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Do Comps need to be within a Mile?

September 26, 2016 by 2 Comments

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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What Happend to the Spring Market?

July 21, 2014 by Leave a Comment

In a post earlier this year I interviewed four of the top real estate agents in the Greater Philadelphia Metro area about their thoughts on the market. All four felt that inventory, namely the lack of, was going to be the biggest factor in the market going forward…and I totally agreed with them.

Well, here it is half way through 2014 and I’m seeing some odd trends. Take a look at the numbers below that were taken right from the TrendMLS.  Thank you, TReND MLS for publishing this great info.

The Coyle Group - Philadelphia Stats - Appraiser

The Coyle Group - Bucks Stats - Appraiser   The Coyle Group - Chester Stats - Appraiser   The Coyle Group - Montgomery Stats - Appraiser

In Philadelphia and the surrounding “collar” counties (Bucks, Chester, Delaware and Montgomery) all of the inventory levels increased over the 2013 levels.  Adding to that, the data indicates that settled sales are flat or down compared to last year.  In fact, Philly, Bucks and Delaware counties are showing signs of over-supply (7 months of inventory being the lower end of what many in the industry would classify as an over-supply).

What?! The inventory levels were supposed to be low. It was a Buyer’s market, no one was selling. Buyers were chomping at the bit to jump on any listing that popped up. There were going to be bidding wars and homes selling for thousands over asking price. What happened?!?!   (Now, I know there are agents out there who are having a fabulous Spring and Summer.  I’m just pointing out that the numbers suggest a different trend.)

Well, I honestly think it was the brutal winter we had. It forced Buyers to the sideline and effectively killed the Spring Selling Season. Essentially, the Spring Selling Season never happened and inventory began to pile up as Buyers went into Summer-mode.  Now, typically we will see a bump in Buyer activity once Summer is over and school starts, again.

Hopefully, that will be the case this year, too. What are your thoughts on how the 2014 market is playing out?

 

The Coyle Group’s team of Philadelphia appraisers is a leading provider of appraisals for Estate/Probate, Divorce, Bankruptcy, Tax Appeal and Pre-Listing appraisals.  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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Got UAD?

August 25, 2011 by Leave a Comment

Got UAD?  If you don’t, you certainly will by September 1st, 2011. 

What is UAD you might ask?  Well, UAD stands for Uniform Appraisal Dataset.  It is the new format in which all appraisal reports will be completed if the loan is to be sold to Fannie Mae or Freddie Mac.  The UAD was developed in an effort to standardize appraisal reports and to aide the GSEs (Fannie and Freddie) in better manage their loans and risk.  Since, most loans are sold to Fannie or Freddie, and since the VA and HUD have already agreed to adopt the new UAD format, almost all mortgage appraisals completed on or after September 1st will have to comply. 

The UAD will change the way appraisals are written and make understanding the reports even more complicated for the average homeowner.  Some of the changes are fairly minor; however, 0thers are more significant.  The biggest changes are in how certain data fields are populated.  Fields like Condition, Quality of Construction, Bathroom Count, Lot Size and View will see the most change.

Condition – rather than using terms like “Average” and “Good” to describe a property’s condition there will be a rating scale of C1 – C6.  Each rating will describe a specific degree of condition.  C1 will be at the high end and C6 will be at the low end of the range.

Quality of Construction – like Condition, this field will do away with descriptors like “Stone/Frame/Good” and “Vinyl/Average”.  There will be a quality range with standardized definitions from Q1 – Q6. 

Bathroom Count – the new UAD will standardize the format in which bathroom count is shown in the report.  Before, appraisers might use 2.5 or 2F1H to describe a home with 2 full and 1 half baths.  The new format will be shown as 2.1 baths.  If a property has 3 full and 2 half baths, it will say 2.2 baths.  Not that big a change.

Lot Size – lot size and acreage will be described in whole numbers.  Rather that an appraiser using 16’X 72’ to describe a lot in an urban setting they will use 1152 (square feet).  Acres will look like this, 3.2 to describe 3.20 acres.  Anything less than an acre will be in square feet.

View – the appraiser will have to use one of a number of abbreviations or acronyms to illustrate certain view attributes. They will also have to make a determination as to whether or not the view is “N” (Neutral), “B” (Beneficial) or “A” (Adverse).  So the UAD complaint View field describing a home with a residential, golf course location may look like this “B, Res, GlfCrs”.

Below is a guide that describes the Condition and Quality rating scales, Bathroom Count and some of the new abbreviations for View as well as other fields.

This new format may be confusing at first.  If you have any questions about the UAD or appraisals, please feel free to contact one of the appraisers at our office.

Please note that the UAD will not effect the way appraisals are completed for Divorce, Tax Appeal, Estates/Probate, Pre-Listing valuation, Commercial valuation, QRPTs or for determinations of Fair Market Value.

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Another Reason to get a Pre-Listing Appraisal

April 11, 2011 by 1 Comment

Just the other day, I received a phone call from a Mortgage Broker friend of mine. Yes, appraisers and Mortgage Brokers are still allowed to be friends.

He wanted my input on a situation in which one of his former clients found themselves.  Let’s call them the Utley’s. (For the privacy of the parties involved, I will not use the actual names, streets, pricing or house photo in this post.)  The Utley’s currently have their home listed for sale in Springfield Township, Montgomery County for $345,900.  There home has been on the market for 39 days and they have an offer on the table for $339,000.  The Utley’s are concerned about whether or not they should accept an offer this “low”.

I began buy pulling up the information on the Utley’s home in the MLS and public records.  It is a nice 1939 colonial with three bedrooms, 1.5 baths, approximately 1,500 Sq.Ft.  A very common home in this area.

Then, I took a look at the sales and listing activity in the immediate area for similar homes.  What I found was surprising.  The last three sales in the neighborhood in the past year sold for $370,000, $370, 000 and $412,000.  There are currently two competing listings in the neighborhood listed for $370,000 and $469,900.  The home listed at $469,900 was a larger, four bedroom that was completely renovated, probably not the best comparable.

However, there was also one pending sale right around the corner from the Utley’s.  This house was last listed for $339,900 but, it lacked a powder room and was roughly 220 Sq.Ft. smaller.  It had also been on the market for over 160 days with an original list price of $364,000.

After looking at this information, my question to my Mortgage Broker friend was “why did they list it so low?”

By listing at $345,900, the Utley’s are basically telling the market “Hey, this is my pie-in-the-sky, hope I can get it number…but, I am probably willing to take less!”  The reason they are receiving “low” offers is because they apparently under listed their home, based on available market data.  They (and their agent) may have shot themselves in the foot.

To compound the issue, it turns out, the Utley’s agent is a “friend of the family” (probably not for much longer after this experience) that is a licensed agent but, who is not very familiar with their neighborhood.   In the end, the Utley’s may be leaving thousands of dollars on the table or may have to re-list at a higher price.

This is a perfect example of why Sellers and Agents need to have a Pre-Listing Appraisal completed prior to listing a property.  A Pre-Listing appraisal can assist Sellers and their Agents maximize their selling price without over or under pricing.  If the Utley’s and their Agent had an appraisal of the home done prior to listing they might have developed a different price point and might not be in a situation where they are entertaining such “low” offers.

For information on The Coyle Group’s Pre-Listing Appraisal services, please call our office at 215.836.5500 or visit this link.

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Assessment Appeals 101

March 23, 2011 by Leave a Comment

Spring only officially began less than a week ago but, it’s not too early to start thinking about appealing your tax assessment.  Sure, you might think “the deadline for filing an appeal is still months away”…”there is plenty of time to work on the appeal in the Summer”…”geez, it’s not even Memorial Day, why worry about an appeal now?”  

Well, you would be surpized at how many people do begin thinking about their property tax appeal this early in the game.  It ususally occurs to folks when they receive their real estate tax bill in January and February. 

It’s this time of year that we receive hundreds of phone calls and emails from property owners who what to know if appealing their assessment is feasible.  One thing we’ve noticed is that many property owners have a fundamental misconception about their property taxes and how to go about appealing them. Most people think that they can appeal their taxes. Unfortunately, we can’t appeal our taxes. Sorry, folks, no such luck.

However, it is your right as a property owner to appeal your assessment. Your assessment is the underlying factor upon which your taxes are calculated. Given that most properties are taxed on an “ad valorem” basis, meaning the tax is based on the value of the real estate, your assessment should represent the current fair market value of your property.

Now, most counties in the Philadelphia metro region (including Montgomery, Bucks, Delaware, Chester, Berks, Lehigh & Northampton) have not been reassessed in years (it’s very costly to do a countywide reassessment). What this means is that the assessments may present an inaccurate representation of current fair market value. Now, as a means of trying to keep the assessments current with the real estate market, equalization rations have been developed in an attempt to make the assessments echo the current market. These ratios don’t always succeed in reflecting the market, especially the turbulent markets of the past 3-4 years. As a result, the assessment of a given property may be over stated, which translates into taxes that may also be overstated.

So, it stands to reason, if real estate values are declining your assessment should mirror those declines…right? This is done by filing a tax assessment appeal with your county board of assessment. Along with filing the necessary appeal paperwork, it is your responsibility to demonstrate that the assessment does not reflect the current fair market value of your property. The best way to do this is to present an appraisal report to the board at the time of your hearing.

Appraisals should be completed by a state certified appraiser (or licensed appraiser depending on the state) who is familiar with your area. In Pennsylvania, for instance, only a certified appraiser can provide an appraisal of your property. Anything completed by someone other than an state certified appraiser is not an appraisal.  Real estate agents and brokers cannot provide appraisals in Pennsylvania.

The deadlines for filing a tax appeal are usually in Bucks, Delaware and Chester Counties August 1, 2010 and September 1, 2010 for Montgomery County.  If you reside in any other Pennsylvania counties, please check with your county tax assessor’s office to confirm your county’s deadline. Remember, if you miss the deadline, you miss the opportunity to appeal and will have to wait another year (paying the same high taxes).

For more information or to see if you are a candidate for tax assessment appeal, please contact The Coyle Group. 

Note:  Be sure to visit our site from time to time over the next few months as we present a series of posts that relate to Tax Assessment Appeals and property tax reduction.

The Coyle Group provides appraisals for tax assessment appeals in Montgomery, Bucks, Delaware, Chester, Lehigh, Berks and Northampton Counties.  Call us at 215.836.5500 for more information.

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Price vs Value

April 14, 2010 by Leave a Comment

I was invited to speak at the monthly meeting of local Caldwell Banker Agents and Brokers. I was there to discuss the appraisal process, recent market trends and how the HVCC is affecting agents and their clients.

After speaking, I opened up the floor to questions. One of the first questions was a great one. The agent asked me to explain the difference between Price and Value. I’ve been thinking about it and have come up with the following explanation.

When viewed against the backdrop of recent marketplaces shifts both locally and nationally over the past few years, the difference between Price and Value has become more and more important to understand. In fact, I feel that most Agents and their clients are using the terms incorrectly.

When discussing a property most Agents and their clients are thinking in terms of price. “What is the price of the house”, “will they come down in price”, “that price is high/low” and my favorite “did the appraisal come in at the selling price?” The fundamental problem in these scenarios is that it is not about price, it’s about value. The focus should be on what the value of the home is, not the price. Value takes into consideration today’s market and underlying market conditions. Price often does not.

Price is a marketing tool. By setting a price, the Seller is actually choosing a segment buyers who will hopefully see the price as being the value of the property. The closer the Seller positions the price to the true value of the property, the larger the pool of potential Buyers the house will appeal to. Just the opposite is true, as well. The further the price is placed from the actual value of a property, the smaller the pool of buyers who will see that value.

An example of this was this property in Gladwyne. This property was listed in 2009 for $19,500,000. It was eventually withdrawn from the market. In 2010, it was re-listed for $17,900,000. All totaled, the house sat on the market for more that 660 days.

This is a situation where the Seller priced the house so far above the perceived value placed on it by the market, that they effectively diminished the pool of potential buyers to zero. This market did not support the price that was being asked

Remember value is guided by the market. Price is guided by the individual Selling the property. If the price is not supported by the market, no sale will occur.

Common perception is that price and value are interchangable. They are not. Value relates to what something is really worth.  That is, what could one expect to receive in terms of money in the free market?  It doesn’t matter what the value was last year, last month, or even last week. Value is determined by the conditions and influences of the current marketplace. Too often, sellers get hung up on that fact when the marketplace moves in the other direction. They don’t want to acknowledge the fact that their home was worth $800,000 a year ago and, based on supply and demand, is only worth $700,000 in today’s market. Value is determined by the scarcity of something and the ease of replacement with similar, equal, or better products or service (i.e. The Principle of Substitution).  In its most basic form, this is a simple function of supply and demand.

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