An Appraiser's View

Shopping for or updating your real property insuance? Make sure you have the right amount of coverage. 

Our wildfire crisis has forced many changes within the insurance industry over the past several years as they struggle to be profitable. Most insurance companies have a standard formula they use to ASSIST you in determining how much coverage you need, but it is up to you to determine if it is correct. If you have made improvements, these numbers may not reflect the true replacement cost of your structure. And in the case of disaster, you may be out tens of thousands! If it has been more than two years since you had your home appraised for insurance purposes or you have made any substantive improvements, don't take a chance, get an appraisal before updating your coverage! 

Investing in residential property

Let Eagle Appraisal Services help you determine REPRODUTION COST value for insurance purposes 

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Why Replacement cost vs Reproduction cost

A typical appraisal for mortgage reports replacement cost which is the cost to rebuild your home using similar materials. Reproduction costs takes into account the exact materials you used in constructing your home, and more importantly, the cost of the upgrades you have made. 

Protect yourself and your investment

It's easy to protect yourself: Hire a professional appraiser to ensure the property has the right amount of insurance coverage.

 


Posted by Jeff Pickerel on February 4th, 2024 10:26 AMLeave a Comment

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Do you look at your property tax bill and wonder why it keeps going up every year? Although a percentage of the increase is likely due to government imposed and voter approved “fees”, the largest increase is most likely due to an increase in your assessed value. This is especially true if you have owned your home less than 10 years! But what is assessed value, where does it come from, and is it accurate? Great questions, I’m glad you asked!

1st off, no, it is not accurate, nor is it intended to be. Here is why. Assessed value is the value your home is given by your county assessors office each year. The value can be developed by the assessor’s office by utilizing data from various sources, such as the price you paid for your home, adjusted for the average yearly market increase in your market area, improvements to your home or site derived from county building permits, and/or a “mass appraisal” of homes in your market by the assessor’s office staff appraiser. None of these include an actual inspection of your home nor do they currently have access to any appraisals completed on your home for any purpose. Therefore, it would be impossible for them to be precise in the development of your assessed value. This also why appraisers do not use assessed value as a data point when developing an appraisal (yet online valuation models rely on them, but that’s a different blog for a different day)

If you disagree with your property tax bill you can file an appeal with the assessor’s office and they will review your tax assessment, but they will not inspect your property, therefore a tax appeal is most successful when it includes a full appraisal by a licensed appraiser. We are an unbiased 3rd party with no interest in the outcome of your appeal, so the assessor trusts our opinion. Because we are unbiased, telling an appraiser what you need the property to appraise for should cause the appraiser to recuse themselves and refer you to a new appraiser. An appraiser’s job is to provide an opinion of value, not a high one, not a low one, just one that reflects what the market indicates your property is worth. There is however a way you can influence the appraiser’s opinion of value to be lower. Here’s how.

Complete the following steps before the appraiser arrives & it will affect the opinion of value of your home.

  1. Let your pristine landscape and hardscaping go. I’m talking dead plants, shrubs, knocked over tress, 2’ tall overgrown lawn with weeds. Take a jackhammer to sidewalks, patios, and retaining walls, and cause some real damage! You could even make a little extra cash by allowing contractors to pay to dump their construction debris all over your site.
  2. Do not clean your house for at least a month. Leave dishes, dirty clothes, mud, etc. where it is. Don’t take out the trash, let it pile. Stop by some yard sales and get free items to place throughout the house. Pile the floors with junk high, the counters even higher. Do not leave old food in the fridge. Appraisers don’t look inside the fridge and honestly, that’s just disgusting.
  3. Destroy your flooring. Bring an engine into the living room, get oil and grease on the carpet, leave an oil pan out with oil in it and a few parts laying on the floor.
  4. Decorate your walls with custom graffiti. This one can be fun! Get those old cans of spray out and go to town! Just make sure you are not artistic; a good Disney mural might have the opposite effect on the appraisal. A few well positioned holes in the drywall are always a good negative value impactor.
  5. Make it appear your roof is failing. You don’t have to destroy your new roof, just run a hose into the attic, attach a sprinkler, and let it run for a couple hours every day for a week. The damage will be extensive and should give the appraiser cause to make an assumption the roof is in need of replacing (along with the drywall, insulation, flooring, and well, maybe the entire roof depending on what the sprinkler hits)
  6. Have a kitchen fire! Go ahead and start a fire on your stove. Let the smoke damage your entire house. Do not clean it up. Do put out the fire though.

*Note* The above recommendations are both tongue in cheek and based on actual experiences I have appraising homes. Please do not do any of them. The cost to repair will outweigh any tax savings by tens of thousands of dollars.

Next week’s blog is “How to increase the value of your home by $5,000 with just a $10,000 investment!”

The point is if you need an appraisal for any purpose, tax, refi, estate, or divorce, improvements (or dis improvements) to your property aren’t necessary as they typically do not result in enough of a difference to warrant the cost of the improvements. Appraisers are also trained to “see” things that impact value, both positively and negatively, without you having to stage your home.  

If you need a tax appraisal for appeal, or just valuation for an estate, don’t damage your home! Give us a call today @ (916) 303-0960 and get an unbiased opinion of value. A valuation you can rely on.

Eagle 
  Appraisal 
       
Services 
"We Value Your Home" Tm
5693 Sparas Street
Loomis, Ca 95650
Cell (916)303-0960

 


Posted by Jeff Pickerel on December 30th, 2023 6:04 AMLeave a Comment

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September 20th, 2023 2:49 AM
Logic can be enlightening.
If taxes on fossil fuels and fees on the manufacturing of fossil fuel vehicles have been raised in order to make electric vehicles more competitive, then was the purpose of raising the wage of fast food workers to make the use of Artificial Intelligence (AI) in lieu of humans more competitive?
Truckers have a bill before the governor of California that would ban the use of AI in trucking for 6 years unless a human was behind the wheel. The stated purpose is "to save jobs with a possible side benefit of public safety." Would truckers still support this bill if there was added language that prohibits truckers from pumping their own gas or patronizing establishments that use AI until 2029?
Hollywood writers are on strike in part due to fear of being replaced by AI and want the studio's to agree not to use AI to replace them. By going on strike they have forced the studio's to seek a way to replace them. In my opinion, AI driven scripts will look a lot like early CGI and patrons will demand better, and studios will be forced to bring back good and great writers, who will be in a more powerful position.
And, my self serving point, if you don't want AI to drive a truck, write a movie, or make your happy meal, is it ok for AI to decide if you can refinance or buy a home? I get it, technology is awesome and AI is here to stay. AI is currently and will continue to replace humans in the workforce, however those who are good to great at what they do will always be in demand, because AI can't come up with new ideas for entertaining scripts, make an amazing tasting burger, drive a truck through outside the normal conditions, or provide an accurate opinion of value on a property with complexities.

Posted by Jeff Pickerel on September 20th, 2023 2:49 AMLeave a Comment

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April 8th, 2023 5:24 AM
Lamar Jackson's inability to get a contract negotiated is the 2nd biggest story of this NFL offseason, and the rhetoric has me wondering if anyone really understands how this (and home sales/appraisals) actually work? Let me try and summarize it. 
The work that goes into determining the right deal for an NFL contract is enormous. Each potential signee is individually assessed by 32 different teams for their weaknesses and strengths on the field, in the locker room, off the field, in the off season, potential income they will generate, injury risks, estimated number of years left contributing at current rate, and an estimate of contribution at a either an increased or declining rate as the contract ages, depending on the players projection. The team then looks at the entirety of the market, comparable available players, what they are asking for, comparable unavailable players that have recently signed a deal, what were the terms of that deal, and what the team has available to spend. Because each team performs their own analysis each will have their own opinion of a players value. The work and analysis that needs to be done is similar to an appraisal of your home for a mortgage, but differs in that it only takes into consideration what the value is for a specific buyer, which is why some teams are willing to pay more than others. 
Lets look at the contract negotiations from the players side. Most players are represented by a sports agent that either has a long history of successful contract negotiations or works with an agency that does. These agents and agencies do their own research on exactly the same thing the teams do, discuss their results including how they players value may be higher for which teams and why, and come to an agreement on how much they are going to ask for prior to taking calls and offers. Once they have agreed on what they feel is their market price, the agent brings the player to the market. The analysis and agent/player agreement is similar to what an appraiser and real estate agent would do if the property had unique features that would be best marketed to a specific clientele.
  But if all sides have done their homework, why doesn't Lamar have a contract yet? From an outside point of view, it appears to be because Lamar is his own agent, and the valuation of himself done by himself, is at above current market due to his own bias (sound familiar agents?). Although it is possible race may play into some owners or general managers decisions, it certainly does not apply to all of them. The owners are in the NFL business for 3 reasons. Money, glory, and  power. If a player can bring them either of the 1st two on the list, they will be signed. Period. But despite being available for an amount less than what Lamar is asking the Ravens to pay him, not one team has made an offer. That is the fact of the market for Lamar today, and the market is what determines his NFL value. 
 

Posted by Jeff Pickerel on April 8th, 2023 5:24 AMLeave a Comment

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As a long time die hard 49er fan I have spent a lot of time watching games both in person and at home. I also enjoy preparing to watch games as if I am the coach, breaking down the opposing teams strengths and weaknesses, how they match up with my team, how my team should adjust, and how their team may adjust. The last two years I have added in how the assigned refs will influence the way the game is played. As an expert in both fields, my honest assessment is NFL officials are nowhere near the standard of excellence required of real estate appraisers. 
For instance.
A real estate appraiser provides an unbiased opinion whereas NFL refs are influenced by the home crowd.
A real estate appraiser does their due diligence on each aspect of the appraisal. NFL officials make the customer (the coach) request someone else look at it in order to ensure it was correct. And they limit them to requesting accuracy twice a game. 
A real estate appraiser reports everything they see. An NFL ref "let's them play" which alters the result. and  
A real estate appraiser can take as much time as needed to be accurate, whereas an NFL official has to keep the pace of the game. 

Wow, in looking over the list, it appears NFL officiating is similar to an online valuation of your home, quick, but not very accurate.
 
To be fair, it's the speed at which the decision is required that affects the accuracy, not the integrity of the appraiser or ref. So the next time you get impatient with how long an accurate, unbiased appraisal takes remember, the alternative is a poorly called game that has a 50% chance of altering the result against you. 

It's been one heck of a season, 
FAITHFUL THEN, FAITHFUL NOW. GO NINERS!! 





Posted by Jeff Pickerel on January 30th, 2023 3:54 AMLeave a Comment

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January 27th, 2023 4:34 AM
It's been documented that a business that puts forth an opinion on a political hot topic is committing suicide. I believe that CAN be the case, but I also believe being silent on an important issue that is within your area of expertise can also be detrimental to that business. For me, racial bias in appraising falls in the latter category. So lets dive in. 
First of all, let me be transparent. I have not yet taken the course on racial bias that I will need to take before I can renew my license. I am purposely venturing an opinion prior to taking the course, because I am curious if my opinion and approach will differ once I have the required education? I am open minded but as of now cannot see how it could change. Here's why. 
Appraised values have been required by federal law to be unbiased since 1983.  Additionally appraisers are required to use the most relevant comparable sales or they are also in violation of both appraiser bylaws and federal law. The State of California also has laws against appraiser bias. Yes, I realize that just because there is a law doesn't mean everyone abides by it and that bias doesn't exist. It just means that a biased appraiser would need to be diligent in preparing a biased appraisal that would not raise red flags so as not to get caught. I'm sure bias happens, but not in my reports. I always report my opinion of MARKET VALUE which ensures I do not have bias or prejudice. What do I mean by "Market Value" and how does that keep me from being biased? 
Market value, as defined for federally related transactions, is what a TYPICAL buyer would pay for a home. The determination of a typical buyer includes location, size of home, size of site, age and condition of home, quality of home, etc.. Market value does not include a neighborhoods make up of race, religion, sexual orientation, etc. . Think "If I found a house I wanted to buy, who else would be looking to buy that home?" Those are the typical buyers for that house. Using comparable sales from outside the defined "typical buyer" market throws up a red flag that the appraisal needs to be reviewed which cause the appraiser more work. I think it's important to also understand what exactly is a comparable sales. 
A comparable sale is just what it sounds like. It is a sale of a home that you and other typical buyers would considered similar to the home you are wanting to refinance or buy. It is rarely an exact match, but should be similar in some of the following. Location (think things like School district, near freeway, rural area, etc), living area, bedroom count, bath count, stories, amenities, and site size. ie; If you are buying a 2500 square foot, 5 bedroom, 3 bath home, would you pay the same price as you would for a 1500 square foot 3 bedroom 2 bath home on a similar sized lot in the same neighborhood? Of course not. Similarly, you probably would not pay the same price for a home that is located in an neighborhood that has industrial and commercial uses as you would for one that is in a quieter neighborhood. Basically, comparable sales are sales that have the features most similar to the the home you are wanting to buy or refinance. A neighborhoods racial or religious profile should have no influence on which comparable sales an appraiser uses. In fact, I believe it has no place in any industry.  
I am not racist or prejudice. I have seen it and it's both disgusting and confusing. I like talking to people, especially those who have culture. How can someone judge a person without getting to know them? Do they not realize what they are missing out on? I have been invited to many family Bbq's of people I have just met and the celebration itself is the only reason I remember what race or religion they were. 
Anyway, I digress from the point of the post. (Climbs down off soap box) The point is, I understand racial bias exists in appraising, it just doesn't exist in mine. 
 
Have a great day everyone, talk to people you don't know, and enjoy life! 

  

Posted by Jeff Pickerel on January 27th, 2023 4:34 AMLeave a Comment

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September 27th, 2022 3:31 AM
A recent price shopper asked me "If online valuations are free, why does an appraisal cost so much?" The reason is both simple and complex. The simple is, online valuations aren't required to be unbiased or accurate. Providing an accurate opinion of value requires an inspection not only of your property, but a neighborhood inspection, and a street inspection of all sales deemed relevant. This takes extensive time, gas, and unbiased reasoning. If you don't need an unbiased accurate opinion of value, I will tell you. But first I must know the reason you want an appraisal. That's where it gets a little complex.
In every appraisal request I determine the scope of work before I provide a fee quote. It is as important for me to understand the reason you need an appraisal as it is to have the details on what is being appraised, because the time needed to inspect and complete an appraisal depends on the purpose of the appraisal. The fee is based on the time needed to provide an accurate opinion of value. Although there are typically only 3 or 4 sales plus a listing or two in the reports I complete, those sales are selected after extensive research into 20 to 30 sales from within the market.  Rarely are the 3 sales you see the "easiest" sales, which is what online valuations use. The average time to complete an appraisal today is 10 hours. Add in the cost of a vehicle, gas, yearly schooling, tools needed, mls access, insurances, software, etc. and the cost per appraisal easily exceeds $500. It's possible that you can hire an appraiser for less, but based on the math, you may end up with the equivalent of an expensive online valuation.
When shopping around remember, your are getting an appraisal because you need an accurate opinion of value, so you might want to hire an appraiser who is good at math.      


     

Posted by Jeff Pickerel on September 27th, 2022 3:31 AMLeave a Comment

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Ok, now that I have your attention, no, the market is not declining in most areas, but I guarantee you it will. When? Well, if I knew the answer to that I would be sipping a beverage on the beach of a tropical island instead of trying to help people prepare for the coming market decline. That said, when asked, my magic 8 ball responds with "Without a Doubt" and "You may rely on it" instead of the  "Cannot predict now" it was coming up with just a few months ago. Given the accuracy of the 8 ball I myself have decided to prepare for the decline. I recommend you do the same. 
But how do I "prepare" for a market decline? I recommend three things. #1 Refinance out of a variable rate 1st mortgage. #2. If you have a HELOC balance either pay it off or refinance it into your 1st *Note* If when refinanced you will not be able to afford payment do not refinance. and #3. If you are considering investing in distressed sales by tapping into your home equity, increase the value of your home so you can get the lowest rate possible on monies borrowed. 
Which brings us to the meat and potatoes. How do you increase the value of your home in a declining market when with a few exceptions, remodeling currently  increases home value by only 70%-85% of the cost? Yes, I have seen all the tv shows and even know a few contractors who specialize in flipping properties. They have a spreadsheet that shows what they paid, what their costs were, and how much they sold it for, usually showing a 15-20% flip profit. But they are leaving out two important parts of the formula, their own labor costs and the time factor of an increasing market. (The home would have increased in value during the time they were remodeling whether they remodeled or not). Plus, if they are acting as the real estate agent they leave their 3-6% sales commission out as well! When these are added profit usually drops down below 10%. Which means the exception is, if your home is in need of repairs and/or significant updating, taking care of your home maintenance, finishing those projects, and updating your home can increase the value by as much as 10% in a declining market!  
My magic 8 ball says the market decline is coming "Without a doubt" so my advice is don't wait. Prepare your home today. 

Posted by Jeff Pickerel on September 21st, 2022 3:25 AMLeave a Comment

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August 25th, 2022 4:57 AM

Will appraisers be replaced next year with big data provided by companies like Corelogic, Zillow, Cubicasa, and Open Door? 
?            Well, no. And yes. I entered the profession in 2001, and one week after starting my new career I was stunned to find a front page article that laid out the end of the appraisal industry within a year. The culprit? Big data and appraisers who unknowingly allowed companies to data mine their appraisals, (The content once belonged solely to the appraiser and use of the content for anything but the purpose stated by the appraiser was prohibited) but that's a story for another day. Today I want to talk about why does big data and algorithms continue to fail to be accurate?
            First a simplified explanation of what big data is and where it comes from. Big data in the appraisal industry is a compilation of everything real estate. It is data mined appraisals uploaded through software companies, the entirety of Fannie Mae and Freddie Mac's appraisal portfolio, current and past mls data, county records, national real estate trends, local trends, and more recently, third party property data such as building sketches, all input into an AI system that analyzes it in seconds and spits out a current market value. The key to accuracy is the algorithm(s) it uses. And in a subdivision of similar quality and condition homes, it can be accurate. But it isn't always. Why?
            I have explained for 21 years why online valuations aren't accurate on properties with non standard amenities, the easiest explanation being that if an appraiser failed to consider non standard amenities in developing an an opinion of value for a property they wouldn't be accurate either. But the losses incurred by Open Door this year and my direct knowledge of homes they overpaid for last year when the market was increasing had me wondering how their model is so far off on a simple tract home. The answer is they have a faulty algorithm. It may be as simple as they built their algorithm during a historic market increase and the AI determined the increase would continue, or the human component influenced the AI by buying properties above the suggested value. In any case, like the platforms before, it failed to be accurate on a large scale.  Imagine big data, algorithms, and private enterprise as the only means of valuation in a declining market and how that would affect lending abilities and home prices? Yikes!  
            Markets change, neighborhoods change, buyers preferences change. What increased the sales price by 5% in 2010 may not affect the sales price today. Algorithms and AI can only consider data after enough of it has been compiled to affect the algorithm. Any change to that and you end up with home values being based on the last house that sold. As appraisers we analyze the last hold sold, contact the selling agent, look through photo's, drive by the property, etc. and incorporate the result in developing their opinion of value of your home.  
            The appraisal industry isn't the only one experiencing big data pains, and certainly isn't the 1st. In fact, big data has been around since the early 1980's. I embrace big data fully, and even wrote a big data program in the mid 1980's (DB3 anyone?). But big data has it's faults, and those faults haven't changed much in 40 years. You ever wonder why your local hardware or big box store is always out of something? It may be because they use big data to order for them. Big data orders based on what is selling, and if at the time of inception there wasn't much inventory on an item, sales would therefor be low, and big data can only order off that data. Example. An electrical supply house installed a big data ordering system. At the time they had just sold all of the most popular romex wire they had in stock, 14-2 with ground. The computer didn't order any because it had no record of selling it and it took a couple months before a human was able to override the system. It was 1988 and they lost over 3 million dollars in sales, as well as several customers. Today we have algorithms all over the world basing what is needed on data acquired during the pandemic. Inventories are undersupplied and staffing is shorted today because a computer is telling humans what is needed and humans aren't being allowed to override the systems.        
            There is a place for big data. The more data we have the more accurate an appraiser can be when comparing properties and market influences. When I started in this industry all the data was obtained in a printed book, on a black computer screen with green writing, driving by a property, and calling the listing agent. Today we have multiple sources of photo's, permit records, assessor records, etc. at our fingertips which help, but big data cannot (yet) replace a physical inspection by a knowledgeable appraiser who can consider the quality of materials, condition of the improvements, location influences (does it really have a view?), and functionality of your home.  
            So no, big data is not replacing your trusted appraiser next year. But yes, if appraisers stop providing more accurate opinions of value than big data does, then they will be replaced.  


Posted by Jeff Pickerel on August 25th, 2022 4:57 AMLeave a Comment

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Do mortgage interest rates affect or effect appraised values? The simple answer is no, and yes. Confused? Let me explain. 
Assuming you are aware of how an appraiser arrives at his or her opinion of value, lets take a look to see if interest rates "affect" appraisal values. Affect is a verb and describes current action, which means something that AFFECTS the appraiser's selection of comparable properties, ie; the presence of a pool, the size of the house, number of baths, location, condition, etc., the appraisers reconciliation of the cost to build a similar home, or the appraisers selection of comparable rental properties. And although changes in the market can make the selection of more recent sales important, that is due to the price they sold at, which may or may not be from the interest rate the buyer received.
But do interest rates EFFECT appraised values? You bet they do. EFFECT is a noun, descriptive after the fact, so current mortgage interest rates AFFECT how much a buyer can afford to borrow, which EFFECTED how much they were able to pay for a home. This is similar to the current job market in a an area. A borrowers employment status AFFECTS how much they borrow, so if an area is depressed, this will EFFECT the values in the area. Understand? No?
Hmmm. That's ok, just try and think of it this way. Appraisers do not determine how much you will buy or sell your house for, or how much the bank will loan you against your house. We report current market conditions like increasing or decreasing values, supply, and demand, which AFFECTS the banks lending decision, and EFFECTS your buying decision.
One last thought. Did you know yo can get an appraised value based on what a property will be worth at a selected future date? It's called a *Prospective Appraisal. It's a handy tool when you are looking at flipping, renting for market appreciation, subdividing, spec building, or holding paper on a loan. One aspect of prospective appraising is determining where the market will be on the chosen prospective date, and historical interest rate trends are part of that equation. So as in all things involving the English language, prospective appraisals are the exception to rule. 

Up next. Math, the English method. 

*If interested in a prospective appraisal or you would like prospective appraising explained, feel free to contact me directly. 
    

  

Posted by Jeff Pickerel on August 6th, 2022 6:00 AMLeave a Comment

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