Appraising Lakes, Beyond Front Footage

2017-08-13 20.48.44

When attempting to determine the value of lakefront property, there’s so much more to the equation than just measuring waterfront space. Here’s what appraisers and agents need to know.

As summer approaches, activity on lakes—large and small—increases. But in my experience as a REALTOR® and certified appraiser, it is apparent that many agents, brokers, and appraisers have not acquired all the knowledge, skills, and perspective needed to accurately evaluate lakefront property. In the hope of filling in some of the gaps, here are some tips on how appraisers can provide a more defensible appraisal on these complex properties as well as some of the nuances that agents who are new to lake properties should consider.

The Why of the Buy

Both appraisers and agents alike need to be aware of the motivations that result in sales. Appraisers need to be in touch with the vagaries of the different submarkets in order to adequately analyze the properties they appraise, and agents need to understand that there is much more to selling lake property than front footage.

What motivates a buyer to purchase a lake property? Is it the tranquility? The beauty of the water? The excitement of a speedboat and waterskiing, or casting a line into the water in hopes of landing a trophy catch? It is all of these things, and none of these things. The motivations are almost as numerous as the buyers looking for a lake house are, and one buyer’s paradise is another’s hell. Different types of lakes attract different buyers, and the buyer looking for tranquility is going to be very unhappy purchasing a house on a lake crowded with jet skis and powerboats. The same would be true for the avid motorist who buys on a small, quiet fishing lake.

Quality Over Quantity

While some depend on how many “front feet” the property has on the water to determine value, that is not necessarily the best course. The amount of frontage usually relates to space between neighbors and how much area is available for docking and beach toys. But consider the house sitting on the edge of a bluff, with 200 feet of frontage and 100 steep steps down to the water. What if the shoreline is also rocky and reedy? Five lots south, the topography has sloped in to a gentle, almost level lot and the frontage itself is a natural sandy beach. This lot has only 50 feet at the lakefront. Which is more valuable?

The value of a lake property could be tied not only to the ease of the access and the quality of the frontage but also to the lake itself. For a clean swimming lake, the narrower 50-foot lot might be much more valuable than the less accessible 200-foot lot. But for a lake that is picturesque but not good for swimming or boating, the 200-foot lot with the elevated views might be the more valuable site. It all depends on the lake and why buyers might be interested in that particular spot.

Present and Future Demand

I live and work in Michigan, a state surrounded by lakes of all kinds. The Great Lakes are a treasure, but not exactly the bastions of privacy and quiet you see on some of the smaller inland lakes. Many of our inland lakes are massive in size, deep, and clean. Some are shallow, reedy, and mucky, making them more of a viewing amenity than anything else. Some lakes allow all the toys and others only a kayak or canoe. Some are merely ponds in buyers’ eyes.

There are many questions that buyers, real estate agents, and appraisers should consider in addition to the present appeal of the lake itself, because these issues contribute to whether the lake remains appealing into the future. Some lakes are manmade in that they are the result of damming a river. Some municipalities are considering removing such dams—in that case, what happens to the manmade lake? Some lakes have been invaded by unwelcome species such as zebra mussels, Eurasian watermilfoil, and other nuisances. Lakes with public access sites tend to have more trouble with these invasive species, though they do also travel naturally through waterfowl and other means. Could a lake with an invasive species problem become less desirable than one without? Is there any guarantee that a pristine lake will remain so? What about the life cycle of a lake? Is it a dying lake, or is it likely to stay in similar condition for the foreseeable future? How is the management on the lake? Is there an active association that seeks to ensure the health of the lake? Are septic systems monitored? Does the association have prohibitions against fertilizers?

But just as bodies of water can change, so too can our perspectives on them. Is it possible that we are starting to see a shift, as our population ages, to the desire for quiet lakes that do not allow gas motors? It used to be that these quiet “no-wake” lakes had less appeal, but in many instances, they are now attracting buyers that would not have considered them 10 or 20 years ago. There is something to be said for the quiet of a lake without loud motors and loud reveling at all hours of the day and night. On the other hand, these lakes have limitations of use, and buyers who want to have it all might find the sportier lakes desirable, in particular if there are limited year-round residents. The lack of year-round residents could mean that the owner has quieter weekdays, with increased activity on the weekends and over holidays.

The Tools at Your Disposal

The Department of Natural Resources maintains lake maps in most areas. These maps show the topography and composition of the lake bottom. DNR maps will also show public access points, existing housing, and other features. Appraisers and agents alike should become familiar with these maps. Plat maps are also available in many areas, and these can be used to examine other features, such as ownership issues where a third party may control the frontage in between a property and the lake shore. Another concern that can impact value is keyholing or funneling, where backlot owners have rights to a parcel on the water. Just being aware of some of these issues can help you be a better advocate for your client and know when to direct them toward legal counsel to help determine whether they have water rights.

Not All Sales Are Comparable

If possible, it’s best to find comparables on the same lake, but remember, lakes also have varied topography, both on shore and to the lake bottoms, and just because the potential comparable property is on the same lake might not mean that the properties are actually comparable.

Appraisers need to understand the lake itself and which lakes are reasonable alternates if nothing is available on the lake upon which we are doing our appraisal. Know your market and write about what is important to the target audience. How large is the lake? How deep is it? What types of activities are allowed on the lake? What are the other lakes that the buyer for our property would reasonably consider and why? Fully describe the topography, frontage, and access to the water at the subject site. Write about whether the beach is sandy, mucky, rocky, reedy, and so forth. Document sunrise and sunset views, parking, and docking. Agents don’t have the same communication requirements as appraisers do here, but they should be aware of what appraisers are considering and what they are reporting, because such factors affect the pricing conversation as well.

Determining logical comparable search criteria is incredibly important in lakefront homes because buyers may consider properties on lakes that are 20 or 30 miles apart, something that might scare some of the most experienced underwriters if not properly explained. A smart appraiser will set the stage ahead of time through the narrative in the report, which will help the underwriter and reviewers understand the thought process for the choice of comparables. Once the appraisers have spelled out the reasons that have drawn a buyer to the subject lake, discussion follows about the lakes that are competitive and why they are competitive. This can justify the use of sometimes very distant comparables.

Agents can help by providing appraisers with information about the lakes that the buyer considered and why they considered them as competitive. If your buyer would only consider one lake, explain why. While it might not be possible for the appraiser to stay on that lake due to lack of recent sales data, the buyer’s motivations to that lake over others can still be helpful.

Summer is coming and lake buyers will be out in force again soon. Be prepared to have a lake appraisal take longer and be costlier than a regular subdivision job. Take the extra time necessary for these lake deals to research the lake and the site, in addition to the improvements on the site. Hopefully the extra effort will pay off and you’ll be better able to enjoy your next lakeside sunset or cool dip in the water.


Reprinted from REALTOR® Magazine Online, March 2018, with permission of the National Association of REALTORS®. Copyright 2018. All rights reserved.

beyond front footage







It certainly would be ideal to have a magic pill that would allow one to stay in shape, at the same time as staying productive at work. The advent of the treadmill desk and its increasing popularity is making this magic pill seem a real possibility. Imagine being able to work, talk, research and type, all while walking. Sounds great doesn’t it? It is, but there are limitations. The set up can be awkward, and if you are vertically, or space challenged, there can be limitations with the workspace. If you are a bit of an overachiever, like I have a tendency to be, there can be real limitations to the physicality of the system.

I purchased my first treadmill desk in 2011 in an effort to get up off my seat and ease my aching back. Sitting was causing a whole host of physical issues, not the least of which was an increasingly widening girth and backside. I already owned a good solid treadmill from the days when I was a runner, and trained on this workhorse of a machine. The desk itself was something that could go on top of any treadmill and that was very appealing because it made the set up much less expensive than buying one of the combination treadmill desks that have gained popularity in the marketplace.

This brings me to the first limitation: space! If you have a large scale treadmill then it is not going to have a small footprint. If you are going to be using one of these beasts upwards of four or five hours (or more) per day, then it darn well better be a workhorse or the motor and/or deck and/or belt are going to wear out very quickly.  So the big treadmill takes up space, and the desk itself can take up a lot of space as well.  The area that contains my treadmill desk takes up eight by seven feet and this doesn’t include any of the office peripherals such as bookshelves, printers, cabinets and so forth. While you may be able to get by with a smaller workspace and treadmill, most people want to have at least two monitors at their disposal, and therefore the larger workspace may be imperative.

Another limitation to the setup is the treadmill itself. Treadmills that are for runners and exercise are not designed to do long hours at slow speeds and the motors can burn out quickly, in particular if you have something like an orthopedic belt to soften your tread. If the treadmill deck is too narrow, or two short, drift may cause you to step on the rails and crash, not a pleasant experience. A good wide deck that is long enough to have your body close to half way back, in order to accommodate the desk, and a treadmill that can take hours of use every day at a low speed, is going to cost a pretty penny. At the same time, if you buy one that is not robust enough to handle the stress, it will burn out far sooner than desired and the expense of purchasing a new one is often cost prohibitive. There are some brands that have both treadmill and desk combined, with a treadmill that is built specifically for the long hours of use at a slow speed, and these, while expensive, are often the best solution.

Limitation number three, at least for me, is height. At 5’2” I am a bit vertically challenged, and my treadmill desk does not go low enough for me to work at a good ergonomic height. As such, I had to purchase a laptop that had a wide and comfortable keyboard that included the integrated touchpad in the center of the computer so I didn’t end up with carpel tunnel from repetitive motions, i.e., no mouse. That and sometimes my shoulders are touching my ears, not a good thing for ergonomic design. The large laptop and a smaller monitor next to it work well though, without me having to look down.

The final, but most limiting of limitations for me was repetitive use and the development of tendinitis in one of my feet.  Because I have a tendency to overdo things, I thought that if walking four hours a day felt so good, walking six hours a day would feel even better. At first it did. I lost weight, I felt great, my energy was superb, but within a year of having upped my walking to six, and sometimes seven hours a day, I developed a roaring case of tendinitis that sidelined me from walking for months. Now over a year after taking a couple months off, I cannot walk the way I used to without aggravating my tendinitis, and am happy walking only two or three hours a day, and nowhere near the speed I used to walk. Unfortunately the weight has come back, and with it, the feeling of sluggishness. That said, when I walk, I feel great, and my mind is clearer and I am able to concentrate better.

The limitations that I described above are all just cautionary for those who are thinking of a treadmill desk setup. Four years into using one, I cannot imagine returning to sitting for more than a couple of hours at a time, and hope to be able to use one of these desks until I decide to turn in the keyboard. Limitations that arise are nothing compared to the benefits that are gained in my opinion.

The treadmill desk is a magic pill to a stationary office worker, as long as moderation is used and forethought is exercised in setting up your workstation. Remember a good solid treadmill with a wide and long deck is key, and no orthopedic belts because they will burn out the motor faster. Think how you will use the desk, and make sure you have a place to sit in between periods on the treadmill because most of us cannot spend a full working day walking, without consequences.


Originally published with AppraiserNews in 2015

What does the SRA mean to me?

black belt


  • What does being a designated member of the Appraisal Institute mean to me?
  • Does my designation matter to my clients?
  • Do I get more business because of having earned a designation?
  • Is it worth the time, effort and cost?

These are questions I often hear from people contemplating this path. For me, there is no one answer, because it means different things at different times and in different situations. What I can answer, with certainty, is that I would do it all over again. I never once regretted going through the designation process.

The process is designed to help one become a better appraiser. It is designed to provide a solid foundation, from which to grow, and designed to provide the tools to become a lifelong learner. Working through the process of becoming designated made me a better appraiser. That said, it is a continual process. It is a start, not an end. The goal is to continue to improve as opposed to reaching a point and stopping. I see earning the designation very much the same as earning a black belt in a martial art. There are many excellent martial artists who never test for a belt. Likewise, there are many excellent appraisers who have no desire to work on a designation. But, working towards a goal such as a designation or a blackbelt, provides a focus of intense learning and growth. Having a blackbelt does not mean that one is an expert, all it means is that a level of proficiency has been reached, and the martial artist is a serious beginner. Earning a designation means that a level of proficiency has been reached, and the designee is a serious beginner.  For me, it provided the structure and a goal, as it does and did for countless others.

I was designated towards the end of 2003. Completing the demonstration appraisal report was a monumental task for me, and through it, I saw how the three approaches to value fit together in the real, and very imperfect world. It was amazing to see that the sales comparison, cost and income approaches tied together on my subject property. Even more amazing being that my subject was a fifty plus year old house in a 100% built-out development. The biggest sticking point was the cost approach. In fact, my first submission passed on all but the cost approach section. I ended up attending part of Course 500 again (the cost approach day) to make sure I approached it correctly.  Second time I submitted was the charm.

The demonstration appraisal process provided me confidence in working through a problem, and communicating my results in a manner that was judged, and eventually accepted. This was, and still is, my seminal appraisal education experience. Even though in the end, it took me well over three years from start to finish, and countless hours, once I actually started writing, it taught me more than book-learning likely ever would. It gave me confidence in my ability to analyze and extract adjustments from imperfect real-world data. I had help from many mentors along the way, from the instructors in my narrative reporting writing course, to local appraisers who I leaned on for moral support and to steer me in the right direction if I thought I was going in the wrong one. Not only did the process help me become a better appraiser, but I forged relationships with more senior appraisers along the way, all of whom gave of their time willingly and freely.

After earning my designation, I thought that magically, business would fall in my lap from the heavens above. But we all know that this is not the case, and you must work for it. Never being very good at marketing, it did not magically fall in my lap, but I did have increased opportunities with some clients.  The attorneys started using me greater regularity after I received my designation. My relocation work increased, as did my estate work. Lender work declined. It declined because I had been consciously ridding myself of that business to make way for more private, attorney and ERC work since the late 1990’s.  Having earned my designation, I was able to increase this private business. Being in the Appraisal Institute directory exposed me to new potential clients better than any other marketing tool I had available.

By the middle of 2004 our market had started to shift. We were building inventory in housing, and although there were no price declines noted at that time, there was evidence that some change was coming. The contract-to-listing ratios were declining, and inventory was not absorbing at anywhere near a normal pace. Any lender work that I did take on, seemed to end up with angry borrowers and particularly angry loan officers. Other appraisers were also moving into the non-lending niche, probably noticing some of the same factors in lending. With more appraisers moving into private work, I started to lose enough of this work to worry me, designated or not. The final straw for me was a divorce appraisal that had been referred to me by both the husband’s attorney, the wife’s attorney, and the mediator facilitating the settlement. I lost the assignment to someone who charged only a fraction less. The designation helped me get the referrals, but my fees lost me the work.

Instead of fighting piecemeal for work, I decided to look for a job with a regular salary and benefits, and having my SRA opened the doors and got me hired with a large national lender. Although I left that job and moved onto another shortly after, I likely would not have been able to even have an interview if I did not have the designation behind my name. In the years that followed I have been in and out of the fee world, preferring review to field work, but always happy to take on relocation work. The designation has helped me have greater options on what I do.

So, does the SRA matter to my clients? To the clients that I care about and want to keep, it seems to matter very much. These include relocation companies, attorneys, and my current employer. Do I get more business because of having my SRA? When I have been in the field, in between my review jobs, yes. I picked up trust and estate work through the Appraisal Institute directory, and through networking and referrals from other appraisers. Does it help get me lender work? When working as a staff reviewer, I think I was hired in large part because of having the designation. For mortgage work related to private client groups, yes, I do believe that work comes through in part due to having a designation. For AMC driven mortgage work, no, I do not see it as a selling feature, but I have long tried to move away from that type of work on the origination side anyway.

Is it worth the time, effort and cost? My answer to that is an unequivocal yes! At least for me, yes, yes, yes! It is worth it because I understand very well that getting a designation does not mean you achieve it, and then leave it, never progressing past a certain point.  It means giving back to the profession in whatever way I can. For me this is teaching, writing, participating in committees and work groups, and trying to help other appraisers.  Other appraisers help/helped me, because they too see giving back as a critical need. This is part of being a lifelong learner, because through teaching, writing, participating, and assisting others, I continue to learn. I learn in the classroom, I learn outside of the classroom, and from other appraisers. I believe that going through the designation process set me up to expect that I would need to continue to be open to learning if I remain an active appraiser.

A well-developed martial arts program will instill that same idea to the practitioner. Reaching a blackbelt level does not mean that you have arrived and are an expert, but that you have reached a level of being a very serious beginner. To continue progressing in martial arts means constantly revisiting basics, and to progress as an appraiser, the same process of revisiting the fundamentals also exists. For martial artists, teaching is a great way of learning, as it exposes weaknesses that need to be corrected. This is no different from appraisers, who find that through teaching, their weaknesses are also exposed, and through that exposure, recognition on what needs to be corrected.

The process of becoming a designated appraiser was long and sometimes arduous. Being designated does not mean that I am an expert, but that I reached a level of proficiency and need to continue building from there. Success, in terms of work has followed directly based on the amount of effort that I put into learning and improving, and ebbs and flows, as does everything in life. While I would like to be able to answer with financial statistics related to how much value the designation has had for me, I cannot. I cannot because I cannot quantify it in that manner. From the perspective of professional satisfaction, it has been an immeasurable benefit. I would encourage anyone who wants to exceed their own expectations, to pursue the path, even if you no intention of ever being designated. After all, knowledge is power.


This was first published in Appraisal Today and has been re-shared in its original form, with permission by the publisher.

I am not “just” a residential appraiser

This article was originally posted in AppraisersBlogs ( and I am resharing as it needs repeating.  If you are searching for an appraiser to handle a residential assignment, look for someone with ample experience, who goes above and beyond the minimums related to education. There are countless appraisers out there who fit that bill, all you need to do is interview the appraiser about their education and experience related to the property, location, and intended use of the assignment.

View of Office Building

I am not “JUST” a residential appraiser!

There is no doubt that moving to obtaining a certified general appraisal license opens doors to varied and interesting work. If it is in one’s capacity to obtain this level, it is a great idea. That said, the idea of being “just” a residential appraiser has got to stop. A good professional residential appraiser who studies the market, knows how to analyze and solve a problem, and can communicate effectively and succinctly, is a very valuable appraiser at that!

As professional residential appraisers, we constantly work at honing skills. We work at becoming better appraisers every day, realizing that learning never ceases if one is open to it. As professional residential appraisers, we exceed minimum qualifications and minimum education requirements. Many of us have earned designations that take significant study and testing. Many of us spend a lot of time, money, and resources honing our skills and trying to improve every day. We work with most people’s largest single assets, and we are aware of that. We must be aware of nuances in buyer preferences, and how they change and evolve.  We must be very aware of what is happening in our markets and pay close attention to changes as they start to occur.

Homeowners hire us because they have a real need. They need to have someone who is independent, impartial, and objective help answer questions they have. They need someone who knows the market, knows how to analyze segments of the market, and who can present their findings in a way that makes sense and is usable, regardless of the opinion of value. Homeowners hire us to answer questions as varied as “what will this proposed addition add in terms of value” or “what will my value be after I split off five acres from my seven-acre tract of land” or “will it be cost effective for me to complete the list of improvements recommended by my REALTOR prior to listing my house for sale”? There is a myriad of reasons a homeowner would want to hire us directly to answer questions.

Attorneys hire us to answer questions as well. They might need to know what the value of a property was as of the date of a marriage in 1992, and what the current value is. They may need to hire us to address what a property would be worth if there was no construction defect, as well as with the defect indicated. They need someone who is not only independent, impartial and objective, but someone who is knowledgeable about retrospective valuation, or understands construction properly, and can complete a report based on both the as if value, and as is value.

As residential appraisers, we often come under extreme pressure. Pressure to ignore issues with a property, pressure to turn in assignments too quickly and to cut corners, pressure to meet sales prices that are too high, pressure to appraise lower than market value to accommodate some interest or another. For someone who is proud of their work ethic and quality, and is independent, impartial, objective and knowledgeable about the work they do and how to support it, we will never be “just” a residential appraiser. We will forever be standing up for doing our work the right way and not bending to pressures. This is the mark of a professional. This is the mark of someone who takes the profession seriously and understands how important our work is.

For those of us who treat being a residential appraiser seriously, and as a significant responsibility, we will never be “just” a residential appraiser. Think about that next time the word “just” crosses your mind. We must change this narrative from within. Be professional, be the best you can be. Be proud of being a residential appraiser. I know I am!

I have Google Earth and I know how to use it

Originally published in Appraisal Today, thank you Ann O’Rourke for allowing me to republish

I have Google Earth and I know how to use it

Seriously though, as a reviewer, it is one of the first tools I reach for when I look up the property that is the subject of the appraisal I am reviewing. Assume all reviewers do. We use it to make sure that the property does not back up to, side against, or face some type of externality such as a major 8-lane freeway, massive shopping mall or toxic waste facility. Hopefully the appraisal that has one of these externalities addresses it. Sometimes the appraisals go to great length to discuss externalities and any effect on marketability and value. Sometimes there is a sentence or two. Sometimes crickets.

Yesterday I pulled up GE on the house that was the subject of an appraisal I was reviewing and it backed up to a bunch of buildings. Looked possibly to be a school, but the street view maps took me around the side and to the entrance of what turned out to be a large condominium complex. Absolutely no big deal, but there wasn’t one single word related to this in the appraisal. I asked a group of appraisers whether they would make a comment if their subject property backed up to a condominium complex, and the responses ran the gamut from “of course”, to “no way, it is already covered in the neighborhood check boxes”.

While the check boxes for the neighborhood include multi-family, they do not include condominium, and in this instance, there was nothing in the appraisal even hinting that there was a mixture of single-unit uses in the area. This property didn’t raise a red-flag insomuch as backing to a freeway, commercial shopping center or toxic waste facility, but it did raise a question and warranted a bit more research. This is fine as it part of my job, but as someone who actually reads the reports in front of me, I was just left confused as to why it wasn’t even mentioned. I was even more confused by why so many appraisers say that it is not worth mentioning.

Maybe it is being old fashioned, but I grew up with the understanding that an appraiser was the eyes and the ears of the client, and that anything that would likely raise a question for the client should be addressed. Of course the freeway, mall and toxic waste facility are givens, but wouldn’t anything that was literally in the backyard also be something that would get questioned? How many minutes does it take out of the process to write a few sentences about a condominium complex? Couldn’t it be as simple as saying “The subject backs up to the XYZ condominium complex and has a seasonal view of some of these buildings. There is no negative effect on marketability or value of the subject property related to its location adjacent to this residential use” or some such rot?

While it is easy to overlook potential concerns due to the amount of reporting we have to do (and remember, there is no such thing as a perfect appraisal), stepping into the mind of the client and asking yourself “what would the client be concerned about” is a very useful exercise. While the client may not care about the house backing to a condominium complex because it is a residential use like the subject, they may care about it backing to the complex if for some reason it does affect marketability and/or value. It is up to us, as appraisers, to report and analyze what it is we see, and although we can never catch every little thing, our value is partly measured by our ability to communicate and to analyze these nuances.

Remember, reviewers have Google Earth and other tools at their fingertips, and most use them.

What is the purpose of the adjustment process?

This article was originally published in Appraisal Today, A hearty thank you to Ann O’Rourke


Some appraisals can take a narrow range of unadjusted sales prices, for example the range of $115,000 to $122,000, which is a spread of 6.09%, and through the process of analysis, it widens from $96,000 to more than $132,000 (spread of 37.5%). In case you think this is made up, it was a real world example, which spurred this short article,

This begs the question, if proper analysis of the units of comparison were applied, why would the range widen?

Sometimes it is due to the mechanical act of extracting adjustments from the market and putting them in the grid, without actually analyzing whether the adjustments extracted are actually valid. Alternatively, if there are a number of adjustments to be considered, do some of them weigh each other out? This means does the smaller house that is highly upgraded; possibly have more worth than the larger but dated house? If condition is not adequately accounted for, it is easy to see how the adjustments could make the dated house look more appealing, when in reality the market may well be more concerned with cosmetic condition than anything else. Because of the way buyers actually buy in the market place, it is critical that the appraiser step back from the process and look at the big picture to see if the value opinion ends up passing the curb test. The curb test is that of asking yourself, either whether you could see yourself paying that amount for the property, or if you would feel comfortable lending your own hard earned money for a buyer purchasing that property. If the answer is “heck yeah” then probably either it is too good a deal, or you are just that good. If the answer on the other hand is “heck no” then the value opinion is likely too high. Just right refers to that sweet spot where you consider that the price you would pay is fair to you as buyer, or lender, but also fair to the seller where it would be attractive enough to sell without any duress

What is the purpose of the adjustment process?

We make adjustments for the units of comparison that buyers recognize in the market, and through this process, narrow a range of unadjusted prices to something tighter, from which we reconcile. If for some reason the range actually broadens, there is a piece of the puzzle missing. This means we have to step back and reanalyze the processes and our adjustments; or perhaps even, our comparable choices. This is the very reason “bracketing” with a superior property and an inferior property is an important application. The unadjusted sales price of the inferior property sets the logical lower limit of expected value. The superior property also sets an upper limit of the expected value opinion. As soon as the appraised value is higher than superior, or lower than inferior, we know that there is something off in the analysis. If there are also similar properties to the subject included in the analysis, these become benchmarks for a generally expected value range.

Think of the way that buyers normally purchase property for a minute. Although there are some buyers who try to quantify everything, most do not. Most buyers simply like one house over another, and they do so because of location of the property, the site, the overall size, the flow/design, the condition and the amenities. Buyers will opt for the property that best meets their needs and is to their liking, for the most advantageous price. They will expect to pay less for a house that something that is superior to it and more than something inferior to it. Of course there are exceptions, such as the buyer who is under pressure to buy because they have sold their house and need to move, today. Or the buyer who wants to locate next to the grandchildren, or any other myriad reason that does not appear rational in the market as a whole. Often it is those very sales that throw off the appraisal in terms of widening the adjusted sales price range. Sellers also sometimes have undue motivations, which could cause them to sell at a lower price than expected, such as divorce, death, or other mitigating circumstances. Sometimes a seller will have an undisclosed sweetener, which might induce a buyer to pay more than expected, like that fancy new Mercedes that the buyer took a real fancy to that was parked in the garage of the otherwise vacant house. Verification of any unusual buyer circumstances with a party to the transaction is very important in this instance (it is in most, but when something is off in the adjusted range, this is often the best place to start reanalyzing). A conversation with the agent who sold the property will often uncover why the buyer paid what they did, such as the need to move, or even lately, having been outbid on so many prior offers that the buyer would simply have paid whatever necessary to buy the house.

Because houses are purchased and sold by humans, and humans do not always make rational decisions, understanding the “why” of a transaction can be critical. Because humans are making the purchasing decisions, it is important to understand what drives buyers to certain properties over others. Conversations with agents in the field are critical in understanding shifting buyer sentiments. So too is visiting builder models and seeing what the builders are installing in newly built properties. The builders are reacting to buyer desires and demands, and are a good source of information. Open Houses are also an excellent source of information, not only from the standpoint of seeing your future comparable sale, but also in listening to what buyers are saying while they are at the property, and talking with the agent if no one is there. A house with a much desired feature may sell for far more than others, and will skew the adjusted sales price range if the desired feature is not adequately analyzed or even isolated.

Market fluidity also affects sales prices. At times when there is an abundance, buyers have many options and can become very picky about features and condition of houses, and this will be shown in what they pay. Conversely, when the market is tight, and there is little to no inventory, buyers may pay far above what would be considered rational. This is one reason that we need to be aware of supply and demand.

After everything is considered and analyzed, there is no good rational reason for the unadjusted range of $115,000 to $122,000 to widen to the degree it did ($96,000 to $132,000). When this happens, step back from the process and ask what is missing. Pick up the phone and call the agents involved in the sales to get buyer motivations. Next time the adjusted sales price range widens, start asking if the various factors involved in the sales that were used in the appraisal report were adequately addressed –because through the very process of adjusting, the range should narrow, not widen.

Lake Appraisal

Thanks to Working RE for permission to re-post my articles. Hope you all enjoy this one.

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Lake appraisal

What motivates a buyer to purchase a lake property? Is it the tranquility? The beauty of the water? The excitement of a speedboat and waterskiing, or casting a line into the water in hopes of landing a trophy? It is all of these things, and none of these things. The motivations are almost as numerous as the buyers looking for a lake house are, and one buyer’s paradise is another’s hell. Different types of lakes attract different buyers, and the buyer looking for tranquility is going to be very unhappy purchasing a house on a lake crowded with jet skis and powerboats. The same would be true for the buyer who wants to have all the lake toys buying on a small quiet fishing lake.

This article is geared towards residential appraisers who are providing lake appraisals for mortgage lending. Because of increased scrutiny from the underwriters, reviewers, and GSEs, and moves towards more and more repurchase demands, I hope this offers some insight into how to provide a more defensible appraisal on these complex properties.

I’ve heard many comments about the value in a lake property being all about how many front feet you have on the water, but that is not necessarily so. The amount of frontage usually relates to space that you have between neighbors and how much area you have for docking and beach toys, but consider the house sitting on the edge of a bluff, with 200 feet of frontage and 100 steep steps down to the water. What if the shoreline is also rocky and reedy? Five lots south the topography has sloped in to a gentle almost level lot and the frontage itself is a natural sandy beach. This lot is only 50 feet in width at the lake. Which is more valuable?  The value could be tied not only to the ease of the access and the quality of the frontage itself, but also very much related to the lake. For a clean swimming lake, the less wide, 50 foot lot might be much more valuable than the less accessible 200-foot lot, but for a lake that is picturesque but not a good swimming and/or boating lake, the 200-foot lot with the elevated views might be the more valuable site. It all depends on the lake and why buyers look to that particular lake.

What about the lake itself? I live and work in Michigan, and in Michigan, we are surrounded by lakes. The Great Lakes are a treasure, but not exactly the private and quiet of some of the smaller inland lakes. Many of our inland lakes are massive in size, deep and clean. Some of the inland lakes are shallow, reedy and mucky and more of a view amenity than anything else. Some lakes allow all the toys and others only a kayak or canoe. Some are merely ponds in buyer’s eyes. What one buyer wants for the lake can be completely different from another. There is starting to be a shift, as our population ages, to the desire for quiet lakes that do not allow gas motors. It used to be that these quiet “no-wake” lakes had less appeal, but in many instances now they are attracting buyers that would not have considered them 10 or 20 years ago. There is something to be said for the quiet of a lake without loud motors and loud reveling at all hours of the day and night.

All of this is a prelude, my appraiser friends, that when developing and communicating an appraisal for a lake front property, it is critical that we also address the lake. We need to talk about the lake itself, and what lakes are alternates if nothing is available on the lake which we are doing our appraisal. How large is the lake? How deep is it? What types of activities are allowed on the lake? What are the other lakes that the buyer for our property would reasonably consider and why. Spell it out for the client. Help them understand what the potential buyer is looking for. Write about the subject site, not only about the size and the frontage, but also about the topography, about the frontage, and the access to the water. Write about whether the beach is sandy, mucky, rocky, reedy, and so forth. Write about sunset/sunrise views, about parking, about docking, etc. Know your market and write about what is important to your market.

I have spelled out many reasons why most buyers consider lake properties and the subject in particular. I have laid out logical comparable search criteria, which is particularly important in lake properties because often buyers consider lakes comparable that are 20-30 miles apart; something that might scare even the most experienced of underwriters and reviewers and make the appraisers life hell if it is not well explained. Once you have spelled out the reasons for what draws a buyer to the subject lake, talk about the lakes that are competitive and why they are competitive. It sets the stage for using sometimes very distant comparables.

Take the following example write up that I completed for a lake property in my market. The lake is isolated from others, and is more of a market unto itself, but if there are inadequate sales on this lake, you cannot just make them up, so communication is critical.

The subject is located on Pleasant Lake in Freedom Township. It is on the south side of the lake. The “neighborhood” consists only of water front properties on Pleasant Lake proper, and is therefore very limited in number and has a wide variety of styles, sizes, ages, etc.


It is an unusual lake for the area due to size and access to area amenities. The lake is 202 acres in size, and has depths up to 36 feet, much of which is in the 10 foot depth range. The northern shore is sandy. There is a mixture of sand and marl on a large portion of the lake, some of which is directly north of the subject that provides good water frontage for the site. There are three areas in the lake that have deep spots. These include up to 25 feet deep along the mid-east section and another 24-foot deep spot towards the narrows in the middle, not far from the subject. Much of the lake is weedy and there have been problems with Eurasian Milfoil on the lake. Mitigation plans are in process to combat this nuisance plant.


The lake, which I consider most competitive to the subject include Clear Lake in Waterloo Township, Independence Lake in Webster Township, and Winans Lake in Hamburg Township. Only Independence Lake is within Washtenaw County and the other two are in adjoining counties (Jackson and Livingston).


Clear Lake is a smaller lake in Jackson County. It is 138 acres in size and is a natural, spring fed lake that has state land adjoining in parts. The lake has depths up to 34 feet with much of the lake around 10-15 feet in depth, much like Pleasant Lake. There is a public access point as a county park, but the access point is not for boating. Instead it is for picnicking. The lake allows for all sports but is typically quiet other than a few weekends a year. That makes it similar to Pleasant Lake. Although distant to Ann Arbor, it is in the Chelsea school district, and has a similar “vibe” as Pleasant Lake (PL) and is expected to draw many of the same buyers. Prices on the lake over the past three years have ranged from a low of $195,000 to a high of $455,000 for the sold properties, with the median sales price at $325,500 for a 2,081-sqft house. This is in the same price range as Pleasant Lake.


Winans Lake in Livingston County is a unique lake. It is not heavily populated, and is an “electric motor” only lake, which renders it much more peaceful than lakes that allow all sports. Some buyers prefer this type of lake due to the quiet and lack of worry about being hit by a boat while swimming. As Pleasant Lake is a fairly quiet lake in spite of allowing all sports, there is similarity in that respect. Winans Lake is a natural lake which is deep (up to 54 feet deep) with much of the lake in the 20 foot depth range. It is not particularly weedy and it does not have excessive housing along the lakeshore. There were only three sales on the lake through the MLS in the past three years, with the low price of $170,000, high of $452,000 and median price of $450,000 for a 2,309-sqft house. Even though this lake is not a motor lake, the fact that it is natural, is independent from other lakes, and has a wide range of housing prices and appeal, does make it similar to the subject lake.


Independence Lake is unique in that it is also very close to Ann Arbor, independent of other nearby lakes, much like Pleasant Lake. Independence Lake is surrounded by mostly State-owned land, with a state park on the north and east side of the lake. The lake itself is 192 acres and has depths up to 34 feet, with four deep areas and a lot of sandy beach area towards the north of the lake. There are cottages and year round houses only on the west and south side of the lake, and most of these properties are substantial in size (other than a number on Pellett that are seasonal). There have been four sales in the past three years on the lake through the MLS, from a low of $397,500 to a high of $630,000. The median price is $461,250 for a 2,511-sqft house. These houses are mostly much larger than those of the other lakes and the price range has been greater. Part of this relates to the size, but part also relates to the size of the lots, which are mostly an acre or more. Overall the prices on Independence Lake are slightly higher than Pleasant Lake.


Part of what makes these three lakes competitive in my opinion, is that they are natural lakes that are spring fed, are stand-alone (not part of a chain) and have a good variety of housing, plus some larger sites. There are other lakes that are also competitive, but the three noted are considered to be the best alternatives if nothing on Pleasant Lake is available. Buyers of lake properties tend to focus mainly on the lake first, and then the frontage of the property (i.e., is it sandy, a gentle slope to the lake, free of weeds and rocks, etc., as well as the amount of front footage). Houses are important as well, but with lake properties often 50% or more of the value of the property is the frontage itself. Therefore it is not at all uncommon to find lake properties that sell from $100,000 to $150,000 and have the structure torn down to build a new house. In fact, on Clear Lake a sale was located that was uninhabitable and sold for $73,500 cash in 2011 (market has increased since that time) even though it was listed for $31,000. This is land value plus the cost of demolition.

The subject Lake Frontage at the time of appointment was entirely snow covered and the actual frontage could not be observed. Per the owner the lot is sandy at the beach. Per the GIS maps this appears reasonable, as does the DNR lake maps which show a sandy area. Therefore the subject lot is expected to be a good sandy lot, which should have good appeal. In addition, the lot is a gentle slope out to the beach, which makes for good usable lake frontage of higher appeal than typical or for a lot that has a steep slope. Frontage is substantial, allowing for good privacy between the subject and the neighbors. As such, sandy beach properties with good frontage were sought as comparable sales when possible.*

Realizing this is rather a long-drawn out write-up, it may be overkill. However, given the reasons that buyers buy on lakes, and how distant comparable lakes can be (my sales were from 12-20 miles away other than one on the lake), it may be time well spent developing this type of narrative. Often it is easier to explain things at the outset, than to try to defend your report a year or more down the line.

*truncated, I eliminated some of the write-up because of length.