What do appraisers care about in Kentucky?

Question

New to real estate investing but read appraisers value different things in different parts of the country.

Can anyone offer some advice on what appraisers are looking at in Kentucky when evaluating its worth?

Can anyone share what they did to improve their ARV in Kentucky?

Thanks!

Jamie DeRossett · Answer

Hello Matthew I have been appraising in Lexington for over 20 years and I can tell from experience of not only doing alot of appraisals but also having had 100's of appraisals performed on my own properties over the years not only do appraisers vary from state to state, but also from appraiser to appraiser in the same area. I number 1 thing you want to look for in a appraiser is experience because you dont know what you dont know. As far as specific property values go here are the property characteristics that affect value. 1. Location- You can not do anything about the location most likely so it is fixed and why it is most important.2. Condition- This how most investors create value by improving condition.3. Size-Has great importance with comp selection and is expensive to increase. 4. Amentites-Porchs, patios, decks, fireplaces, pools, fencing, barns, and all real property amentites.5. Defects-Deferred maintance (roof leaks, windows rotting out, mechanicals not workings) must be considered. These 5 items are what an appraiser should be looking at. So, if you can not influence one of these items it will not make a difference. Here are the things you can do from an appraiser to give your self the best chances for appraisal you are happy with. 1. Be as nice, polite, and courteous to the appraiser. If you are meeting the appraiser make sure you are early and when the appraiser arrives late, no matter how late it is, great them with a smile and say nice to meet you. Then let the appraiser do there thing and when they are done they will ask if you have any questions and that is when you strike. When appraisers call to set up the appointment they usually like to do the inspection as soon as possible. Work with the appraiser to get the inspection done and do everything you can do to be part of the solution to get it done and not a roadblock in getting the inspection set up. It is very important to get started off on the right foot with the appraiser and you only get 1 chance to make a first impression and it is very important.2. You do not have to get the dwelling professionally cleaned and a bunch of little things that need to be taken care of (leaky pipe, yard moved, leaves in yard, bed not made, ect.). The appraiser does not care about those little things as we walk through and take pictures the pics are only to show the lender we inspected each room and not as a representation of condition. 3. Do your own research. My appraiser cover a many counties and may not appraise in your neighborhood every day. With zillow everyone can do there own searchs for (listings, solds) online. When appraisers value real estate they look at recent sales activity (within 12 months) of similar houses in close proximity and typically the most recent sales are the best indicators of current market value. Now don't shove the sales down the appraisers throat as soon as they walk in the door. There is a method that works I will explain in the end. 4. Have a improvement list. A improvement list can be as detailed as you like the appraiser can either just insert in the appraisal report or go through and see what is relevant. What they will be looking for: remodeled kitchens and baths, roof, windows, mechanicals, paint, floor covering, ect. This is very important if you are expecting a big jump in value in a short time an appraiser will want to see some improvements that justify the increase. 5. Seal the deal. You have kindly welcomed the appraiser and let him do his thing and at the end of the inspection you will be ask if you have any questions. At this time play dumb and ask them what determines value and let them reply. Then kindly tell them you made an improvement list of all the updates you made since owning the home and let them know of any recent updates made by previous owners. When you give them the updates tell the appraiser you did your own research online and give them the comps you have. This is a tricky situation and some appraisers are offended; however, it is worth if it if the comps are relevant and in no way does the appraiser have to use them and they will most likely say thank but they have to do there own research. I always take everything the homeowner gives me with a smile. This is also a good time to give the appraiser a copy of your deed and plat if you have them if not we can get it on our own but it is a nice to get it from the homeowner. You've done everything you can do but the value came in lower than what you thought. You still have a few options. My wife is broker and over the years we have had a few appraisals come in low and she always comes to me and we usually get it resolved. Here is what I do. 1. Tear the appraisal apart. The overwhelming majority of appraisers many times do multipul appraisals in a day, rely on cheap help, and rush to get things done. I have not only been doing appraisals but also reviewing appraisals for the past 20 years and I have never seen 1 apppraisal report without errors. Go through every line of the appraisal and make sure the information is entered correctly. Make sure the size of house is correct. Make sure all pictures are correct. If there are a series of errors in the report it would not be USPAP compliant and unusable. This is a tricky situation because it you want to take legal action do not inform the lender of the mistakes because they will notify the appraiser and the appraiser will correct the report and we go by the last report sent to the client. So even if the appraiser makes a bunch of mistakes if you let the correct them the corrected report stands and not the first one with the mistakes. Appraisers will almost never change there value unless they know they made a significant error. 2. Look at the comps in the report and see if they are similar to your house. If they are not you ask for a reconsideration of value and at this time you will be ask to submitt your own comps.3. Request another appraisal. This is expensive but if numerous errors were found in the first low appraisal I would not pay for it. 4. Appraiser Board. If there are errors in the report and you can't get resoluation with the appraiser or lender and feel you have been harmed as a last resort you can submitt the report to the appraisers board for review. Most states require you to personally submitt the grevience and the board will investigate to see if USPAP was followed in the value opinion. Every house is unique and would require different updates to increase ARV based on the other improvements that have been made. Without knowing the specifics of the property you have it would be very difficult. Almost always the lowest cost items that create the most value are cosemetic (paint, flooring, cleaning inside and out). Everything else are big ticket items. Appraisal Expert

Joseph Back · Answer

@Matthew Bruce Bailey Appraisers are going to be looking at properties that have sold nearby recently to establish the value of your property. Specifically they are going to care about bed and bath count, square footage and quality of finishes in bathrooms and kitchen. My advice would be to see what houses nearby that have sold for the most have and look like and then copy that.

Matt Bailey · Answer

Thanks - has it been your experience that they differ state to state?Worthwhile taking one to lunch?

Joe Roberts · Answer

Great advice and I’m putting it to work now, thank you!

Jamie DeRossett · Answer

There is no concrete answer for the finishes questions. In my opinion those items modernize the dwelling and make a big difference; however, I done those things and have a appraiser come in and not think they are a big deal. Appraiser should look at the market and determine the difference between dwellings that have and have not been remodeled. Then you would subtract your cost from the ARV to if it is worth it or not, but in your case there may be extra motization of getting a better tenant at higher rent. Your best bet for a good appraisal after the improvements is to document the cost and provide it to the appraiser. Look at the neighrhood comps and see what remodeled homes are selling for and subract your cost and that gives you a pretty good indicator if it is worth it or not.

Joe Roberts · Answer

THANK YOU @Jamie DeRossett for that very thorough and very helpful post. Getting one's property appraised at expected ARV is so important to many investors' deals, but it seems like this is a topic with very little practical advice out there. Much appreciated. A couple questions for you. In terms of interiors, how much value do appraisers typically place on the finishes in kitchens and bathrooms? Also, I am considering removing some walls to create a more open concept floorplan between kitchen, dining room and living room. It will likely get the house rented faster, but is this something that an appraiser will even care about?

Terry Clothier · Answer

Thank you for the post

Matt Bailey · Answer

awesome advice and much appreciated!!

Andrew Kougl · Answer

@Jamie DeRossettThank you so much for such a helpful post.