How does an appraisal work? What gets counted, and what doesn’t? If you’ve ever wondered about how this mystical voodoo math gets done, Joel Frost is here to help you understand!
1:20 – Joel, tell us about yourself. Appraising since 2006, and has completed 16,000 appraiser files. The appraisal is one of the most-stressful parts of a purchase or refinance — mostly because not very many people understand what an appraisal is and what it’s for.
2:40 – What do appraisers look at? What’s a comp? Appraisers assume your house is working just fine (they’re not inspectors!). How is the market reacting to homes for sale with your characteristics?
Appraisers keep their finger on the pulse of what people are paying for different features.
3:50 – The appraiser’s job is to establish how much money could the home be foreclosed for to get the lender’s money back.
4:13 – What are the key features appraiser look at? Solar panels, for example. No money for leasing solar panels. No money for a loan on solar panels. If you use a HELOC, they’re paid off, and they DO add value. Appraisers need information about the system for context. Appraiser also needs a comp.
7:00 – Can a real estate agent influence an appraiser’s evaluation? Giving information is not against the rules, but pressuring for value is a big no-no.
8:03 – Mother in Law apartments (MIL) vs Accessory Dwelling Unit (ADU) vs Duplex. MIL is contiguous — there’s no separation between the living spaces. An ADU almost always has a separation — you have to go outside in order to go into the other unit. A duplex is like an ADU, but it was zoned for duplex. It will often come down to how it was zoned…not if there are separate utility meters.
10:33 – What makes a house a “comp” (or not a comp)? Pick the most similar properties that have sold recently, but appraisers will depart from style in order to get comps that represent all the aspects of the property. The lender requires a minimum of 3 comps because they want to ensure you’re not basing value entirely on one property.
13:41 – What is bracketing? Selecting comps that spread the gamut of features in the home. This means an appraiser may include a low-weight “weird” comp that doesn’t look like it belongs. It’s so they can show bracketing. Discussion of 2-car and 3-car garages.
15:40 – Geographic bracketing makes sure you don’t have a “mini market”. Use some comps from within the development and some outside of it. One of Joel’s investment secrets.
16:51 – What about basements? Why isn’t my basement being considered? They are, but appraisers always distinguish between “above grade” and “below grade”. If any portion of a lower level is below ground level, that entire floor is considered to be “below grade” or basement. They are valued separated, because above grade square footage is considered more valuable. Discussion of a “mullet house”.
20:23 – What’d we learn today?
22:22 – Bloopers.
*No mother-in-law apartments were harmed in the filming of this real estate discussion.
Please contact us to tell us you love us, you want to hire us! Call or text:
Joel Frost is an Appraiser with
ExcelAppraise
Reach him on Twitter @JustAskJoel
https://twitter.com/justaskjoel
Realtors with Hive Collective at Presidio Real Estate:
Tyler Cazier: 801-210-0230
Aric Wiszt: 801-228-7687
Lender with Elite Team at Security Home Mortgage:
NMLS: 178787
Jason Christiansen: 801-669-7271
NMLS: 240472
A Production with Security Home Mortgage’s Jason Christiansen, and Hive Collective at Presidio’s Tyler Cazier and “Mr. Suit” Aric Wiszt.