Appraisal

[Chad B.]

Have to share a story about an appraiser and actually have a question for everyone at the end of this so stick around, I'll try to keep it short.

OK I'm buying a REO and was supposed to close this week but that's an entirely different debacle I won't get into. I'm not going to a bank for the money so I don't need an appraisal for that purpose but I decided I'd like to get an appraisal just to see how a bank might look at it when I go to sell.

I hired this company I have worked with before and had been satisfied with in the past. So last week I met this appraiser at the site and first thing I notice is that he seems real nervous. He starts fumbling around and works up the courage to ask me for the money up front before he starts the work. No problem, I know that's how this company opperates so I hand him a wad of cash, show him the house and go on about my business to let him do his thing. About 30 minutes later he hunts me down up in the Master Bedroom and hands me this hand scribbled note written on the back of some letter that he had ripped up and said "Here's your receipt. I'm going to get started." OK now I'm thinking what the %$*& have you been doing for the last half an hour but I'm too busy working with my contractors checking out the mechanicals so I let it go. About an hour and a half later, we are wrapping up our once over on the place so I want to go check on what the appraiser is up to, if he is even still here haven't seen him in a while. I find him just walking around the upstairs staring at the tile in the bathrooms and he asks what type of tile is this? For God's sake it was marble. So now I have to start probing, "So what do you think of the place?" I asked. "Well, this is the biggest house I've ever done." or something to that effect which I immediately knew I was in trouble. How could they send me a rookie?

A little information: it's a 6,000SF duplex that sits in a quiet little neighborhood overlooking Lake Michigan. The neighborhood is mostly SF homes a handful of duplexes and a couple of large condo buildings. I'm only purchasing one side of the duplex and the otherside is pretty much an exact duplicate with 3 more duplex buildings in a row of exact duplicates. Another tidbit of information about this area that I'd say atleast 50% of housing within a 20 min drive north or south of this location is over $1M and anything you find under $600k is probably a teardown so my point is that this house is not that unusual for this area and I would say it is slightly larger than average homes. That is why it scares me when he says it's the biggest house he has ever done because that means he hasn't been doing this for very long. Anyway, after about 3 hours of him screwing around he finally finished. I asked him if he'd have this over to me by Monday, he said he would and I went on my way.

Monday and Tuesday came and went with no word from him and to be honest I was just to busy to care. Wednesday morning I decided enough was enough and I called him and laid into him about where my appraisal was. He went on and on about how he has looked and looked and can't find any comps. So I thought I would "remind" him that the entire neighborhood is nothing but comps. There are 25 to 30 SF homes in that neighborhood that are comp in size and style. There are a dozen other duplexes of that exact size and style. He insists that no home in that neighborhood has sold in the past 3 or 4 years which I know is BS because I had a client who lived in that neighborhood before he moved into a new home that I built for him less than 2 years ago. I also know of 4 single family homes in that neighborhood that are for sale right now between $1.3M and $1.9M. The duplex unit connected went on the market last week for $1.3M and it is the same condition. That's when he told me since he couldn't find any comps he was just going to use the cost approach where he calculates what it would cost to build the house. And "good news" he says I'm estimating it will cost $900k. I said how is that good news? Well aren't you getting the place for less than 800k. Well yeah I am so what? "So then it's a good purchase" he says. So this makes me think all he is doing is looking at what I'm buying it for and appraising it that way. What the hell good does that do me? I can tell you if someone offered to build me that place for $900k I would take it. As a builder I can tell you that he is probably close to what my true construction costs to build that place would be with the finishes it has in it but that doesn't include any overhead or profit for a builder. What a bonehead! Another point I made to him is that this place sold for $1.26 in early 2005 and $1.1 in 2003 and that was before the new kitchen and baths were put in. He responded my telling me that was the height of the market and prices have dropped around 30%. That's when I asked if he thought we were in CA or FL and ended my call.

Here it is nearly 5pm on Thursday and I still haven't received an appraisal from this guy and I don't really care because I know it won't even be worth my time to bother opening up the email. What an idiot? Thanks for listening to my rant if you made it this far.

My questions for you:
Should an appraiser really even be looking at or considering what I'm paying for a place when he appraises it?

If one can't find comps (yeah right lol) wouldn't you look at when and at what price it previously sold (to some extent). Can't he also use what some of the houses in the neighborhood are listed at for comparison? Anything would have to be better than him estimating what it would cost to build, I mean he has less experience in construction than what he does in real estate.

What is the deal...seems like every day I meet more and more stupid people? Is this another effect of our greenhouse gases?

Ooopps guess I wasn't able to keep it short afterall but I feel much better.