If you look at the blueprints of a house, the outside measurements are of the exterior part of the foundation wall.  The framing of the house and the exterior siding can extend beyond the foundation wall.

When an appraiser is measuring a house, I feel it is best to approximate the foundation wall dimensions.  Therefore, if a wall being measured is 24 feet nine inches long, it might be better to call that a 24 and 1/2 foot wall.  Rounding back three inches would put the measurements closer to representing the exterior foundation wall, rather than the measurements of the siding.  More importantly, it would be inappropriate for the appraiser to round the 24 foot nine inch measurement to 25 feet.  By doing this the appraiser would be including space that is not contained in the house.

Garages and other attached or detached areas are usually measured separately.  An important reason for this is that a garage usually is not finished to the degree of the living area of the house.  The garage seldom has bathrooms, or kitchens and usually no finished flooring.  For this reason the garage would need to be analyzed separately, therefore measured separately.

Today there are very good sketching programs that allow the appraiser to enter the house dimensions and have a very accurate representation of the dimensions of the house.

Ralph Olsen

pwas.net

I have been asked to describe the methodologies that appraisers use when estimating the market value of a house.  There is a lot to be said about that topic, but I will briefly describe the methods here.  With houses as the frame of reference, I will describe the three appraisal methods with the least reliable first and the most reliable last.

First, the Income Approach to value is used when a property produces an income stream to the owner.  This approach is more viable with apartment buildings, shopping centers, office buildings, etc.  All these property types are designed to produce a revenue stream.  Houses, on the other hand, are mainly built to house an owner occupant.  A small percentage of the housing stock is rented.  For this reason, it is difficult (but not impossible) to develop a value estimation based on revenues generated by the property.  Also, to do this type of analysis there must be plentiful information from houses that sold while rented.  It is from recent sales of rented houses that the Gross Rent Multiplier is developed.  Since this data is not plentiful, the Income Approach to value is not often very reliable for house appraisal analysis.

Second, the Cost Approach to value is used in most residential appraisals.  The idea is to estimate the site (land) value, add to it the cost to build the house, and from that subtract the depreciation on the improvements (house).  A new house has no accrued physical depreciation.  Older houses have more or less depreciation depending on their age, how well they have been maintained, and other economic influences.  Although the Cost Approach is generally useful, it is not what the market uses to set house prices.  So, it is not as reliable as the Sales Comparison Approach, but often more reliable than the Income Approach.

Third, the Sales Comparison Approach is the one that best reflects the activities of the market.  This technique looks at recent sales of houses near and similar to the house being appraised (subject property).  After gathering the most recent, near and similar sales data, the appraiser will go through an analytical process to compensate for differences between the subject property and the other sales.  For instance, if the subject house has a one car garage, and one of the sales that was nearby and recent had a two car garage, yet was otherwise very similar to the subject, the appraiser would subtract the value of the second garage space from the sales price of the house with the two car garage.  This effectively accounts for the difference in value of a house with a one car garage compared to a similar house with a two car garage.  After all the details of this process are completed the appraiser will have several “adjusted” sales that give value indications.  After completing this process the appraiser has to decide which of the data is most similar to the subject property and then determine a value conclusion.

This whole process leads to the value conclusion that the appraiser presents in an appraisal report.  The process is simple and straight forward.  If you ever read an appraisal report, and you don’t understand how the value conclusion was reached, either the appraiser was not a good report writer, or someone is tying to fool someone.  There are properties that are so unusual that it is difficult to make sense of them.  Then, the  appraisal report may be more difficult to follow.  But, generally, an appraisal report is very logical and funnels down from the general information about the property and the market it is in, down to the specific value conclusion.

Ralph Olsen

pwas.net

I joined the Appraiser’s Coalition of Washington (ACOW).

They need the support of all the real estate appraisers in Washington.

You can see their website at    http://www.acow-wa.org/

“The Appraisers’ Coalition of Washington (ACOW) is a Washington non-profit corporation organized by the Washington chapters of all appraisal organizations that are member organizations of the Appraisal Foundation Advisory Council.”

If you support the integrity of the real estate appraisal profession and are committed to its health and vitality, please review their website, then join.

Thank you

Ralph Olsen

Pacific West Appraisal Services, Inc.

pwas.net

In the east Hazel Dell area there is a condominium named Hidden Abodes.  A look at its performance since coming on line in 2005 depicts the current state of the market.

Hidden Abodes was completed in 2005 and began selling.  There are a total of 18 units in the development.  All sold in 2005 except for one unit, which has never sold.

In 2005 the seventeen units that did sell were on the market for an average of 68 days and sold for an average of $135 per square foot.  That equates to an average sales price of $164,606.  The average size of these two story units is 1,221 square feet.

After having mostly sold out, there was one sale in 2006 for $192,500.  That is a rate per square foot of $143.  The market was still rising.

In 2007 there were three sales that averaged $162,933, or $137 per square foot.  The market had gone past it’s peak.

In 2008 there has been one sale for $142,000.  The rate per square foot was $120.

From 2005 to 2006 the market for these properties appeared to have jumped almost 17%.  From 2006 to 2007 it appears to have declined about 15.3%.  Then, from 2007 to 2008 it declined another 13%.

There is not enough data from the sales in this project to be statistically definitive, but they do track with the rest of the market pretty well.

Currently there are two listings in the development.  They average $122,100.  That is $103 per square foot.

Ralph K. Olsen, IFA

Pacific West Appraisal Services, Inc.

pwas.net

The Hillhurst subdivision in Ridgefield, Washington was placed in the county records in November 2003. There are 117 platted lots, including some with older houses on them. Roughly 24 of the lots, or 21% of the development appears to have been existing housing (according to on line county records). I was not able to tell from the county records how many of the lots have been built on. However, the MLS reports that since 01/01/2004 there have been 32 sales of new houses.

I went into the development yesterday to look at a house in foreclosure. I saw lots of for sale signs along the street. The MLS shows 19 active listings in the subdivision with an additional three pending sales.

Of the 19 listings there were nine noted in the listings or county records as being foreclosures or bank owned. There were five notations of “price reductions.”

Hillhurst has a lot of product on the market with little demand at this time.

Ralph Olsen, Appraiser

Pacific West Appraisal Services, Inc.

pwas.net