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.


Courage of your convictions

Courage of your convictions


…….Or put your money where your mouth is

As an appraiser who works a very small area, and has for many years, I am fortunate to have quite good relationships with the agents in my community. Because of this, I get a lot of calls and emails asking for help when they run into situations with appraisals on their sales. Often the situation involves an appraisal that is under sales price where the agent is adamant that the appraisal is wrong.

Yesterday I had an email from an agent who told me that she had done her CMA and had arrived at an estimate of $325,000 for a sales price and that the house went under contract for $321,000, so pretty darn close to what her estimate was. The appraisal came back at $286,000 which is quite a bit lower than sales price, and the buyers and sellers were in negotiation to have the seller come down in price and the buyer bring more money to the table. The agent was adamant that the appraisal was faulty and used old sales that she did not think were appropriate. I offered to do a review of the appraisal as well as provide an opinion of value, all for a fee of course.

In this instance the agent balked and said that she didn’t want to spend the money; that the seller didn’t want to spend the money. My question is why? If you are convinced the appraisal is wrong, why not spend the money to either show that indeed the appraisal is wrong, or to provide a second opinion that the appraisal is actually correct? If there is $35,000 difference at stake, isn’t $500 or so for a second appraisal or review a worthwhile use of money? Or, is it possible that the reason that the agent didn’t want to spend the money, is in examination, that the appraisal might be fine?

What I really want to know from agents is why they don’t take the route of getting a second opinion from a local appraiser who knows the market well? If the review indicates there is a problem with the appraisal, then the agent can share it with the lender to see if there is recourse, such as a new appraisal, or a review from one of the lender panel appraisers. If the appraisal is shown to be fine, then there is a level of comfort that the agent and seller can have to negotiate, or move forward (or not) with the transaction.


Latest comparison to online valuation models

Latest comparison to online valuation models

It is quite frustrating to see how many people rely on these online value estimators to either price their home, or use it for marital dissolution, or other reasons. As will be shown in a minute, these can be off by a significant amount, either low or high.

I just ran sales in Ann Arbor, in the 48103 area for the past couple of weeks. I then compared the sales prices to two online value estimators and State Equalized Value times two. The only consistency to the information is that these online value estimators overestimated on houses in need of work and underestimated on those houses that were remodeled. In only a small percentage of cases, were the value tools within five percent of the actual sales price.


Appraisals are “opinions” of value by educated professionals. They are opinions based on factual data, but in the end of the opinion of a professional. Not all appraisers have equal qualifications and experience, and therefore not all opinions are equal.

If you are shopping for an appraiser to help provide you an independent opinion of value, base your selection on the breadth and depth of that appraiser’s knowledge and experience, not the price of the appraisal assignment. After all, it is typically your client’s largest investment, and does it make sense to be penny-wise and pound-foolish?

Rachel Massey, www.annarborappraisal.com


Another bifurcated market snapshot

Bifurcated Market Snapshot


In my venture to stay abreast with what is happening in Washtenaw County, I offer the latest study of differences in median sales price and number of sales for one market within the larger area.

In short, prices are up from the same time last year, but there are signs of weakness and even a possible decline in place in this market segment right now.


The analysis relates to all sales exposed through the Ann Arbor Area Board of Realtors MLS between 1/1/11 and 4/1/14 in the one area. The data is in two graphs, one related to the number of sales and the other to median sales price. These two graphs compare arm’s length transactions to REO transactions in both categories.

This data includes everything in the MLS so there are duplicate listings.  This occurs when agents have listings in both Realcomp and the A2BR MLS. Since this data is run on the median price as opposed to average price, it should be very similar on that graph, even with duplicates.  Only the Great Lakes Repository was omitted from the search results since there are not very many of those and they tend to be triplicates as opposed to duplicates.

These sales are run on a yearly basis, but one month at a time, so that each segment includes one years’ worth of data. Doing so eliminates the seasonality that is common in Michigan and should correspond with the Board statistics (if they were to go by school district or area as opposed to the entire MLS).


Total number of sales/arm’s length compared to REO

Here is a snapshot of the number of arm’s length sales compared to the number of REO sales. At first there were more REO sales and now there are far more arm’s length sales.  This means the distress sales have largely made their way through the market at this point, leaving far fewer available. This is a good thing and helps stabilize the market.


Median price comparison

The graph above is the median sales price comparison between arm’s length and REO. In the past five months, there has been stability to a slight decline in arm’s length sale prices, and stability in the REO market for the past three months. With this data, you can see the ebb and flow as to prices rising, declining, rising and then stabilizing to dipping just slightly in the past couple months. This could be related to the very difficult weather our area has experienced this winter.

Comparing the most recent year-to-year results in the arm’s length category there is an increase in median price of 9.41%. Comparing the same with REO sales, the increase is 49.88% for median price. Clearly, the largest increase in this market has been with the foreclosed properties, increasing as these numbers dwindle.

I find that tracking the contract-to-listing ratio a great predictor of activity. This is simply the total number of contracted listings compared to the total number of listings, and it relates to general activity levels. In the arm’s length category as of 4/3/14, it was 33.33%, which is reasonably robust, but certainly not off the charts. At this level, it is what I would consider “in balance” to slightly favoring sellers, due mainly to lack of inventory.

Inventory is low with 46 offerings not under contract (4/3/14) compared to 237 sales the year before. That equates to less than two and a half months inventory based on the previous year’s sales. Perhaps the price increases have put a damper on interest in some of these sales, and the lessening of the REO inventory means there are fewer good deals to swoop up (less than 1.5 months inventory of REOs).

Based on the data, my opinion is this market as a whole is stable in price, undersupplied, and may be feeling the effects of the price increases last year starting to put a damper on current price trends. This is the entire area market, and every submarket is unique. That means you could be looking at a market that is in an upward trajectory, or even one that is starting a downward track, and as such should always try to whittle down to the market in which your property actually competes. The data above is purposely broad.

As always, I hope that you have found my musings useful. Just remember it is the educated opinion of one appraiser. I am always available to help Realtors, attorneys and property owners alike.

Rachel Massey www.annarborappraisal.com

What is a bifurcated market?

What is a bifurcated market?

I am sure you have all heard the term bifurcated before; the question is what does it mean?

Basically a bifurcation of the market relates to two different market segments that may have the appearance of being the same, but in essence are not; two different branches as it were. In order to show this in action, I have taken the Ann Arbor Board of Realtors MLS and examined one area that is fairly homogeneous (Lincoln School District) and separated the foreclosed (REO) properties from the arm’s length sales. I have then presented them as graphs, with a little bit of analysis underneath so you can see what appraisers deal with on a daily basis.


This first graph includes the number of sales over time for both foreclosed properties and arm’s length sales. In all instances the data is run on annualized monthly data runs, which include one years’ worth of sales at a time, run by month (eliminates seasonality). Clearly, the number of foreclosed properties has been declining at the same time the number of arm’s length sales has been increasing. What do you expect to see when this happens?

Hint, price increases!


Look at the data above; price increases all around after a period of stability. Price increases are happening in the REO sector at a quicker rate than with the arm’s length segment. The arm’s length segment shows price stability over the past five months whereas the REO market still shows an increase. This is bifurcation.

Observe the difference in median sales price between the arm’s length sales and the REO sales.  Generally, there is a $20,000 gap or more in price between the arm’s length and distress sales. If there were an adequate number of arm’s length sales available, would there be any reason to consider a foreclosed property in comparison to an owner occupied house in good condition? The only time this might come into play is when there is some feature that the appraiser is trying to analyze that requires using distress sales. You will often see that happen when the subject property is larger than everything else is (or smaller) and the appraiser attempts to “bracket” the size.

If you consider all the REO sales over time, the prices have increased in median price 25.48% over this two plus year period. If you analyze arm’s length sales, prices have increased 15.38% for the same period (10.78% of it in the previous year). While prices have obviously improved, the difference is not as great as the news media has indicated lately. By comparing an entire market there is a false sense of greater improvement, simply due to fewer distress sales showing on the market. Which way of looking at the market do you consider to be more realistic?

As always, if you have valuation needs in Washtenaw County, think of Rachel Massey first!

Rachel Massey, SRA, AI-RRS www.annarborappraisal.com




January 25, 2014 Washtenaw County market snapshot

January 25, 2014 Washtenaw County snapshot


On January 11, 2014 I posted a snapshot of the Washtenaw County market showing the number of arm’s length sales in each school district as well as the change in price per square foot over time and the current number of offerings and houses under contract.  

After some consideration, I have eliminated all “to-be-built” houses as they are starting to flood into the market locally. These houses are not truly on the market as they are not yet started and are not available for immediate, or even generally quick, occupancy.

The data below is a snapshot of the supply and demand factors for the various Washtenaw County markets as of 1/25/14 through the Ann Arbor Area Board of Realtors MLS.  Instead of showing price trends in this snippet, this data shows the number of arm’s length sales of houses that are already built, or under construction, compared to how many are on the market at this time that are NOT showing as under contract.

  • The number of sales relates to one year prior to 1/25/14 and the number of active listings are the number that were available and not under contract on that day.
  • The number of months’ supply relates to, given the number of historic sales, how quickly the current inventory “should” absorb.
  • The contract-to-listing ratio relates to how many of the current listings are under contract and to me, that number is most telling of current activity. Historically I find that between 25% – 30% is a typical active market and that less than 20% is generally slow, favoring buyers. Over 35% we start to see a seller’s market.

Without further ado, here are the results:


Based on this information, Ann Arbor still is in seller’s market territory, as is Lincoln and now Milan (when I did this last, Milan was showing over-supplied but that relates to a large number of “to-be-built” houses). Saline, Dexter, Chelsea, Ypsilanti, Willow Run and Whitmore Lake seem to be in a more normal market, and Manchester is slow with the greatest supply compared to historic demand. In most cases, inventory is in the 2-month range, which is an under-supply. Ann Arbor is particularly undersupplied.

Not all houses that are on the market are appropriately priced, and if a house is over-priced for the market (due to condition or functional/external issues, or just too optimistic pricing); these houses show as part of the supply chain but are not yet truly competitive. When Realtors ® talk about how they are finding the market to be highly undersupplied, my opinion is that the market itself is undersupplied, but not significantly so, but there is a definite undersupply of appropriately priced houses in good condition.

If you are curious about the market from the perspective of a 30-year market veteran, follow this blog or contact me directly. I have experience both from the sales side (from 1984-1989) and as a full-time appraiser since 1989. I am always happy to discuss your needs on the appraisal end and am open to discussion as to how to best present data that helps you.

All the best to all of my readers!  Rachel Massey @ www.annarborappraisal.com