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Every fourth Sunday, Regana Kooman-Henry discusses various aspects of the home buying process and home ownership experience.
Kevin Krall 0:00
You're listening to special programming brought to you by Regatta. kumin. Henry of Coldwell Banker Premier Realty, the content of this program does not reflect the views or opinions of 91.5 Jazz and more, the University of Nevada, Las Vegas, or the Board of Regents of the Nevada System of Higher Education.
Regana Kooman Henry 0:32
Welcome to the Southern Nevada real estate Show. I'm your host regatta and today, I have a very special guest, Brent Jones, owner and chief appraiser of our three appraisal management company, talking about real estate appraisals to help the listeners out there, understand the appraisal process, the role that an appraisal has in the transaction, and how appraisals are changing with our changing housing market. Welcome, Brent.
Unknown Speaker 1:02
Hi, Regatta. How are you today?
Regana Kooman Henry 1:04
Great. How are you?
Unknown Speaker 1:05
Thank you for having me.
Regana Kooman Henry 1:06
Great. Great. And Brent, you know, for the listeners out there that may not have heard you before or just for the first time? How many years? Have you been an appraiser in Southern Nevada?
Unknown Speaker 1:21
Well, you know, some of my peers might argue too long. I've been here about 30 years now I started as an intern in 1990, I actually worked for a friend of mine for free, and said I want to be an appraiser. And in 92, I was licensed so this is my 30th. Year as of September Wow, in the valley doing appraisals. And it's been a it's been quite a quite a ride. I'm sure
Regana Kooman Henry 1:47
you probably I've witnessed seen and heard a whole lot of things in 30 years. And wow, that's you have great experience. So, Brent, you know, for the listeners out there that may not know or maybe they're first time buyers, what is the purpose of an appraisal for a lender, Brent.
Unknown Speaker 2:05
So lenders use our appraisal to really understand what the collateral is that they're making the loan on. They're concerned about the equity position of the borrower, and the rates that people get dependent upon their equity position can be different. And so the appraisal is done either for a purchase transaction, or we actually do them for refinance transactions as well.
Regana Kooman Henry 2:30
Okay. And also, Brent, thank you for that explanation for the lender side. And also for anyone that's never purchased a home before Brent, what would be the purpose of an appraisal for a purchaser.
Unknown Speaker 2:43
So while you're not specifically our client, it does give you an idea. As a borrower, you do receive a copy of the appraisal, and it gives you an idea whether you're paying market value, or whether you're paying over or whether you're getting a deal. So while it's meant for the lender, and they use it for their process, the buyer certainly gets a copy and they're able to see what our analysis is and what the final estimate of value is. Okay.
Regana Kooman Henry 3:13
And Brent, for the listeners out there also what are the different let's say types of appraisals that you yourself specialize in Brent,
Unknown Speaker 3:24
so I do conventional appraisers, appraisals only, I do have a number of independent contractor appraisers that do work for the appraisal management company that do FHA, and then VA appraisers have a special certification and those appraisals are ordered through the lender directly and not through an appraisal management company. Okay,
Regana Kooman Henry 3:49
and so, do you specialize in FHA, VA and conventional loan appraisals all together, all of them
Unknown Speaker 3:56
just myself conventional, but our company, we do FHA, conventional, and we also do private appraisals for non mortgage transactions, whether it be probate work or Estate Settlement, tax tax purposes, or anything else where an appraisal is needed for any kind of litigation.
Regana Kooman Henry 4:20
Okay. And Brent, what are the primary like, for example, differences between the three loans of FHA, VA and the conventional appraisal.
Unknown Speaker 4:34
So, technically, they should be the same, the value is the value, FHA and VA pay a little bit closer attention to the property condition. And so with an FHA or VA appraisal, they will be making sure that there are no health and safety issues and already chipping and peeling paint, especially for homes that were built before 1978 with lead issues is. And so it's a much more thorough inspection with FHA and VA, they will check outlets, electrical appliances, they'll make sure things are working more towards a home inspection, but the conventional, we just go into the property and we're just we're just assessing the collateral assuming that everything is working. Okay, that's
Regana Kooman Henry 5:19
good to know, for the listeners also. And Brent, for example, with regarding new construction, do you perform appraisals for lenders on new construction homes?
Unknown Speaker 5:30
Absolutely. So and the difference there is we use as our comparable sales we use to homes from within the subdivision. So we're comparing apples to the builders Apple if you would. And then we also are tasked with finding an outside sales comparable from a competing builder, as well as a listing or to pendings to reflect what the current market is. So yes, we do do it for them. But it is a little bit different in that we don't compare it against resale homes, because traditionally new construction is carried a premium to it, as it still does today.
Regana Kooman Henry 6:10
Okay. And when you do an appraisal for new construction, Brent, do you ever like for example, have a difficult time with the appraisal coming in at value.
Unknown Speaker 6:20
So there are those instances where we have a borrower if you would, who's gone a little too crazy in the Design Center, and they've picked out a bundle of options that isn't typical in the neighborhood. And so in those cases, the property is over improved, and we can't support that value. And in those cases, the borrower has to come up and make make the difference. For the most part, people stay pretty consistent with their neighborhoods. But now that we're starting to see some markets kind of soften, we're seeing some homes that are under contract early in the year that are now having trouble appraising out. So dependent upon each specific market area, then that's what we look at. So we do have issues. Again, it doesn't happen all the time, but it certainly can happen. That's why it's very important to make sure that your option package is consistent with the rest of your neighborhood.
Regana Kooman Henry 7:21
Okay, good to know if someone else is trying to purchase new construction, and brand. If there are not, for example, if there's not enough comps around a home you're appraising, then how would you determine the appraised value?
Unknown Speaker 7:34
So my job for the lender is to find three sold comparable sales and provide one or two listings, depending upon the lender. So I will do whatever it takes to get that sometimes I have to stretch out the proximity from the subject. Sometimes I have to stretch out the square footage filter. For instance, if we had a 2500 square foot home, I may have to expand it to 2000 to 3000. So my job is to find the apples to apples comp, so I don't have to make adjustments. So to answer your question in markets like this that are moving quickly have moved quickly up and quickly down. I'm going to try and find the most recent comps so I don't have to make those appreciation or depreciation adjustments.
Regana Kooman Henry 8:21
Okay? And Brent, what are considered for example, a major upgrade in a home that would help to increase the appraised value.
Unknown Speaker 8:32
So it's the old adage kitchens and bathrooms are really the main areas for to begin any kind of renovation, obviously, flooring, paint, curb appeal, cleaning up the front yards, back yard, roof if necessary. The major components, there's no specific breakdown as to what each of them return. My job is when we do find have homes that have those kinds of upgrades, I'm going to try and find those similar properties that have been renovated. Again, my job under the Sobia repeating theme today is worth trying to compare apples to apples, okay.
Regana Kooman Henry 9:15
And for the listeners out there that might not be aware, are you for example, able to give the full value of what a homeowner paid for, let's say an inground pool when performing an appraisal.
Unknown Speaker 9:28
So unfortunately, we don't make any friends when it comes to pools. They are they've now gotten very, very expensive because of materials and labor. And we do struggle to make those adjustments for dollar for dollar. They're generally a fractional amount, but again, I'm going to stretch my proximities out and my square footage filters to try and find a pool up so I can give it as much value as it deserves. And especially we live in the desert so pools absolutely do have homes that sell at a premium. And it is getting closer and closer, the numbers certainly are going up for what we do adjust for pools nowadays.
Regana Kooman Henry 10:11
This is true. And for the listeners out there also with track homes, for example being sold identical in Las Vegas being comprised of so many track homes, how do you appraise one at a higher value than another when they both have the same floor plan similar upgrades, similar lot size? If you are appraising them both, let's say within the same time period, how do you do that?
Unknown Speaker 10:39
Again, I'm going to try and find the home that is the most similar to it. And then if not, then we will make an adjustment based on our professional opinion as to how much more those upgrades really contributed. It does become a very subjective adjustment, we're only able to make adjustments so that we can statistically prove and upgrades and condition is very subjective and in the eyes of the professional. So we do the best we can to try and find like properties will go out of the subdivision if it makes sense. If it's a similar style, home to story, similar age competing builder. We're not afraid to do that, because I don't want to have to make an adjustment that I can't support.
Regana Kooman Henry 11:27
Okay, that's a good, good explanation. Thank you for being so thorough. And, Brent, how do you appraise Custom Homes, for example, I had a purchase contract with a buyer last year, and the home was just so different and unique. There was actually a warehouse in the back of the custom home and the appraiser had a horrible time trying to compete with other homes because nothing had a warehouse in the back. My client was crazy about it, you know, single guy, but you know, it just was very, very challenging. So when you when you don't have another custom home that has recently sold sold within the same radius. With us some kind of similar features. What do you do, Brent?
Unknown Speaker 12:17
You know what, sometimes the entire valley becomes our search area. Again, not all custom homes are created equal. And in fact, what you're talking about warehouses in the back and big garage spaces and RV and outbuildings, we call those unicorns, if you would, because they're just nobody builds those to sell them again, so they become a cop. So what we try and do is we'll look at the cost estimates for that particular improvement will depreciate some of the costs. That's one way that we'll look at it. The other way that we'll look at is when we will try and find a home that has that whether it be anywhere in the valley, and we'll try and basically extract what the premium was for that in terms of percentage basis, how much more did it really add to the value of the property? Again, trying to find a comp that is without it and when with it? How much more would I pay for that improvement? Sure. And it becomes subjective. Because guess what not that's for some people who have number of cars or you know, or want to have a shop in their backyard, they will pay a premium for that that's not necessarily a typical buyer.
Regana Kooman Henry 13:31
Right, right. So yeah, so thank you for that explanation on on those type of situations. And Brent, for example, I've had sellers in the past, representing them say, Oh, my house is worth so much more. If it's on a corner lot or cul de sac, do you give like a lot of value to corner lots or culdesac homes.
Unknown Speaker 13:53
So corner lots haven't have an offset. It's very hard for us to prove that a corner lot is more valuable, because you do have the added traffic considerations. And while you do have nobody to one side of you or the other, you do have traffic coming both ways. It's not very clear cut with culdesac and premium lots on cul de sacs, the pie shape lots, we absolutely do see a premium for that it makes good sense for people, for families with children that want to have their children be able to play out there without worrying about oncoming traffic. So we do see a premium for those kinds of locations. Okay.
Regana Kooman Henry 14:33
And brand. Regarding views. How much difference can a home that, let's say has a strip view being in Las Vegas Strip view? How much difference what the home that has one of those Strip views differ versus a home in the same community that doesn't, let's say have a strip view and how do you determine how much extra value to give the home that has that view?
Unknown Speaker 14:59
Right it And the one thing we always know in this, in this town, is views are borrowed. We never know whether a house is going to be backing a golf course. We don't know whether there's going to be buildings in front of it. But to answer your question, there's no, there's no ballparks, there's no hard and fast rules with views are because you and I could be at the same house and you would pay a much different amount for that view, it would be more important for you than it is for me. So what we try and do is we try and find that view comp. So we don't have to make that adjustment. And generally when we have that, we're able to see what that premium is. But when we had homes that were built new construction in seven hills, I mean that 200 to $250,000 view premiums for views of Rios Aiko, and, and the strip, with every sale that happens in those neighborhoods that are on the golf course, that view adjustment is is adjusted based on what that current sale is. So they're a tough, it's a tough analysis. It's not it's not a simple formula, we try and look not only in that subdivision, but we'll either try and find other subdivisions where there may be a home with a view and not and we can extract that premium.
Regana Kooman Henry 16:16
Okay, good to know. And let's flip for a minute to high rise condos. How much more money is a high rise condo worth that, let's say is on a higher floor, let's say the 20th floor than a lower floor, let's say the fifth floor regarding conduct those high rise condos being in the same building and having the same floor floor plan. How do you determine how much more money that condo on the higher floor is worth and like what is the rule of how much more money a high rise condo is worth for each. Each higher floor it's located at brands.
Unknown Speaker 16:52
And there's really no rule because a a floor difference in Turnberry would be different than a lower if you would, the more important consideration is which way the view is facing the Strip view, as opposed to a north or valley facing view to the to the west is not going to carry as much of a premium as any of those units that actually look out to the strip. Again, when we look at higher floors, we're going to try and find find higher floor comps. And in some towers like Turnberry, I think after the eighth floor, or before the eighth floors, some of those units are staring at a parking garage. So we're going to really try not to use those, we're going to really look for the orientation. And sometimes we can prove that there's a floor differential and sometimes we can't, but common sense would dictate that the higher the floor, guess what the better the view, it should be worth more what that is, is just each separate analysis.
Regana Kooman Henry 17:57
Okay. And brand. Here's a question that a lot of people are probably wondering about, with the real estate market having price corrections currently, and prices being lowered right now and a lot of pricing adjustments. How is that impacting your appraisals? And are you having to predict let's say, for example, what's going to happen in the coming months like predicted like a Houdini, to appreciate to appraise the home? Or are you like focused on the present time when you're performing the appraisal? How is that working out?
Unknown Speaker 18:32
So our job is to create a snapshot in time. You know, I went through the 2007 to 2014. And my crystal ball was very murky then, and it's murky. today. We look at inventory, we look at supply and demand. It's the supply side has really moved up significantly since February. We were at about two two weeks supply now. We're at four months, we have over 10,000 homes in inventory, which includes condos, townhomes manufactured and single family. Whereas the first of the year, buyers couldn't buy a home they couldn't get one couldn't get an offer accepted. Right now there are plenty of homes for people to buy. But now we have two other issues. We have affordability, which is a function of interest rates. And we have credit availability where the secondary markets are very, very skittish about making loans at 7%. When they know that they're going to come back and be refinanced very quickly if when rates do move back down. So we try and find the most recent comps in markets that are moving up and markets that are moving sideways or down. So we try not to have to make those adjustments but it is in some markets we started seeing some appraisals where it is being marked decline any market and the comps that were used for March and April, were actually deducted downward for those time adjustments.
Regana Kooman Henry 20:08
Okay? And do you include distressed sales as comps when you're appraising a home? That is not a distressed Melbourne?
Unknown Speaker 20:15
You know what if it would, if I don't have to? I absolutely won't, because it's not a fair indication of what true market value is. Again, we'd like that information from the agents when we meet them at the property, they can tell us whether it's been, you know, it was close to being a foreclosure or short sale, or there was a divorce situation where they lowered the price significantly. So whenever we have the agents insight information, if you would, on that particular neighborhood, because you farm them, that's very beneficial to us. But again, all things being equal, I'm going to look for market transactions, typical buyer and seller motivations, and arm's length transactions, not between family members,
Regana Kooman Henry 21:01
okay. And for example, if there are enough foreclosures, which we haven't had, or short sells, which we haven't had, would you at all, ever use those with a traditional seller?
Unknown Speaker 21:14
Only if there was absolutely no data at all. But again, I'm going to really try and find apples to apples. And if the home I'm appraising is not a distressed sale, then I'm going to be looking for non distressed sales to compare it too.
Regana Kooman Henry 21:30
Okay? And how do you perform an appraisal on a home that is, like more upgraded than any other home in the neighborhood? Or in the area? And is it and is in an area where the homes are not as well kept? As the one that you're appraising? How do you deal with that? So
Unknown Speaker 21:47
again, we're going to, we don't have perfect data all the time. But for the most part in Las Vegas, we're very lucky. There have been a lot of flip properties, a lot of good renovated properties that have gone on the market. So we're able to capture most of those upgrades by using comps that have been renovated or updated at least. And so again, we can try and give as much value to those improvements as we possibly can. Because the bottom line is for the lender, we have to support our adjustments, and we have to support our market value. And the way we do that is by having homes that have sold over or at those same levels with the same level of upgrades.
Regana Kooman Henry 22:31
Okay, and can a homeowner hire you to do an appraisal to let's say, determine what they should sell their home for? And will the buyers lender be able to use that same appraisal report once there is a purchase agreement with that seller?
Unknown Speaker 22:46
You know, as a seller? You may not like the answer. I do a lot of private appraisals, where I am asked to appraise the property because the the sellers expectation is is unrealistic. So when you have a private appraisal, you have that choice, you may not like the answer, but you can also put it in the drawer. It doesn't go anywhere. There's no record of it. The downside to it is if you liked the value, you can always use it to market the property. But there is a second appraisal if you do go under contract, that buyer can't use that appraisal. So that is another cost as part of the lending transaction.
Regana Kooman Henry 23:30
I see. And Brent, how many months is an appraisal good for.
Unknown Speaker 23:36
So FHA and VA have different requirements. If you have a VA FHA appraiser, appraisal, it sticks with the property for about four months, I believe is the number and VA is longer. Conventional appraisal does not stick with the property, you could have a conventional one done. And if the deal fell out, you needed another appraisal that can be done, you know, within, you know, a couple of days if if the case need be. So there's no rules for conventional accepting a conventional offer. But with FHA and VA, that value does stick with the property for a time. And that's really who you should talk to the lender about.
Regana Kooman Henry 24:18
Okay. And is it true that an FHA appraisal will automatically stick for six months even if the current sell cancels and the seller accepts another offer with another FHA buyer and they have another FHA appraisal performed?
Unknown Speaker 24:35
Yeah, it's I think the number is four months, and I would check with your lender on that, but that doesn't really concern us, but it does certainly concern the parties to a transaction. Absolutely.
Regana Kooman Henry 24:48
Okay, and how do you perform appraisals for investors flipping homes quickly after they purchased the home and what do you consider an order for the home to were praised for a higher value in such a short period of time.
Unknown Speaker 25:03
So we always go back to the, we always go back to the investor, and we get a list of their upgrades and their costs, and they provide those to us. So once we have that, we're able to build the case for trying to find similar homes that have been renovated. And again, we'll stretch our proximity out as far as we need to go. And to find a light comp, because we want to be able to give it fair value. And the way we do that is to find a home that has similar upgrades, even if it is in a similar area competing area, that we value the property fairly and give them as much value as is warranted.
Regana Kooman Henry 25:51
Okay. And brand. Was it challenging, and the recent past to comp homes when it was a total seller's market so many months ago? You know, because there were so many buyers out there, paying above the appraised value and cash just to get the offer accepted. How did you do appraisals back then?
Unknown Speaker 26:13
Right. So we would make time adjustments based on the appreciation figures that we could prove. And also, whenever in the contract, it's written that the buyer is willing to pay over appraisal, that's kind of code to us that everybody knows that the appraisal is going to come in low because they they've over they overpaid. I mean, we had Bedlam you know, for the for quite a few months of people falling all over each other, you could have a home on the market, not even coming soon. And you'd have five or six offers. And it was really fueled by the mortgage, you know, by the low mortgage rates and COVID with people realizing they didn't have to wait to retire here. So that's the that's how we did it. We came in short a lot. And the buyers have for the most part were prepared to, to offer to pay their own money as opposed to the bank's money.
Regana Kooman Henry 27:12
Very good to know very good information. Brent, and Brent. What is like, for example, the most unique property you've ever appraised in your career that really stands out for you.
Unknown Speaker 27:28
That's, well, I've I accepted an order and I didn't really research it. And I showed up and it was a two storey dome home. And where there is absolutely no comparable properties whatsoever. So I actually was out of my league there. So
Regana Kooman Henry 27:48
how do you do that? Well,
Unknown Speaker 27:50
you know, I didn't, I walked off and let you know, sometimes you got to know your limitations. So Wow. So yeah, if you have crazy, you know, if there are homes that are crazy, or have bunkers or you know, all those kinds of things that sometimes as an appraiser, you have to say, hey, you know what, I don't know the answer here. I'm going to defer to somebody who may have had that experience.
Regana Kooman Henry 28:14
Okay. Yeah, that's interesting. A dome home. Wow. And, you know, for example, last question, when you're appraising a home for buyer, do you ever, like have to deal with unhappy sellers?
Unknown Speaker 28:28
Oh, all the time. Yeah. In fact, part of what we do is in our appraisal management company is we communicate with everybody why the appraisal came in low. And we actually take calls from the sellers and the listing agent, the buyer's agent. We're very transparent about what about what we do and who gets the information and being able to help everybody understand why we did what we did is very important.
Regana Kooman Henry 28:56
Okay, sounds good. Yeah. So you've been a very wealth of information. Brant with your very welcome wonderful, wonderful knowledge of, of real estate appraisals. And you know, you are very much a master in your field. And, Brent, thank you so much for being on my show today. My pleasure. Yes, yes. It was really a blast to have you. Please say your name, company name and phone number tries for the listeners so they can write your number down. Okay, it's
Unknown Speaker 29:30
Brent Jones. My cell phone is 702-591-7245. My company name is our three appraisal management. And my license number is a dot 0001382 Dash res.
Regana Kooman Henry 29:47
Okay, maybe say it one more time with a phone number. So
Unknown Speaker 29:50
702591724 or five.
Regana Kooman Henry 29:54
Okay, thank you so much, Brian. It's been a pleasure. And I am Rick. Gotta kumin Henry with Coldwell Banker Premier Realty, your host for the Southern Nevada real estate show that airs every fourth Sunday of the month at 7:30am. My number is 702-596-1267. That seven zero to 5961267. And my license number is BS 27880. Thank you so much for listening to my show today. And I wish everyone listening a great Sunday and a great week.
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