are almost new or have been recently completely renovated and are similar in condition to new construction.

Note: The improvements represent a relatively new property that is well-maintained with no deferred maintenance and little or no physical depreciation, or an older property that has been recently completely renovated.

C3 – The improvements are well-maintained and feature limited physical depreciation due to normal wear and tear. Some components, but not every major building component, may be updated or recently rehabilitated. The structure has been well-maintained.

Note: The improvement is in its first-cycle of replacing short-lived building components (appliances, floor coverings, HVAC, etc.) and is being well– maintained. Its estimated effective age is less than its actual age. It also may reflect a property in which the majority of short-lived building components have been replaced but not to the level of a complete renovation.

C4 – The improvements feature some minor deferred maintenance and physical deterioration due to normal wear and tear. The dwelling has been adequately maintained and requires only minimal repairs to building components/mechanical systems and cosmetic repairs. All major building components have been adequately maintained and are functionally adequate.

Note: The estimated effective age may be close to or equal to its actual age. It reflects a property in which some of the short-lived building components have been replaced, and some short-lived building components are at or near the end of their physical life expectancy; however, they still function adequately. Most minor repairs have been addressed on an ongoing basis resulting in an adequately maintained property.

C5 – The improvements feature obvious deferred maintenance and are in need of some significant repairs. Some building components need repairs, rehabilitation, or updating. The functional utility and overall livability are somewhat diminished due to condition, but the dwelling remains useable and functional as a residence.

Note: Some significant repairs are needed to the improvements due to the lack of adequate maintenance. It reflects a property in which many of its short-lived building components are at the end of or have exceeded their physical life expectancy, but remain functional.

C6 – The improvements have substantial damage or deferred maintenance with deficiencies or defects that are severe enough to affect the safety, soundness, or structural integrity of the improvements. The improvements are in need of substantial repairs and rehabilitation, including many or most major components.

Note: Substantial repairs are needed to the improvements due to the lack of adequate maintenance or property damage. It reflects a property with conditions severe enough to affect the safety, soundness, or structural integrity of the improvements.

If you have any questions about Condition Ratings or any other appraisal related matter, please feel free to contact us by phone, email or by visiting our FaceBook page.

The Coyle Group’s team of Philadelphia Real Estate Appraisers are a leading provider of appraisals for Estate/Probate, Divorce, Bankruptcy, Tax Appeal and Pre-Listing. If you need a guest speaker at your next sales meeting, please give us a call. We would welcome to opportunity to speak to your group and field any appraisal related questions you may have. For more information please visit our website at www.TheCoyleGroupLLC.com You can also contact The Coyle Group at 215-836-5500 or appraisals@coyleappraisals.com

 

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FHA & VA Repairs?…be sure to Ask Questions!

I hope everyone is enjoying their summer, so far.  I haven’t posted recently but ran into a situation that all agents should be aware of, especially those who work with FHA & VA Buyers.

Now most FHA and VA purchase appraisals will result in a list of mandatory repairs that must be completed and signed-off on prior to the Buyer receiving FHA or VA financing.  The repairs are typically the responsibility of the Seller to complete.  The only problem, in my experience, is that the Sellers often don’t want to incur the expense of those repairs and will often cut corners in doing so.

There was a situation like this last week where our office completed an FHA appraisal for a Buyer in Mount Airy.  The appraisal was delivered to the lender along with a list of required repairs and pictures of those repair items. The lender sent the list of repairs to the Seller’s agent.  However, the photos were not sent.  What resulted was a lot of confusion and a postponement of settlement.

In this case, the Seller did not fully understand what was being requested in the list of repairs.  The Seller’s agent was not aware that the Seller was confused and was interpreting the list of repairs incorrectly.  So, when the Seller read “Stain/Paint the exposed wood on the exterior of the rear deck” they just assumed that the repair meant the deck flooring.  Had they seen the pictures in the report, they would have understood that the appraiser was calling the exposed wood in the entire deck to be stained/painted.  This included the floor decking, the railings, the handrails and posts.  Check out the photos below to see what was missed.

 

 

 

 

 

 

 

 

 

 

When the appraiser went out to do the final inspection, he had to inform the lender that the repairs were not competed.  The lender informed the Seller’s agent and the Seller who thought the repairs were done and that they were settling the next day.  In fact, they now had to complete the additional repairs which delayed settlement for several days.

The moral of the story is, as a Seller involved with FHA/VA Buyers, it is imperative that you have a full understanding of the repairs required by the appraiser.  Be sure that you request any pictures of damage or repairs that the Seller might be responsible for completing.  Lastly, if you have any questions or are unsure about what is being asked of you and your Seller, reach out to the Buyer’s lender and ask them to obtain clarification from the appraiser.  Most appraisers are more than happy to help out.

The Coyle Group’s team of Philadelphia Real Estate Appraisers are a leading provider of appraisals for Estate/Probate, Divorce, Bankruptcy, Tax Appeal and Pre-Listing. If you need a guest speaker at your next sales meeting, please give us a call. We would welcome to opportunity to speak to your group and field any appraisal related questions you may have. For more information please visit our website at www.TheCoyleGroupLLC.com You can also contact The Coyle Group at 215-836-5500 or appraisals@coyleappraisals.com

 

 

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Don’t Rely on the Public Records…

Don’t Rely on the Public Records…When It Comes to Reporting Gross Living Area Accurately.

Just today, I had a situation where I was asked to appraise a property in the Graduate Hospital area.  As it turns out, the homeowner informed me that I was the second appraiser to look at the property.  This was a For Sale By Owner, as well.  The owner also stated that the reason that a second appraisal was ordered was because the first appraiser “muffed-up” the sketch and got the GLA all wrong.  Apparently, the calculations on the sketch were a couple hundred square feet smaller that what was recorded in the public records.  I could feel my eyes beginning to roll backwards.

The homeowner was hanging her hat and the potential sale of her property on the Philadelphia public records.  Geez.  She was very insistent that the other appraiser had no idea what they were doing.  The idea that the public records could be wrong never crossed her mind.  She’d been living in a house of certain size for 10 years and no one was going to tell her different.

So, I went about my inspection, making sure to measure twice.  Upon getting back to my office I drew the floor plan up using my sketch software.  As luck would have it I must have “muffed-up” the sketch, as well.  My calculations were some 200 SF smaller than what was reported in the public records.  Imagine that, two, seasoned, professional appraisers made the same mistakes and arrived at almost the exact same GLA for her home?!?!

The lesson here is it’s never a good idea to rely solely on the public records when it comes to matters of GLA.  Think about it.  Where does the information in the public records come from?  Did an assessor measure the property?  Did a developer provide the info when submitting plans?  Was it taken from an architects rendering?  Who knows?

If you really want to know the accurate GLA of a property, you have to measure it…whether you measure it yourself or use a measuring service!  It’s not difficult to do and can help you avoid all sorts of headaches and misunderstanding.  If you have any questions about how measure a house or about our Home Measuring Services, just let me know.

The Coyle Group’s team of Philadelphia Real Estate Appraisers are a leading provider of appraisals for Estate/Probate, Divorce, Bankruptcy, Tax Appeal and Pre-Listing. If you need a guest speaker at your next sales meeting, please give us a call. We would welcome to opportunity to speak to your group and field any appraisal related questions you may have. For more information please visit our website at www.TheCoyleGroupLLC.com You can also contact The Coyle Group at 215-836-5500 or appraisals@coyleappraisals.com

 

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Let’s End the Trend

For the past few years I’ve been noticing a trend in how homes, particularly new construction, are being marketed.  Perhaps you’ve noticed it, too.  What I’m referencing is the inclusion of finished basement space in the overall Gross Living Area (GLA) calculations. (I’ve even seen it where one agent included the roof deck in the overall GLA because the deck was covered)

I get it.  From a marketing perspective, bigger is better.  Everyone wants to be able to say that their home is larger.  I guess size does matter when discussing square footage.  The only problem is that this practice can be misleading and can contribute to inaccurate appraisals and failed deals.

Picture this.  There is a property in Point Breeze.  It’s new construction, three stories, finished basement, roof deck…the same house that everyone is building right now.  The agent and developer market the property as being 4 bedrooms, 3.5 baths and 2,400SF of living space.  Now, 600SF of that space is entirely below grade in the basement and contains one of the bedrooms and a full bath.

Along comes the appraiser.  From the appraiser’s point of view the house is a 3 bedroom, 2.5 bath house of 1,800SF above grade.  There is also a 600SF finished basement that contains a full bath and a room that could be used as a 4th bedroom.  The appraiser will assign contributory value to the finished basement and the rooms down there but, they will not be included it in the above grade GLA.  The reason being, most appraisers adhere to the ANSI Guidelines for measuring a dwelling.  These guidelines state that only above grade living space is to be included in the overall GLA for a property.  Anything below grade is finished basement space.  (For a copy of the ANSI Guideline, just email me)

This trend can effect the selection of comparables and by extension have an impact on the appraised value of a property.  If an appraiser inspects a property and determines it to have 1,800SF above grade and 600SF below grade, the appraiser is going to select comparables that are closer to 1,800SF, not the 2,400SF reported in the MLS listing.  This could result in the selection of comparables that are smaller and worth less money.  This could adversely impact the sale.

Also, imagine the confusion of the new homeowner when he reads the appraisal.  Here, he thought he just bought 2,400SF home but, the appraiser says it’s only 1,800SF.  In the buyer’s mind, they just overpaid.  There are likely to be some angry phone calls as a result.

But there’s hope!  The Trend MLS allows agents to separate the above grade from the below grade living space when listing a property.  This helps paint a more accurate representation of the living space within a building.  It also helps appraisers make more accurate comparisons to other homes.  I would love to see this become the new trend in Philadelphia real estate, where agents and appraisers are on the same page and above grade and below grade living spaces are separately reported.

NOTE:  If you ever have a question as to what the actually GLA is for a given property, have the house measured.  Many appraisers will perform this service as will a number of “measuring” companies.

The Coyle Group’s team of Philadelphia Real Estate Appraisers are a leading provider of appraisals for Estate/Probate, Divorce, Bankruptcy, Tax Appeal and Pre-Listing. If you need a guest speaker at your next sales meeting, please give us a call. We would welcome to opportunity to speak to your group and field any appraisal related questions you may have. For more information please visit our website at www.TheCoyleGroupLLC.com You can also contact The Coyle Group at 215-836-5500 or appraisals@coyleappraisals.com

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Do Comps need to be within a Mile?

the-coyle-group-one-mile-philadelphia-appraiserThis post is basically a follow-up to my last post, The 6 Month Rule.  If you recall, I discussed how far back in time appraisers can go when selecting comparables.  In this post I’d like to address a similar misconception brought up in a comment by Portland, OR appraiser, Gary Kristensen.  He suggested that we answer another question that appraisers hear a lot…

Can you only use comparable sales that are within one mile away?

Well, as most appraisal answers begin…that depends.  It depends on the location of the property.  Are we talking urban, suburban or rural?  It depends on the type of property.  Is it a 3 bedroom Twin in Roxboro or a custom-built Mansion in Bryn Mawr?

In urban settings, like Philadelphia, were homes are often very similar and the housing stock is dense and sales are plentiful, it can be easy to find comparables.  In situations like this an appraiser may only need to search a few blocks away to find appropriate comps.  Going a mile for comparables in a place like Philly will likely put you in a completely different neighborhood, zip code and market.  Unless the property is extremely unusual chances are the appraiser will be well within a mile when selecting comps.the-coyle-group-maple-glen-house-philadelphia-appraiser

Suburban settings tend to be less built up with fewer sales.  In cases like this an appraiser may have to go more than a mile for comparables.  Even if they are more than a mile from the subject they may still be located in the same municipality, school district and general market place.  For instance, if I appraised a house in Maple Glen and went over a mile away I could still be in Upper Dublin Township & School District and the 19002 zip code…the same general market.

Appraisers have even more latitude in Rural settings.  While most of my experience has been appraising in the greater Philadelphia region in an urban/suburban market, I know appraisers who do work in Rural markets.  For them it’s not uncommon to go 10 or more miles away or into different counties (and states) in order to identify appropriate comparables.  Think about it, the market for a 500-acre horse farm could easily span across miles, counties and state borders.

The Coyle Group - Exeter - Philadelphia AppraiserNow suppose you have that custom-built Mansion that I mentioned earlier.  There may not be many sales in the immediate area that would be considered comparable.  An appraiser may have to go 4-5 (or more) miles away to find a suitable comparable.  In cases like this it may even be appropriate to go outside Lower Merion Township (Montgomery County) into neighboring Radnor Township (Delaware County) to find comps.

If the appraiser stays within an area that would be considered to be the same real estate market place*, the comparables are likely going to be appropriate.  It’s also very important for the appraiser to explain their rationale for expanding the search for comparables. This is necessary to help the end user of the appraisal understand the appraiser’s reasoning and methodology.

Bottom-line, there is no rule or law that compels an appraiser to select comparable no more than a mile from the subject.  This is a guideline established by underwriters/lenders and has nothing to do with good appraisal practice.

* A real estate market place is where forces of supply and demand operate, and where buyers and sellers interact to trade real estate for money.  Market places have mechanisms or means for (1) determining price of the traded item, (2) communicating the price information, (3) facilitating deals and transactions, and (4) effecting distribution. The market for a particular property is made up of buyers who need a home and have the ability and willingness to pay for it.

The Coyle Group’s team of Philadelphia Real Estate Appraisers are a leading provider of appraisals for Estate/Probate, Divorce, Bankruptcy, Tax Appeal and Pre-Listing. If you need a guest speaker at your next sales meeting, please give us a call. We would welcome to opportunity to speak to your group and field any appraisal related questions you may have. For more information please visit our website at www.TheCoyleGroupLLC.com You can also contact The Coyle Group at 215-836-5500 or appraisals@coyleappraisals.com

 

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