Vicky's Appraisal Blog

I had the privilege of providing training at First Team's Success Academy in Orange County, CA earlier this month. In the training, we deconstructed an appraisal of a property that didn't appraise at the purchase price; which was mainly due to its size being miscalculated and misrepresented. During the discussion surrounding this issue the question was asked, "Who decides what counts as the living square footage of a home?" Appraisal textbooks describes the Gross Living Area or GLA as the total amount of finished habitable above-grade space, measured along the building's outside perimeter. Of course there are many other aspects to it, and other things to consider, but that is the general statement on how to measure the square footage of a home. Okay, so where did that directive come from?

In April 1996, the Board of Standards Review of the American National Standards Institute (ANSI) adopted a voluntary national standard for measuring square footage in single-family attached and detached homes. Committee members included representatives of Fannie Mae, Freddie Mac, VA, HUD, the Appraisal Foundation, American Association of Certified Appraisers, American Institute of Architects, National Association of Home Builders, International Conference of Building Officials and the National Association of Realtors along with numerous other organizations as well as private design building and appraising companies.

There are several directives in the standard but the one I want to emphasize here, because it comes up in a lot of appraisals, is this: Include accessory apartments and other finished areas not within the main house ONLY if they are connected to the main house by finished hallways/stairways. In other words, if the only access to an accessory building causes a person to be touched air, sunshine or rain then it is NOT counted in the total GLA of the main house. Never consider a garage as finished space.

A copy of the standard can be ordered at www.nahbrc.com. By the way, this issue was opened for public comment from Oct. 17, 2011 to Dec. 5, 2011. I believe the reassessment process continues but it doesn't look like any changes will be made to the directive cited above and it will be reaffirmed.

If you are unsure of a homes GLA, have it measured to the ANSI standard. Call me at (949) 939-6806 if you need to schedule a measurement service or to book a training for your group or real estate office. Don't get sued for misrepresenting the size of a home!

© M.Vicky Wilson Feb.18,2012

As promised in my last blog I am writing today about "out of area" appraisers. We almost can't read any article about whats wrong with the real estate market without seeing this term. What does it mean? It means an appraiser may have traveled some distance outside of their local market in order to complete an assignment for a particular lender. An example would be if I traveled from Laguna Beach, Ca. to complete an assignment in Big Bear, CA. Two totally different markets which require local knowledge. I read with great interest an article in the LA Times a few months back titled, "Agents, builders and sellers say low appraisals spoil deals". One of the scenarios in the article focused on an appraiser who was selling a property for their mother. Newsflash, appraisers are human and we are just as susceptible to believing a property we have an interest in is better than the rest...just like most other human beings. In this case, let’s assume the appraiser selling their mothers condo was spot on with their value opinion. They indicate the first appraiser missed the mark by $8,000 but they don't tell us if this was an “out-of-area” appraiser. They simply state the first appraiser was wrong. We don’t know any particulars of the contract, the unit, the association or the parameters this first appraiser was bound to stay within. When the value didn’t come in, the buyer went to another lender. A circumstance I find especially curious for a purchase when buyers and their agents insist the appraised value is too low for their offer and ask for a reconsideration to raise the value so they can buy the house. You’d think they’d be overjoyed they didn’t pay $8,000 too much for the property. Anyway, the second appraiser is said to have traveled 126 miles to complete the assignment. They must be some kind of crazy. With fees as low as they are it is likely they barely got paid for their gas and time just to go to the appointment. Anyway, the article states that since the selling appraiser knew the second appraiser was “geographically incompetent” they “spoon-fed” the second appraiser the "right" comparables and Viola!, the value was suddenly there. I ask again, which appraiser is right? If the first one had geographic competence and didn’t see the value and the out of area appraiser was “spoon fed” the value necessary to complete the deal and didn’t understand other market factors, why is their opinion right? I guarantee you that any appraiser, who has been in this business for 5 years or more, including the selling appraiser, has completed assignments out of their geographic competency zones and are responsible for both over and under valuing properties. Hardly anyone cared where an appraiser came from during the run-up. Now it is used as a convenient scapegoat for value opinions that don’t serve the parties to the transaction. By the way, most big bank lenders don't give assignments to their fee panel appraisers that are beyond 15 miles from the appraiser's office or home base. At least that's what their guidelines say. Having spent the last 10 years focused on becoming an Orange County, CA specialist, you can be assured I have geographic competence in this county. Contact me with your questions or schedule a training with your local real estate office by calling (949) 939-6806 or email me at vicky@yourappraisalpeople.com

© M.Vicky Wilson 2012