Sources of Value
website states my home is worth $X!” In both my Real Estate Appraisal and Real
Estate Brokerage business this discussion happens on a weekly basis.
brokerage side when we receive very low offers, I check these Internet Sites
and see if the offering is based on one of these websites. Often they are the
same. As an Appraiser, the debate will arise if there is an appeal of the
appraisal report’s market value. “But the Internet states my home is worth much
more than your appraisal.”
Let’s look a
little deeper into these third party websites that offer estimates or
guesstimates. While I admire the effort to educate consumers, the variables are
far too vast for these websites. I will admit that sometimes they are pretty
close to correct, but not often.
simplistic explanation for the inaccuracy is the old saying I learned in
Computer Science 30+ years ago is GIGO, Garbage in, Garbage out. These sites
pull data from a variety of sources. Tax records, public records, sometimes
Multiple Listing Data and whatever sources they can manage to gather data. The
problems I see more often than not are incorrect square footages and inaccurate
room counts (bedrooms, baths and so forth.) Their algorithms simply will not
work without accurate data.
Last week I
appraised a 1,700 Square foot ranch with an unfinished basement at $160,000.00.
The Room Count was 7 Total Rooms, 3
Bedrooms, Two full baths and one half bath. As a matter of checking myself, I
glance and see how close my square footage calculation matches the MLS sheet,
tax records and yes sometimes I even check out these popular websites.
I did with this
house and was amazed at what I found. One website stated the house had 10 Rooms
4 baths and 3,400 square feet! The “estimated” value was over $300,000.00!
3rd party sites are interesting, I certainly would not rely on them
for an accurate market value of my home. I do see more potential with these
sites at seeing what is on the market for sale around your home. If the data is
accurate this helps to see what your house would be competing against in the
accurate market value, hire a Certified Appraiser that is familiar with your
market. I am doing more pre-listing work for Realtors and Individuals than I
have in the past 30 years.
Perhaps these third party sites are helping my business!
State Certified General Appraiser – NC
Not a week goes by that I do not have this question asked of me. "Why did you not include my basement in your square footage."
Simple answer, "I did."
Realtors, Homeowners and other Client's often and understandably misunderstand how basements are handled on a Real Estate Appraisal.
Basement areas are defined by law as any area of a house that is below grade in any amount. Grade is ground or soil. Even if one exterior wall is partially below grade (ground level) it is considered a basement and cannot be included in the “Above Grade Living Area.”
It is however included in the appraisal on the separate line item below the above grade square footage. This is found on Page 2 of the URAR Form. It is located in the middle of the Sales Comparison Approach. Here is the segregation: Above Grade Room Count : 8 3 2.1 (8 rooms, 3 bedrooms and 2 full baths and a 1/2 bath) Gross Living Area: 1,800 Square Feet (Above the ground) Basement & Finished Rooms Below Grade: 1,800 Square Feet (Below the ground or grade) The house being appraised has 1,800 SF of above grade living area and 1,800 SF of below grade living area.
Now for the confusing part. One would logically think, "Ok my house has 3,600 SF of heated living area." And frankly it does, but it would create a misleading report if the Appraiser compared your 1,800 SF house with an 1,800 SF Basement with a 3,600 SF house all above grade. In our market buyers pay less for below grade living areas.
More information can be found on the NC Carolina Real Estate Commission's Website by clicking here: http://www.ncrec.gov/Brochures/Measurement%20booklet%202013.pdf
I hope this helps. It is confusing and frustrating for both homeowners, appraisers and particularly real estate agents who routinely will include the basement in the above grade living area. But it is the way we as Professionals are required by law to perform our work.
David S. Massey President Massey Real Estate and Appraisals State Certified General Real Estate Appraiser A2912 firstname.lastname@example.org