Friday, May 18, 2007

Analysis: Why Did Rental #1 Appraise Lower?

Since it's a lazy Friday afternoon, I decided to investigate why my appraisal of Rental #1 came back lower than one made less than 1 year ago. So I started looking over the two side by side and doing a point by point comparison. Here are the major highlights of what I found. NA refers to the new, lower appraisal I had done. OA refers to the original appraisal done in September, 2006.

Housing trends:
NA: sell time 3-6 months
OA: sell time less than 3 months

NA: No driveway
OA: driveway

NA: 1 fireplace
OA: no fireplace

NA: no patio
OA: patio / deck cover

NA: cyclone fence
OA: no fence

NA: Carpet needs to be replaced in near future
OA: No repairs needed

Physical details:
NA: 7 rooms, 3 bedrooms, 2 baths, 1,585 square feet
OA: 8 rooms, 3 bedrooms, 2 baths, 1,640 square feet

NA: 3 comps currently for sale from $74K to $79K
OA: 2 comps currently for sale from $77K to $88K

NA: 5 comps sold in prior 12 months from $47K to $79K
OA: 5 comps sold in prior 12 months from $75K to $90K

NA: Comps had inferior heat, air, superior car storage
OA: All comps truly comparable

Cost approach to value:
NA: Reproduction
OA: Replacement Cost New

NA: Site value $10K
OA: Site value $15K

The new appraisal rates the property at $62 per square foot. Since it also says the square footage is 55 square feet less than the original appraisal, this translates to a $3,410 drop in value. That alone accounts for one-third of the valuation difference!

So it's obvious appraisals are very subject to human error. I mean how hard is it to determine if a property has a fireplace or a driveway? Or to count the number of rooms in a house? And yet the two appraisers looking at this property differed on such seemingly cut and dried items as these. Now I will grant that comps sales have been lower, the market slower, and it is possible the tenants have destroyed the carpet in the 7+ months they've been there. However, I think the other errors can easily account for at least 50% of the difference between the two appraised values.

And yes, I did check to make sure they were actually appraising the same house :-) Pictures were included and all the other identifying details match. I am curious to see what the tax records state the square footage of the house is. I don't believe Oklahoma has that information available on-line, and I don't have the paperwork to look it up with me right now.


Robert Keeler said...

Tulsa County public records list it as 1566 sqft, built in 1940, so the new appraisal (the 'NA') was closest to the country records.

Trisha#1 said...

Son-of-a! That was new carpet--not the cheap stuff, either!!!!

© 2006 Shaun | Site Feed | Back to top