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May 20th, 2024 12:14 PM
Most of the time, the highest and best use of a property is self evident.  Every now and then however, particularly with 2-4 unit properties, the highest and best use can be a tricky question to figure out.  Add in zoning changes allowing for higher density properties, and the question can get even more thorny.  Every appraisal requires that the appraiser consider the highest and best use of the property, and there are four criteria for determining highest and best use: 

-What is physically possible.
-What is legally permissible.
-What is financially feasible.
-What is maximally productive.  

With a single family home in good repair on a typical residential lot in a subdivision, it's a no brainer, but what if the property is a grandfathered in (legal -nonconforming) triplex on a site where the zoning only allows for single family homes?  What is legally permissible in that case?  What is maximally productive?  Good question! 

If you own a property where there is a highest and best use question, or if you are involved with such a property as a real estate professional, knowledge of Fannie Mae's Selling Guide commentary concerning this issue can be very helpful. 

Please note the following concerning Highest And Best Use analysis per the Fannie Mae Selling Guide B4-1.3-04, Site Section of the Appraisal Report:  

The appraiser determines highest and best use of a site as the reasonable and probable use that supports the highest present value on the effective date of the appraisal. For improvements to represent the highest and best use of a site, they must be legally permitted, financially feasible, and physically possible, and must provide more profit than any other use of the site would generate. All of those criteria must be met if the improvements are to be considered as the highest and best use of a site.

It goes on to say: 

The appraiser’s highest and best use analysis of the subject property should consider the property as it is improved. This treatment recognizes that the existing improvements should continue in use until it is financially feasible to remove the dwelling and build a new one, or to renovate the existing dwelling. If the use of comparable sales demonstrates that the improvements are reasonably typical and compatible with market demand for the neighborhood, and the present improvements contribute to the value of the subject property so that its value is greater than the estimated vacant site value, the appraiser should consider the existing use as reasonable and report it as the highest and best use.

So in most cases, if the value of the property as improved is greater than the value of the property vacant then, per Fannie Mae, the highest and best use is the current use.  

The caveat to this that may be an unknown and something to consider, is whether the municipality will allow the property to be rebuilt if more than 50% destroyed.  You'll have to contact them to figure that out!   

Contact Comp One Appraisal Services today and put our local expertise to work for you.  Based in the Globe Building at Peachtree Dekalb Airport, we are the perfect resource for attorneys, agents, homeowners, and lenders.  Thanks for reading!  

Got an appraisal issue or question?  Call my Appraiser On-Call For You Hotline at 404-245-7577. 



Posted by Cameron Horne on May 20th, 2024 12:14 PMLeave a Comment

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If you're considering selling your home to an investor or house flipper, don't just take their estimate at face value. They are looking to get the best deal possible for themselves, not necessarily pay you a fair market price for your home. The only way to truly know what your home is worth is to get an independent, professional appraisal done before entering negotiations.

An appraisal by a licensed appraiser will give you an objective, unbiased valuation of your home based on comparable recent sales in your area, the condition of your home, any upgrades or renovations you've done, the land your home sits on, and other factors. This appraised value is what lenders use to determine how much they are willing to lend on your home. It gives you leverage when selling, whether to an investor or the open market, because you have an expert, third-party opinion of the true market value.

Real estate investors may try to lowball you with their initial offer, hoping you don't know how much your home could really fetch. Or they may use some less-than-scrupulous techniques to try to talk down the value, like pointing out every single flaw and needed repair. With an appraisal in hand, you can counter those tactics and make sure you get paid every penny your home is worth.

There is a cost for an appraisal, but it's a wise investment to avoid potentially leaving tens of thousands on the table. Don't just go with the first number an investor names. Protect yourself and your equity by insisting on an independent appraisal first. That way you can be certain any offer is truly a fair one based on market value, not just a lowball from somebody trying to maximize their own profits.


Contact Comp One Appraisal Services today and put our local expertise to work for you.  Based in the Globe Building at Peachtree Dekalb Airport, we are the perfect resource for attorneys, agents, homeowners, and lenders.  Thanks for reading! 
 

Got an appraisal issue or question?  Call my Appraiser On-Call For You Hotline at 404-245-7577. 


Posted by Cameron Horne on May 13th, 2024 9:04 AMLeave a Comment

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May 7th, 2024 10:03 AM

This noted from Matt Reynolds in the AJC:  



For Atlantans struggling to get into affordable housing, a new report published Tuesday finding the city’s rental market is softening could spell some relief.

There was a 3.7% decline in rents compared to the same time last year, in the cities of Atlanta, Sandy Springs and Roswell, and the area ranked fourth in 10 markets with the largest yearly rent price declines, according to a March rental report by real estate listings company Realtor.com. The median rent in March was $1,626.

“Rising shelter costs have been a major driver of overall inflation, a top concern for the [Federal Reserve] as it meets this week,” Danielle Hale, the listings site’s chief economist, said in a news release. “There is some good news for renters with prices falling in many parts of the country, especially outside expensive metro markets in the West and Northeast.”

The March rental report comes with provisos, noting that while rents in the United States declined for the eighth month in a row, the median rent nationwide of $1,722 was only $36 less than an August 2022 peak. That’s still $313 more than pre-pandemic prices in March 2019.

Moreover, wages have not kept pace with rising housing costs. And a Zillow report released earlier this month found that rents are still rising in metro Atlanta, though at a slower pace.

According to the Realtor.com report, rents in other parts of the country, including the Midwest, were flat. In the South, the median rent fell 1.5% compared to the same time last year, the report found. Hale said this was evidence that increasing the supply of available housing had curbed costs in the region.

“Unemployment is low and demand for rental housing was strong, but an influx of new units has helped push down rental prices,” said the report, which relied on rental data in March for studio, one-bedroom and two-bedroom units listed on Realtor.



Contact Comp One Appraisal Services today and put our local expertise to work for you.  Based in the Globe Building at Peachtree Dekalb Airport, we are the perfect resource for attorneys, agents, homeowners, and lenders.  Thanks for reading! 
 

Got an appraisal issue or question?  Call my Appraiser On-Call For You Hotline at 404-245-7577. 


Posted in:Rents and tagged: #atlantaappraiser#AJC
Posted by Cameron Horne on May 7th, 2024 10:03 AMLeave a Comment

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January 31st, 2024 9:15 AM
Single women own more homes than single men — in Georgia and nationwide.  It's quite a change considering sixty years ago women couldn't get a credit card or a mortgage without a male co-signer.  Check out the story and all the data here:  

http://https//www.axios.com/local/atlanta/2024/01/29/single-women-homeowners-atlanta-georgia



Posted by Cameron Horne on January 31st, 2024 9:15 AMLeave a Comment

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This is the final part of the three-part blog on reviewing your own appraisal like an appraiser.  Again, let's continue with the questions in the Fannie Mae Field Review Form 2000. 

And, remember: 


USPAP Standards Rule 1-1 (c) states the following:
In developing a real property appraisal, an appraiser must not render appraisal services in a careless or negligent manner, such as by making a series of errors that, although individually might not significantly affect the results of an appraisal, in the aggregate affects the credibility of those results.

 

Are the data and analysis (including the individual adjustments) presented in the sales comparison approach complete and accurate?
Supporting your adjustments is a big topic in today’s appraisal industry.  Fannie Mae has been pushing for appraisers to use various methods for this rather than just a gut feeling or a “rule of thumb”.  Let’s go down the list.  Are there adjustments for concessions where the amount noted exceeds the typical amount in the area, and are those adjustments reflective of any impact on the sale price of the comparable sale?  If the property values in the area are increasing (or decreasing), are there adjustments for date of sale based on the contract date of the comparable sale?  Are there adjustments for location if applicable, or are there appropriate adjustments for location that are missing?  If there are location adjustments, is there support for those adjustments?  Are there adjustments for site if applicable or are there potential adjustments for site which are missing?  And again, what about support for those adjustments?  And the same for view?  What about quality, age and condition?  Are there appropriate, well supported adjustments or are there adjustments which should have been made and were not?  Bedrooms, baths, gross living area, basement area and finished area in the basement, too.  Are there appropriate, well supported adjustments or adjustments lacking where they should have been made?  Does the property have insulated windows, high efficiency HVAC or any other energy efficient items and, if so, is that reflected in the sales comparison approach relative to the comparable sales? 

 

Are the data and analysis presented in the income and cost approaches complete and accurate? 
For a single-family home, the income approach is almost never used.  The cost approach might not be developed, but it could be relevant to the adjustments.  A webinar on supporting your adjustments I watched recently, among other items, focused on the depreciated cost method.  The cost approach provides a value indication that is the sum of the estimated land value, plus the depreciated cost (if applicable) of the building and other improvements.  Adjustments in the sales comparison approach should make sense considering the cost approach.  For instance, if the site value of a home is $500,000 and the total value of the home is $600,000, is it reasonable for there to be a $50,000 condition adjustment?  That’s probably very high if the improvements are only contributing $100,000 to the total value of the property.    

 

Is the sale or transfer history reported for the subject property and each of the comparable sales complete and accurate? 
Check for sales and transfers of the subject’s ownership in the past three years and for sales and transfers of the comparable sales within one year prior to the date of sale noted in the report?  Are all sales and transfers reported?  If not, that is an error.  Is it another error in a series of errors?  Sometimes the prior sale of a home can help determine an appropriate condition adjustment for the area.  If a home is purchased as a fixer upper (per the Uniform Appraisal Dataset - C4 or C5 condition) and then later sold after being renovated in C2 or C3 condition, the difference in the sale prices for the two sales could be a reasonable indication of what a condition adjustment for comparable sales relative to the subject should be in the report. 

 

Is the opinion of market value in the appraisal report under review accurate as of the effective date of the appraisal? 
Yes or no?  If not, why not?  At this point the Fanne Mae Form 2000 provides a space for a detailed explanation as to reasons for disagreement with the report under review.  Then it has a sales comparison grid where the review appraiser can analyze the sales from the original report with appropriate adjustments or provide new sales and develop his or her own opinion of value.  It could be worthwhile for you to do the same. 

 

You can find a copy of Fannie Mae Form 2000 for your review and guide here:

https://singlefamily.fanniemae.com/media/12356/display


I hope that this has been a helpful exercise.  Completing an appraisal report or reviewing an appraisal report is a systematic, step by step process.  If you are faced with a lousy report, it can be overwhelming to figure out how to go about addressing it, but if you take it one step at a time you will often be surprised by what you find and how the process will bring you to a meaningful conclusion for better or worse.  I’ll be honest.  In my 21 years as an appraiser, I’ve made mistakes (believe it or not!).  And I believe I’m like most people in that I remember those mistakes, especially what I learned from them.  I’m sure I’ll make mistakes again, but I do know the mistakes I can avoid and what mistakes I find most disagreeable when I review an appraisal report.  That is, easily avoidable, lazy inaccuracies.  Things like not reporting plat book and page in a legal description, not reporting the correct zoning, not reporting the correct site dimensions from the most correct source (the actual plat if available, or the metes and bounds legal description).  Basically, any factual information.  If you set out to review an appraisal and start finding these types of errors, it’s more likely that you will continue to find a series of errors which call the value opinion into question (see
USPAP Standards Rule 1-1 (c) above). 

 

Contact Comp One Appraisal Services today and put our local expertise to work for you.  Based in the Globe Building at Peachtree Dekalb Airport, we are the perfect resource for attorneys, agents, homeowners, and lenders.  Thanks for reading! 

 

Got an appraisal issue or question?  Call my Appraiser On-Call For You Hotline at 404-245-7577. 

 

 


Posted by Cameron Horne on January 5th, 2024 10:09 AMLeave a Comment

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