Lake Lanier Blog

This is perhaps the most asked question of Appraisers...How much do you "give" for a Finished Basement vs. Unfinished, A Pool, Bathrooms, Garages, Fences, Boat Docks, Barns, etc.

The answer is.....I cannot tell you..... WHAT you ask? Why not, you are the Appraiser. 

Back in the Old Days when Appraisers were trained by their Mentors, they were given a Sheet that outlined what adjustments should be made for these types of amenities almost regardless of the price range of the home!

This was DEAD Wrong! Why? Because it is incumbent upon the Appraiser to make MARKET Based adjustments for any and all amenities including square footage, beds, baths, basements, pools and Boat Dock Permits. How do we do this? By Extraction and Matched Pair Analysis (topic for another newsletter) Therefore we cannot give you a set dollar amount for amenities!

Fannie MAE has finally loosened the NOOSE that kept Appraisers from making truly market based adjustments. That noose was what Appraisers call NET and GROSS Aggregate Adjustments. Fannie MAE up until December 2014 had a Guideline in place that Appraisers Stuck to like Glue (Present Company excluded as I always took issue with these guidelines) and that was to keep those adjustments to the comps low enough so that these Aggregates did not exceed 15% for Net and 25% for Gross Adjustments. 

The problem with this was that the TRUE market based adjustments which were typically higher were not being made so that Appraisers would fly under the 15% & 25% aggregate rule and would not be asked by lenders to further explain themselves on their adjustments. Many times LENDERS would make the Appraiser pick a different comp just to make sure these Aggregates were not exceeded!!

In an idealistic world one would think the the lower the number of adjustments the more comparable the property and therefore the Aggregates would NOT be exceeded. 

Well, we all know properties have many characteristics and I would much rather use a home in the same development that was similar to the subject except for some square footage and finished basement variances which I could extract market based adjustments from, rather than to use comps outside the Subject Market area just because they were very similar to the subject in square footage, basement finish etc. You may be entering into a neighborhood that is NOT a good indicator of replacement for the subject and if a location adjustment is not made you may be under valuing the property!

I know this is a lot of technical stuff, but Fannie Mae AND Lenders with their own requirements that have nothing to do with Fannie Guidelines, have for far too long kept a Noose around Appraisers necks and the result was an UNINTENDED Consequence.....NON market based adjustments to the Comparable properties and inaccurate Appraised Values. 

Next Month.....I will be talking to you about BRACKETING Values....Another Pet Peeve of yours truly that Fannie and Lenders have forced on Appraisers in order to conform and in my opinion should be removed by Fannie Mae. 

Thanks for reading and as always we appreciate yourReferral Business......Keep it Coming!

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Lanier Appraisal Service
Flowery Branch, Georgia 30542
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Lanier Appraisal Service | 5747 GARDEN WALK | Flowery Branch | GA | 30542


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