Warning: include(/home/content/81/5137381/html/wp-content/advanced-cache.php) [function.include]: failed to open stream: No such file or directory in /home/content/81/5137381/html/wp-settings.php on line 84
Warning: include() [function.include]: Failed opening '/home/content/81/5137381/html/wp-content/advanced-cache.php' for inclusion (include_path='.:/usr/local/php5/lib/php') in /home/content/81/5137381/html/wp-settings.php on line 84
Warning: Cannot modify header information - headers already sent by (output started at /home/content/81/5137381/html/wp-settings.php:84) in /home/content/81/5137381/html/wp-content/plugins/wordpress-mobile-pack/inc/class-wmp-cookie.php on line 50
Notice: The called constructor method for WP_Widget in Genesis_Featured_Widget_Amplified is deprecated since version 4.3.0! Use
instead. in /home/content/81/5137381/html/wp-includes/functions.php on line 3895 Real Estate Appraisal Video - Podcasts and Audio | Texas Real Estate Market Activity and Appraisal Information
Ah, good question and one that is getting asked a LOT since the HVCC/AMC debacle of 2009 (and most of 2010) that skewed the fees appraisers receive to the ridiculously low while at the same time hiking the fees consumers were charged.
So the question really is, when the industry gets back to "normal", what might be a typical fee charged by an experienced appraiser to perform a typical, single family residential appraisal?
"Using the data from hundreds of thousands of verified and validated appraisals, the AFR reports the median appraisal fees for each of the 3,221 counties and districts in the 50 states, the District of Columbia, Puerto Rico, and Guam."
In other words, the Appraisal Fee Reference is an incredibly detailed publication, much needed by the appraisal industry.
Appraisers need to be paid what the work is worth, based on the complexity of the assignment, the appraiser's level of expertise, and the area of the country. No one can (or should) set industry-wide standard fees because that would run afoul of too many laws to list, but knowing what others charge for a service is a valuable piece of information. We hope that HR4173 (the Dodd-Frank Financial Reform Bill) helps set the industry back on track and that it will be a win for independent fee appraisers.
You Rarely Get What You Don't Pay For
If you are looking for an appraiser and are shopping for the lowest fee, be warned that if you shop too low, you may not get the quality of work that makes the appraisal worth ordering in the first place.
Do you want that question in the back of your mind? Do you want your client wondering if their deal went south because of a $50 fee differential that resulted in an out-of-area appraiser coming in from a less-expensive area to do the assignment? Experienced (and ethical) appraisers will pass (forgo) assignments that don't compensate adequately for the work involved to assume the professional liability for the report.
I would love to open up the discussion on this topic, so if you have a rant, a question, or an observation, please post your comment and we can get the conversation going!
Your tax bill arrives and you have a heart attack. If your property is worth the property tax assessment the taxing district thinks it is worth, it's time to SELL and retire to Aruba! If only.
Tax Assessment and Market Value Differences
Property tax assessments fall into three categories:
Plausible (somewhat close)
If you're in the first two categories, pay your taxes, file the paperwork and go fishing. If you're in the last one (high), gear up to protest your property taxes, armed with real data that can help your cause. You should read, How Do I Appeal My Property Tax Assessment?
How Do Taxing Districts Determine Value?
If tax values aren't the same as market value, how do taxing districts such as the Travis County Appraisal District (TCAD) come up with their numbers?
Tax districts use massive software programs with sophisticated algorithms to assess property values in an area. Although these values are supposed to assess property at actual market value, they frequently don't.
The reasons for this are many, and include:
These programs use data available in public and governmental databases. This data may be accurate (number of bedrooms, size of the lot), or it may be wrong (3 bedrooms when a home has four because the game room was converted when the addition was added and the addition isn't in the property records yet).
The software does not know about the actual condition of each property. Condition matters. In Travis and Williamson Counties, the programs use something called percent good, which is a marker of how nice your home is. Low percent good means the property isn't in good condition, average condition (from my personal observation) seems to be in the 70s. High percent good ratings trigger the assessing program to give a higher value to your home as compared to a home that is otherwise completely comparable in size, location and condition that has a lower percent good rating. Although the taxing district is supposed to come out and verify these ratings in each neighborhood, that doesn't always happen.
The application is frequently unaware of the market boundaries that define where values change, and sometimes they change by quite a lot. You may already recognize these boundaries, such as a major road where the subdivisions on either side map to a different elementary school or where one is much closer to noisy or yucky stuff (a stone quarry).
All of those things (or any of those things) will make your property tax assessment differ from what it should be.
How Do Appraisers Determine Value?
Appraisers determine fair market value differently than taxing districts. Some key differences:
Appraisers do not use automated valuation programs when appraising individual properties.
After he or she has inspected your property (the appraisal inspection), he or she will carefully analyze your property vs. the most comparable (similar) properties that recently sold in your area, which is the Sales Comparison Approach, one of the three approaches to value used by professional appraisers.
When the analysis is complete, the appraiser will reconcile all of the information and arrive at an opinion of value which will be the appraiser's opinion of the Fair Market Value of your property.
A good appraiser will understand the boundaries of market areas and other factors that influence the value of your own property and your report will reflect this expertise.
Protesting Your Property Tax Assessment: a Personal Tale
The first time I protested my tax assessment in Texas (Travis County), long before I even knew anything about the practice of real estate appraisal, the guy showing me the data kept flashing numbers on the screen for a much newer subdivision that was across a major road that mapped to an elementary school that was, at the time, widely regarded to be superior to the elementary school in my neighborhood. In addition, the newer homes were closer to the city center, and had better access to major transportation corridors.
I pointed out a few things: the homes were much newer (built after 1994, vs built before 1982), the homes were on bigger lots (on average), the homes mapped to a better school. Of these three points, the hearing panel was interested in the first two (age and lot size) because these are more concrete data points. They weren't particularly interested in my third point (the school). I also pointed out that my own area had an ample number of homes (thousands) that were arguably comparable in age and lot size to my own, with lower assessments, and questioned why they would skip those comps and use homes that were several miles away. I also quibbled with the percent good number assigned to my home (90%) when almost all of the others on my own street were marked in the 70s, including ones that I personally knew had expensive new updates that made them far superior in quality to my vintage 1982, seriously ugly house.
The formal hearing panel agreed with my assertions and lowered my tax assessment by about $25,000, which saved me about $700 that year alone.
Another year, I used a similar argument and saved even more. The next year, though, my property tax assessment was close to market value, so I let it slide.
Protesting Your Tax Assessment: Your Own Story
Have you received your tax bill in years past, heaved a big sigh and paid it? Why?
If you're one of the folks whose property value is higher than the likely fair market value, fight it. What have you got to lose? What have you got to gain?
Facing the formal hearing panel the first time can be intimidating, but don't let it get to you. Arm your self with concrete data, and if you're really uncomfortable arguing your case, hire a tax protest company to argue for you.
One excellent piece of evidence you can (and should) use to protest your taxes is a professional real estate appraisal, from a certified residential appraiser.
Hire us to perform your appraisal, and either you will discover that the property tax assessment is low, close, or high. A typical appraisal will cost $350 to $425, depending on the size and complexity of the property, and this is money well spent. If we were to receive another tax bill for our own home that felt out of bounds, we would hire another appraisal firm to appraise our own property, to provide the evidence we needed to protest. (We can't appraise our own property because that would be a conflict of interest.)
To get started, read our more specific tax protest, How do I Appeal my Property Tax Assessment?
Another good read is, Appraisal Steps: Determining the Market Value of Property.
A converted garage may add value to a home. The value added, however may not equal the amount spent on the conversion.
Counting Garage Space as Interior Space
For garage space to add value to a property at the same level as the other interior spaces, it should have the same fit and finish (quality).
The converted garage must also be conditioned space, comparable to the rest of the home. Conditioned space is space that has similar heating and cooling systems (i.e. vents and ducts for air). A converted garage that is inferior to the rest of the home may add value at a lower level than other interior spaces that are included in the square foot measurement of the house.
Value Given, Value Taken Away
You should also know that although the additional interior space may add value to a home (market value, the price a person would expect to receive if the home were sold on the open market), the loss of a garage may take value away.
This can be mitigated by adding a new garage, either attached to the home, or as a detached space.
Garages, attached, or detached, do not count as living space, and therefore do not count in the overall square footage of a home.
Different Areas, Different Value for Converted Garages
Ultimately, the value of a garage conversion is determined by how the market has reacted in the recent past to similar homes with and without converted garages.
Residential real estate appraisers use the Sales Comparison Approach, one of the three approaches to value, to help determine the Fair Market Value of a home. This approach uses data from homes in the same market area (neighborhood) that are comparable to the home being appraised to determine the value of the home. If nearby homes that have recently sold also have converted garages and are otherwise similar in size and condition, this makes the job of determining the value of the garage conversion more straightforward.
FHA Appraisals are performed by approved FHA Appraisers.
FHA Appraisals are required for property that will be purchased with an FHA loan.
FHA loans are mortgages used to buy homes where the mortgage insurance on the loan is provided by the FHA (Federal Housing Administration).
The FHA mortgage insurance provides lenders with protection against losses that are the result of borrowers defaulting (failing to pay) on their mortgage loans.
Property Inspections and FHA Appraisals
If you are buying property with an FHA loan, you need to understand the difference between a property inspection and an FHA home appraisal. Also, you should know that the FHA doesn't actually make loans, it insures them.
The FHA appraisal requirements help ensure that the loans written by lenders meet the requirements for the FHA to insure the loan.
The FHA will insure loans on single family homes, owner-occupied homes of up to 4 units (multi-family housing), and manufactured homes that meet the requirements established by the FHA.
Homes are not qualified before they are under contract (i.e., you can't find an "FHA pre-approved home", although some condominiums are on an FHA-eligible list).
Please also read the FHA Appraisal Guidelines for property condition information for FHA underwriting (loan approval).During the contract period that you have for completing the requirements to complete your home purchase, you will need:
A property inspection (so that you understand clearly the condition of the property and can either accept it as-is, or negotiate changes in the purchase contract), and
An FHA Appraisal.
The FHA Appraisal is not a Home Inspection
The FHA appraisal is not a home inspection (although it is sometimes erroneously referred to as the FHA home inspection), and it does not guarantee that the home is in perfect condition. The FHA does not require you to have a home inspection but you should never, ever buy property without one!
Please note that The Department of Housing and Urban Development (HUD) makes no warranties as to the value or the condition of an FHA Appraised property.
The buyers of the property (borrowers for the FHA loan) must determine for themselves that the property is in a condition that they consider to be acceptable, and that the price they are paying for the property is reasonable.
The Property Inspection
The property inspection, which you and your real estate agent must arrange (and you will pay for at the time of inspection), will be performed during your Option Period in Texas. The Option Period is a time frame of (usually) 7 to 10 days at the beginning of your contract period that you have to investigate the condition of the property.
The primary purpose of a home inspection is:
To assess the condition of the physical structure of the home (is it falling down? Is the roof leaking? Should the foundation be inspected?).
To gauge the remaining useful life of the building and mechanical systems such as the plumbing, HVAC (A/C and furnace) and electrical.
To identify and quantify potential problems with the building and the mechanical systems and itemize items that may need to be repaired and/or replaced either immediately (for safety reasons), or as soon as feasible to prevent further deterioration.
You need to carefully review the results of the inspection and negotiate any changes to the contract (i.e. repairs) before the expiration of the Option Period based on the newly discovered conditions of the property that weren't apparent when the original contract was signed.
The FHA Appraisal
The FHA appraisal happens after the Option Period, once you have decided to follow through on your intentions to purchase the home and are arranging your FHA financing. The appraisal determines whether or not the Market Value of the property satisfies the lender’s requirements for underwriting (i.e., issuing) the loan. (If the property didn't pass your own requirements for condition during the optional-but-not-really-optional home inspection, you shouldn't move forward with your purchase.)
Although the borrower pays the appraisal fee, the appraisal is for the benefit of the lender. For an appraisal to be accepted for an FHA loan, it must be ordered by the lender and performed by an FHA Appraiser. The consumer (aka, buyer or borrower) does not order the appraisal.
Appraisals Help Determine Risk
Lenders use property appraisals in determining the amount of risk involved in making a loan on a piece of property.
The FHA appraisal provides the lender with the FHA Appraiser’s opinion of the Fair Market Value of the property and details the market activity in the area where the property is located.
This market activity includes data on recent comparable sales (homes that have sold that are similar to the property being appraised) as well as the number of similar properties that are currently for sale and how long they have been on the market.
The lender’s underwriting department reviews the appraisal reports and compares the results to their criteria (FHA loan criteria) for lending for home purchases.
Safe and Sound
Although HUD makes no warranties as to the condition of a home, it does take active steps to see that a home is in a “safe, sound and sanitary” condition.
The FHA appraiser is expected to require repairs for conditions of the property that preclude or impact the safe, sound and sanitary habitation of the property.
After the initial appraisal, if repairs are required, the lender will receive a list of repairs that are required before the property meets the requirements for an FHA loan.
This list will be provided to the real estate agents who will then negotiate on behalf of their clients for the repairs.
If the owner (seller) of the property is unable or unwilling to make the repairs, the property will not meet the lender’s requirements for making the loan and the contract will terminate.
You should always have a local, qualified professional answer your appraisal-related questions for any specific property. Do not make decisions about real estate based on the information in this article or on this website.