Tell Me About House Appraisers

Erakad · Erakad's Garage

Property purchase question for those knowledgable in real estate.

I'm looking at purchasing a semi-remote mountain vacation home in CO (private party). I've seen the home and can see it needs work. The county appraises it at about $229,000 (2700 sqft 2 BR/1 Bath house w/large finished basement on 5 acres), but I know the interior needs considerable work. Single pane windows, carpets are original (1988), bathrooms need a lot of work, deck is needing repair/replacement, furnace ok, but needs replacement, basement stairs not code, mouse problem, siding needs painting...etc, etc, the list goes on. In purchasing the property it will be appraised, but my concern is these obvious defects won't be addressed in an appraisal, that is, the appraiser will just walk around the outside and say ok.

I've bought homes and paid appraisers, and even housing inspectors, in the past...but those houses have all been in excellent condition so interior, or even exterior condition never came up. What do the appraisers look at? Any of you smart guys know??

Big Ed · 09-22-2009, 04:53 AM

The appraiser will view both the interior and exterior of the property to determine valuation. He/she will note the overall condition of the property and use that as a guide in determining valuation, but the appraisal itself will not note any specific defects unless they have a huge impact on the valuation -- such as the toxic waste dump in the backyard. Appraisals will note condition in a very broad sense -- typically using a scale of Excellent -- Good -- Average -- Fair -- Poor -- Uninhabitable. Appraisers will also not be concerned with exhaustively testing any aspect of the home -- they are just looking for an overall sense of the current condition. (Unless you are appraising for a VA or FHA loan, in which case there are some basic tests that are included as part of that appraisal).

If you want a more specific and exhaustive list of the defects in a particular property, then it's a home inspector you are looking for.

Erakad · Erakad's Garage

Thanks Ed, that's pretty much what I was wondering. As I said, properties I've purchased in the past haven't been "fixer uppers", so I had concerns on what they really used as a basis for an appraisal. To be sure though, I think you're right to use a home inspector.

javadog · 09-22-2009, 06:04 AM

Just so you know, not all of these guys know what they are doing. When I bought my house, the inspection was done by a guy that was qualified for the job because he had previously been a real estate agent. If you think that he might have been lacking in ability to do the job properly, well, you'd be right.

You need someone that knows how a house is constructed, has an idea of what it costs to build and repair things and has an idea of what the current market conditions are in that area. Lacking any one of those three things, you don't have much. I'd suggest interviewing a few of them before picking one.

Some will ask what the appraisal is for, leading me to believe that the final number is a variable that changes according to who they are trying to please. Need a low number, to justify an offer? Need a high one, for a bank loan or insurance policy?

If it would make you feel better, compile a list of the issues that you know about and hand it to the guy when he arrives. He might be more compelled to be thorough.

JR

berettafan · 09-22-2009, 06:11 AM

Quote:

Originally Posted by Erakad

What do the appraisers look at? Any of you smart guys know??

The contract price.

Seriously.

berettafan · 09-22-2009, 06:13 AM

i see java beat me to it.

r/e appraisers are like traffic cops. they claim they are there to protect you but in truth they're just part of the machine.

you wanna do this right you get 4 written (and itemized) estimates from the best contractors you can find in the area to fix everything they can find wrong with the house. then pick the fluff out.

legion · 09-22-2009, 06:17 AM

Javadog, I think you are confusing real-estate appraisers with home inspectors. They are two different jobs that are similar but have different purposes.

Appraisers value a house for the bank. The bank hires them and the purchaser has little input on who is used (though they do charge you for the service). Traditionally appraisers have been pretty conservative to their valuation of property to protect the banks they are hired by, but.....well, check out the RE thread for a full history of all that went wrong. And yes, the appraisers were involved. I think more recently they have returned to their traditional role. Most of these guys have a lot of experience and it is a difficult business to break in to as the banks have to call you for work.

Home inspectors are hired directly by the purchaser and their job is to find problems with the house. In my opinion, most of them seem to be recent graduates of a state corrections program who earned their license through correspondence while they were "away". Most "home inspections" seem to be completed by driving past the house in question at a triple-digit speed then psychically envisioning what an actual home inspection would have looked like, and writing that up.

javadog · 09-22-2009, 06:24 AM

Quote:

Originally Posted by legion

Javadog, I think you are confusing real-estate appraisers with home inspectors. They are two different jobs that are similar but have different purposes.

No, I know what they are. I've used both. I also own a construction company, so I'm in a related line of work.

My point was that there isn't the same training and licensing for these guys as there is for, say, an architect. I'd wager that there are more bad ones than good ones. And, you might get two different numbers from the same guy, depending upon what he thinks the person hiring him really wants. The end product may not be worth much.

Call me cynical. I've been down the road a piece....

JR

legion · 09-22-2009, 06:28 AM

I don't disagree with your assessment in the least.

I think appraisers, in general, had a lot to do with the RE boom (so did the banks pressuring them to inflate home prices).

I also know for a fact that locally in Bloomington/Normal, local appraisers resisted such pressure and we saw steady 3%-5% appreciation in home prices when SoCal was seeing 25% or more. And now, when home prices are dropping in the rest of the country, we are still seeing steady 3%-5% appreciation in home prices.

Erakad · Erakad's Garage

Quote:

Most "home inspections" seem to be completed by driving past the house in question at a triple-digit speed then psychically envisioning what an actual home inspection would have looked like, and writing that up.

Exactly my concern! I'm going to need to flag the guy down and make him lunch to get him to do the job! The bottom line, as with most home owners, is I want an appraisal that reflects the current state of the home...not what the bank feels it can get out of it.

jorian · 09-22-2009, 05:30 PM

Inspectors typically work for the buyer and appraisers typically work for the lender.

I've ordered thousands of appraisals in my career and it always cracks me up that appraiser wants to know the sales price to make his determination on value. 9 times out of 10 the sales price is the same as the purchase price.

javadog · 09-22-2009, 07:36 PM

A private individual can hire a house appraiser. I've done it.

JR

legion · 09-23-2009, 05:52 AM

Quote:

Originally Posted by javadog

A private individual can hire a house appraiser. I've done it.

JR

Right, but the bank isn't going to use your appraisal.

javadog · 09-23-2009, 06:19 AM

Mine did.

JR

jorian · 09-23-2009, 11:31 AM

A bank might use an appraisal ordered by the homeowner if a letter of direction authorizing the bank as intended user accompanied the appraisal.

john70t · 09-24-2009, 09:14 PM

You can do your own "appraisal" by viewing comps in the area and taking lots of photos/notes. Then do a short review with the appraiser beforehand while watching him work. Mabye even hire another one for comparison.

There are times for cheap tools and times for shortcuts. Purchasing a home isn't one of those.
Your work will be worth thousands of dollars per hour.

MysticLlama · 09-24-2009, 10:19 PM

I'm about to go through this in the next week or so, we just got our final offer on a house accepted last night.

I think we'll be okay, as we got a significant discount to asking price, the house is in very good condition according to our multiple inspections, and compared to the nearby comps we're getting a good deal.

Fingers crossed.