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How to Handle a Low Appraisal: An Interview with Lucas Schreiber of Greater Wisconsin Appraisal Management, LLC

By Lucas Schreiber

Tell us a little bit about your company and its foundation.

I started in the appraisal field working with a certified general appraisal completing residential and commercial appraisals. After establishing a firm understanding of commercial and residential appraisals, I decided that my interests lie firmly in the residential area of appraisal which is when I established Greater Wisconsin Appraisal Mgmt LLC in order to focus solely on residential valuations.

Can you quickly walk our viewers through the appraisal process?

The appraisal process starts with an engagement letter from a client which states the purpose of the appraisal, the address, contact for entry, and any other pertinent information. At this time, the scope of the appraisal is formed in order to ensure that the analysis properly serves the client's purpose of the appraisal. Next, an Appraiser gathers all the pertinent information regarding the subject property which includes tax information including the legal description, parcel number, etc., and assessor's data regarding the property which includes the age, square footage, bed/bath count, amenities etc. After this is completed, the property is viewed in order to verify the subject's square footage, bed/bath count, condition, amenities, etc. During the viewing, the improvements are typically measured and the subject's condition, construction quality, amenities, etc. are documented through photographs and notes. It is important to note that I am calling this step a viewing since I do not want this process to be confused with a home inspection. Though many Appraisers are licensed home inspections, an Appraiser's viewing is not a substitute for a home inspection by a licensed Home Inspector since it is not as in-depth or extensive as an inspection. After viewing the property, an Appraiser views sales (comparables) of similar properties in the area and selects the sales that are most similar to the subject property. This can be more challenging when appraising a property in a rural area since they tend to be more unique and rural sales are limited. Once the most similar sales are selected, the subject is analyzed by comparing the property to the comparable sales. Adjustments are made based upon market observation for variations in age, condition, square footage, bed/bath count, etc. then the adjusted sales prices of the comparables are reconciled.

What is a "low appraisal" and how does it differ per house/neighborhood etc.?

The purpose of an appraisal is to provide the market value of the subject property. The definition of Market Value is defined by The Appraisal Institute in their basic text; The Appraisal of Real Estate, 13th Ed., p.23 as: "The most probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms, for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither is under undue duress." Most homeowners do not consider the most probable price their property would sell for, instead they look at the "highest possible" price that their property could sell for. I have never met an appraiser who purposely provided a "low appraisal". Typically the issue is that most homeowners (present company included) feel that their house is worth more than another person would want to pay for it. Homeowners grow an emotional attachment and take pride in their homes. They know how much all of the updates and improvements they have made to their homes cost, but cost does not necessarily equal value. What I mean by this is that many updates made to homes are necessary in order for the property to just stay relevant or current in their respective markets and at the same time some updates made by one homeowner are not necessarily relevant to another potential buyer/homeowner. A homeowner cannot simply add that costs of updates and renovations to the price they paid for a home and assume that is the value of a home.

Why would someone receive a lower appraised value than assumed?

Due to the recent recession in the housing market, many homeowners are frustrated with the fact that they paid more for their house than it is currently worth. This is understandably frustrating, but it is not the fault of an Appraiser, and not necessarily the fault of the homeowner either. Unfortunately, the housing market is cyclical and there will always be ups and downs. Some areas have experience more foreclosures than others which has a greater negative effect on value. In general, older homes without updates are observed to be more heavily affected by foreclosures while updated homes tend to be less affected by foreclosures, but this varies greatly by the area.

What advice do you have for someone who needs to improve their appraised value?

The most beneficial improvements a homeowner can make in order to improve the value of a home is to update kitchens and bathrooms. Updating old or outdated siding also helps to increase curb appeal which is very important.

Is it beneficial to enlist another appraiser to see if they list your home's value higher?

Values are not pulled from thin air, they are based upon the housing market of the property being appraised. That being said, there is some interpretation of the market left to the individual Appraiser. If a homeowner feels that their property is not appraised for the most probable value, the burden of proof is upon them since the Appraiser who performed the appraisal has already completed market research regarding the property. This is where it would be beneficial for a homeowner to consult another Appraiser in order to see what their value analysis of the property is. It is important to note, I did not say that a homeowner should hire another Appraiser to dispute the value of another's appraisal. If this is the way the situation is approached, most Appraisers will be compelled to turn down the request since accepting an assignment under the terms of an appraisal dispute could be confused with accepting an assignment with a predetermined outcome which is a violation of USPAP (Uniform Standards of Appraisal Practice).

What is the best way for people to reach you and or your company?

There are many uses for appraisals. The most common use for an appraisal is for the purchase of a property or to refinance an existing loan, but appraisals are also used for second opinions, estate settlement, divorce settlement, easement consultation, tax appeal, sales price establishment, appraisal review, etc. If a reader feels they could benefit from our services, the easiest way to reach my company is via our website at www.greaterwisconsinappraisal.com, via email at greaterwiappraisal@gmail.com, or via phone at 608-434-6295.

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