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Positive Changes Coming to Home Appraisal Process?
Some new recommendations to appraisal industry for changes in the way homes are valued are very logical and will help integrators and their clients. It's about time!
It sounds crazy, but the home appraisal industry is using a valuation process that was established in the Great Depression. For non-history buffs, that's the 1930s!
No wonder appraisers can't figure out how to value electronics ... they are using a playbook that probably has electricity as an "option."
According to the "Reengineering the Appraisal Process Redux" (pdf) white paper from the Collateral Risk Network, an update is long overdue and the recommendations being put forth will aid builders, homeowners and integrators.
Here is a look at some of the recommendations.
Dump the antiquated "comparables" method for determining value and use instead databases, real statistics (regarding home amenities like electronics, for example) and local knowledge. The "comps" method has never been logical in my opinion. I can tell you that my tiny 747-square-foot home in Redondo Beach is a perfect example. The house sits three homes away from Manhattan Beach, a more elite neighborhood with a better school system. A house the same as mine just a block away would sell for nearly double what my house is worth.
During several refinances, appraisers have used Manhattan Beach "comps" to elevate the value of my house. Likewise, my house sits near a busy thoroughfare, but that is not taken into account either. Of course, in both those instances, the antiquated appraisal process has benefitted me for refinancing, but it creates a false value should I decide to sell.
Look back at historical sales data over the previous 24 months vs. just the past few months.
Examine the long-term value of the property. In my case, my home is a prime piece of beach-area real estate for a developer. The dirt is worth way more than the house.
Offer a range of values vs. a single number. This is a no-brainer. I have always wondered how an appraiser can look at a home and say, "This is worth $223,437." The whole premise is ridiculous when you really think about it.
Create a single set of appraisal guidelines nationwide. Right now, one appraiser can deem a home theater to have no value while another can highly value it.
Create a national property database for lenders.
I can't wait for these recommendations to be enacted. Let's hope the appraisal industry does the right thing.
No wonder appraisers can't figure out how to value electronics ... they are using a playbook that probably has electricity as an "option."
According to the "Reengineering the Appraisal Process Redux" (pdf) white paper from the Collateral Risk Network, an update is long overdue and the recommendations being put forth will aid builders, homeowners and integrators.
Here is a look at some of the recommendations.
Dump the antiquated "comparables" method for determining value and use instead databases, real statistics (regarding home amenities like electronics, for example) and local knowledge. The "comps" method has never been logical in my opinion. I can tell you that my tiny 747-square-foot home in Redondo Beach is a perfect example. The house sits three homes away from Manhattan Beach, a more elite neighborhood with a better school system. A house the same as mine just a block away would sell for nearly double what my house is worth.
During several refinances, appraisers have used Manhattan Beach "comps" to elevate the value of my house. Likewise, my house sits near a busy thoroughfare, but that is not taken into account either. Of course, in both those instances, the antiquated appraisal process has benefitted me for refinancing, but it creates a false value should I decide to sell.
Look back at historical sales data over the previous 24 months vs. just the past few months.
Examine the long-term value of the property. In my case, my home is a prime piece of beach-area real estate for a developer. The dirt is worth way more than the house.
Offer a range of values vs. a single number. This is a no-brainer. I have always wondered how an appraiser can look at a home and say, "This is worth $223,437." The whole premise is ridiculous when you really think about it.
Create a single set of appraisal guidelines nationwide. Right now, one appraiser can deem a home theater to have no value while another can highly value it.
Create a national property database for lenders.
I can't wait for these recommendations to be enacted. Let's hope the appraisal industry does the right thing.
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About the Author
Jason Knott, Editor, CE Pro
Jason has covered low-voltage electronics as an editor since 1990. He joined EH Publishing in 2000, and before that served as publisher and editor of Security Sales, a leading magazine for the security industry. He served as chairman of the Security Industry Association’s Education Committee from 2000-2004 and sat on the board of that association from 1998-2002. He is also a former board member of the Alarm Industry Research and Educational Foundation. He is currently a member of the CEDIA Education Action Team for Electronic Systems Business. Jason graduated from the University of Southern California.
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