A Guide to Understanding Residential Appraisals

To LAS each and every client is more than an appraisal, or a transaction, they are people who call on us for our expertise.  With 29 years of residential appraisal market experience, reliability is a key factor in our success.  We want to consistently be a resource for our clients, prospective clients, appraisers and the general public.  Therefore, LAS is committed to making your valuation experience better.  Through gaining general appraisal knowledge, homeowners and borrowers alike  will have accurate expectations.  The following is a great resource published by the Appraisal Foundation for potential and current homeowners to assist in their understanding of the appraisal process.  Click HERE to view "A Guide To Understanding Residential Appraisals."  

Pre-Listing / Pre-Sale Home Appraisal Services

If you're like most homeowners, you'll enlist the help of a local real estate agent to help you sell your home. In that case, it's likely that your real estate agent will provide you with a "CMA" (which stands for Comparative Market Analysis) to help determine an appropriate "listing price" for your home.

Pricing your home correctly is absolutely vital if you want to minimize the amount of time it takes to sell your house and maximize your profit.

Let's assume you're working with the most experienced real estate agent, even then it's probably in your best interest to hire an independent third-party who can provide you with an "objective" opinion of your home's market value and selling price.

Often, even when working with the most ethical real estate agent, you may notice that they have a bias towards pricing your home either too low or too high. Let's look at each possibility individually.

Pricing Your Home Too Low

Obviously pricing your home too low is going to take money out of your pocket and you don't want that. But you have to realize that this is a definite possibility when relying solely on a real estate agent's opinion, because after all, they don't get paid unless your home gets listed and sold (and the quicker the better). And if you think that just because they work on commission, they will fight to get you "top-dollar," think again. Their motivation may not be as transparent as you think. Let me explain by showing you a couple of hypothetical examples.

Scenario A: Your house sells for $500,000. With a typical commission agreement of 5%, the commission paid to the real estate agent is $25,000. The listing agent's office usually only gets one-half of that; $12,500 goes to the listing agent's office and the other $12,500 goes to the office of the agent that brought the buyer to the house. Further, your listing agent usually only gets about one-half of the money that was paid to his or her office (the rest goes to the broker that runs the office). So that leaves him or her with about $6,250 or 1.25% of the actual selling price of your home.

Scenario B: The same house sells for $520,000...$20,000 more than in the first scenario. And we've already established that your listing agent will likely only end up with about 1.25% of that $520,000, which is a total of $6,500. Yes, that's right, in this scenario the listing agent will only end up making about an extra $250 for getting you an extra $20,000!

That's not much of an incentive to fight for "top dollar" for your home. It's much easier and safer for them to price your house for less than it's worth in order to make sure it gets sold and ensures they make a commission.

The bottom line, although real estate agents do work on commission it's really not in their best interest to fight for "top-dollar."

Pricing Your Home Too High

Although you want to sell your house for as much money as possible, setting an unrealistically high listing price is likely to take money out of your pocket in the long run. And just because a real estate agent tells you they can get you a certain price for your house (no matter how good it sounds to you)...beware.

There is an all too common, but little talked about practice in the real estate industry. It's called "buying the listing." Essentially what it means is that some agents will try to "buy your listing" by telling you what you want to hear - that your home is worth much more than the other real estate agents have told you.

They do this knowing that your house won't sell for such an inflated price, but they tell you this anyway in order to get you to sign an exclusive listing agreement with them (rather than with their competitors). Once they have you "locked-in," soon after they'll begin trying to talk you into lowering your asking price (because they know your house won't sell for the inflated amount they convinced you it was worth).

And while it may not seem to be a big deal to "start high" and then work your way lower if no one makes an offer...experience has shown that houses that are overpriced from the outset usually end up selling for less than they would have if had they been priced accurately and competitively from the beginning.

This is simply because an overpriced home does not attract buyers. And a house that sits on the market too long becomes "stigmatized" and becomes much harder to sell. Its human nature really, the longer a house sits unsold, the more people begin to think that there's something wrong with it. The end result is that you have to keep lowering your price until it's viewed as a bargain and can finally attract buyers.

The Value of a Home Appraisal

Pricing your home accurately and competitively, relative to other comparable homes in your market, is the key to selling your home for as much as possible, as quickly as possible.

And to accomplish that, you need an expert opinion from an unbiased source. That's where LAS can provide you with a pre-listing appraisal that will help you make an informed decision about how to price your home correctly, so you can maximize profit and minimize it's time on the market.

Call us today at (631) 422-5100 to speak to one of our experienced administrative staff. We'll be happy to answer all of your questions and schedule an appointment time that is convenient for you.


 

Don't Overpay For Your New Home

Protect Yourself by Getting Your Own Independent Home Appraisal

You've been shopping for a new home and you've finally found one that you think you'd like to make an offer on or you've already made an offer, but you're not quite sure what the property is worth. Obviously you don't want to overpay, but how can you know for sure what its worth?

This is where we can help you. One of the best ways to make sure you're not overpaying for your new home is to hire an independent real estate appraiser to provide you with an unbiased opinion of value.

No One Cares More about Your Money than YOU

No one else cares more about your money than you. Not your real estate agent, not the bank, and certainly not the seller. That's why it's up to you to make sure you don't overpay for your new home.

The hard truth is that it's in everyone else's best interest to make sure the deal goes through, regardless of whether or not you're overpaying. You're the only one who really cares if you're overpaying for your new home and it's up to you to prevent that from happening.

Don't make the mistake of relying on the bank appraiser to protect you from overpaying for your new home.

Often times, the appraiser hired by the lender is prompted by the purchase price. Although this type of unethical (and illegal) behavior is deplorable, rest assured that it does happen.

Protect yourself by hiring your own independent real estate appraiser to provide you with an unbiased opinion of the property's value. Only then can you have the peace of mind of knowing that you're not overpaying for your new home.


 

Home Sellers (Real Estate)

Important Information for Anyone Contemplating the Sale of Their Real Property

You’ve cleaned the carpets, straightened out the closets, painted the interior, trimmed the hedges and the unmistakable aroma of freshly baked bread is wafting throughout your home. Your house is ready to sell in the shortest period of time at the highest possible price. Good... But at what price? This, above all else is the million dollar question...

Do not overprice. The first few weeks of marketing your home are usually the most crucial. Seasoned buyers, who have been looking steadily (many have already sold their home and are ready to buy), have learned the market well. Price your home reasonably and be flexible. Market conditions change rapidly and continually in this economy. You must keep an open mind and explore whatever alternatives that are presented.

Be sure to listen carefully to all the buyer's terms, not just the price. A potential buyer who will pay your asking price but only subject to the sale of his/her own home, is of no use to you if your needs call for a quick sale. Sometimes, the first offer is the best offer. Over the years, we have observed numerous sellers, who were firm on their price, often refusing reasonable market supported offers and terms. Even worse, sometimes, sellers will get nervous and drastically reduce their asking price to below fair market value after being listed for a long time at an unrealistically high level.

OK, so what’s the right price??? A seasoned, state certified real estate appraiser will discretely provide you with an independent and completely unbiased estimate of the fair market value of your home or other real property. Your appraiser will guide you to a reasonable asking price and serious buyers will respond. It is imperative that you do not overprice your home when it first comes on the market.

There are several reasons for this. The first is obvious. If the price is too high, no one will pay it, and the house will languish on the market unsold until you reduce the price or the market rises to the level of your asking price. Another reason is less obvious. If your house is sold well above its supportable market value to an uninformed buyer, it will not appraise for the selling price and your potential buyer will have trouble obtaining a mortgage. Many times when this occurs, the parties are unwilling to agree on a reasonable solution, the transaction is cancelled and everyone walks away having wasted several months. Sometimes it is possible to salvage the situation, with everyone compromising, but wouldn't it have been so much easier, if the transaction were put together initially, based upon solid market evidence of the real value of the property in question.

Be smart, price your home realistically, armed with solid evidence of true market value, and you can be assured of the highest possible price in the shortest period of time.

A few Suggestions when dealing with realtors, brokers or agents

In any given real estate market there are always some properties that are just simply overpriced. The reasons these properties end up in the inventory of a real estate broker are varied. Sometimes an owner insists on listing a property at a price much higher than it can realistically sell for in spite of a broker or agent's recommendations. More often properties get listed over a realistic price because the brokers and or agents are essentially "buy the listing." It's tough competing with many other brokers and agents to list a property for sale. There often is a tendency among sellers to list their property with the agent who tells them their house is worth the most money. Because of this factor, many agents will knowingly inflate the "value" they give to the sellers strictly to get the listing. They figure that even though the house won't sell right away, later, after the seller begins to get anxious to sell, they will be able to convince the seller to do a price reduction. An agent who does this is wasting months of a seller's valuable time.

The bottom line is many properties that are listed in most areas are priced too high. Some may well be on the market for longer than the owner anticipated. Suggestion: When you are interviewing different real estate brokers or agents, be very aware of what you have just learned about the tendency to take a listing at any price to get a sign on the lawn. The agent who is telling you what you want to hear about the value of your home may be doing it just to get the listing, especially if other agents quoted you lower prices. There is only one truly unbiased person, qualified to advise you with regard to the real fair market value, a seasoned, state certified real estate appraiser. An independent appraiser will discretely provide you with a completely unbiased estimate of the fair market value of your home or other real property.

Real estate appraisal, property valuation or land valuation is the process of valuing real property. The value usually sought is the property's market value. Appraisals are needed because compared to, say, corporate stock, real estate transactions occur very infrequently. Not only that, but every property is different from the next, a factor that doesn't affect assets like corporate stock. Furthermore, all properties differ from each other in their location - which is an important factor in their value. So a centralized Walrasian auction setting can't exist for the trading of property assets, such as exists to trade corporate stock (i.e. a stock market/exchange). This product differentiation and lack of frequent trading, unlike stocks, means that specialist qualified appraisers are needed to advise on the value of a property. The appraiser usually provides a written report on this value to his or her client. These reports are used as the basis for mortgage loans, for settling estates and divorces, for tax matters, and so on. Sometimes the appraisal report is used by both parties to set the sale price of the property appraised.


 

ROI of Home Improvements

ROI, or return on investment, is the percentage on what a homeowner will recoup from a renovation project.  According to Bob Formisano, About.com Guide, home remodeling "accounts for about 40% of all residential construction spending and about 2% of the US Economy. From 2001 to 2005, spending on home remodeling grew 40% when it reached $215 billion in 2005. And 2006 is projected to reach over $230 billion in home remodeling expenditures according to the NAHB."  When the housing market was rising, homeowners chose to stay at the property and remodel.  It was actually less expensive to do so in most cases on Long Island.  Every year in May Remodeling Magazine publishes the Cost vs. Value Report, a helpful guide for homeowners and sellers looking to remodel.  It highlights national data of home remodeling projects in 9 regions across the United States.  The report exhibits and compares the project, and the average cost of the job with the resale value.  The cost recouped is presented as a percentage, on a national or regional level, and substantiates which projects give the best rate of return on the investment.  See our article in LAS News to find out more.


 

Estate Planning and Tax Purposes

How to Calculate the Value of an Estate

Real property is real estate owned by the decedent, or living person, whose estate value you are calculating and includes a home, business, or rental property. The IRS and most state’s department of revenue require real property values be determined by a licensed and certified residential appraiser for tax purposes. This property valuation is used to determine if a federal estate tax return is due to the IRS (sample appraisal form). This valuation of property is also used to determine a new income tax basis for decedent’s assets once passed on to the heirs.

A date of death (DOD) valuation requires an historical appraisal, also known as a retrospective appraisal, with the fair market value (FMV) of a specific date in the past.  After a loved one’s death, personal representation may need to calculate the value of decedent’s estate for tax and distribution purposes. Furthermore, a party may also wish to ascertain the value of his/her own estate as part of the estate planning process in order to make appropriate decisions and provisions to decrease the amount of taxes that will be due from the estate and its heirs. 

Our opinion of value is prepared by a state certified residential appraiser and a well supported and detailed appraisal report as to how the appraiser arrived at his/her conclusion of fair market value of the property.  The appraisal report will demonstrate to the user that the appraisal is well founded, substantiated, and meets with Treasury Regulations and state agency requirements.  An important factor, not to be over-looked, is what the IRS looks for in an appraisal.  First, the accreditation of the appraiser; all of our appraisers are state certified and have been for an average of 12 years or more.  Second, the rationale of "Fair Market Value" (FMV) opinion as defined by the IRS, "The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts."1  Third, the validity of the comparable research; are the comparables within the subjects defined market area, same school district or city?  How recently have they sold since the effective date of the appraisal?  Along with many other factors, an appraiser must use due diligence in his/her search for comparables by exhausting every data source available.  Lastly, the IRS examines the overall professionalism of the appraisal report.  Any opinion of value prepared by one of our state certified residential appraisers for use in planning and estate probate is well supported by a detailed report as to how the appraiser arrived at the value conclusions.  With LAS you can rest assured all of our appraisal reports meet Treasury Regulations.  Furthermore, all of our experienced real estate appraisers are qualified to handle these types of situations.

Our job is to relieve the stress of the valuation process of any real property involved in the estate. Attorneys, accountants, financial planners, executors and others rely on Lauritano Appraisal Services (LAS) for date of death (DOD) real estate valuations and have trusted our appraisal services for over 25 years. When you use LAS as your estate tax (or planning) appraiser, you can be confident that the appraisal will be completed in a professional and efficient manner by a state certified appraiser experienced in all guidelines set forth by the IRS tax regulations (Section 1.170A-17a).

Extensions Form ET706

Furthermore, the IRS allows 9 months to file estate tax paperwork, and up to 15 months with an extension. Wherefore, the executor and estate planning attorney agree that the valuation of the estate would be less on a certain date within 6 months of the death, they can file for alternative valuation and an optimal date will be used to determine the fair market value of assets. For example, if the testator were to die on January 1, 20xx, then the value of all assets might be calculated on that date. The difficulty with this method is if the assets in an estate changes significantly, for instance if they appreciate, the estate might benefit being taxed at lower original value. In reverse, if the value of assets depreciate, it would be unfair to tax at a higher value 9 months after the DOD.  In addition, if the assets depreciate enough, the taxes could destroy any value in the estate.  Thus to rectify thie event, the IRS allows executors to select an alternate valuation date of up to 6 months after the death of the principal.  However, avoid submitting an appraisal that is more than 2 years old or an appraisal that does not meet other specific IRS guidelines for estate tax valuation of real property.  You may lose time and money.


 

Tax and Casualty Loss Appraisals

On October 30, 2012 President Obama declared a Federal Disaster in the State of New York due to Super Storm Sandy which hit our area on October 27, 2012. Living in New York, the disaster and devastation of the recent events caused by Hurricane Sandy have struck many. Here at Lauritano Appraisal Services, we are well aware of the extent and prepared to help you make the process as easy as possible.

Damage to personal, income-producing, or business property may be a claimable tax loss deduction on your tax return. The loss/deduction must be taken within the year the damage occurred. What this means is that any damage (flood or wind) caused by Super Storm Sandy, which again has been declared a Federal Disaster Event, can be made a Casualty or Loss Deduction on the tax return for the year that immediately preceded this disaster or the year of the Disaster (Federal Tax Return Form 4684 see lines 5 and 6).

The process in determining the Casualty or Loss Deduction requires full residential appraisals before and after the Super Storm to ascertain the amount of the casualty loss as described below:

1. A certified retrospective appraisal to determine the opinion of market value of the home or property before the Super Storm.

2. A certified current appraisal to determine the opinion of market value after the storm inclusive of the damages that were incurred due to the Super Storm. This will determine the decrease in fair market value or the casualty loss of the property as a result of the Federal Disaster or Super Storm Sandy. 

3. Finally, add any insurance or other reimbursement received or expected to receive (there are limits to the amount of the casualty loss that may be deducted for damage to personal-use property) to the appraisal inclusive of the damage and subtract that from the opinion of market value before the storm. This difference will be the Allowable Deductible Casualty Loss.

With LAS you can rest assured that you've hired a competent and professional firm who will provide you with an accurate appraisal. LAS can provide a current "fair market value" or a retrospective opinion of value, whatever the situation warrants. All of our state certified appraisers and support staff is sensitive to the need for discretion and confidentiality in these matters.

Our customer service representatives would love to hear from you!  Feel free to contact us anytime via email at Appraiser@LasHomeValue.com or call us toll free (888) 317-6957 and one of our excellent customer service representatives will respond to you within 24-48 hours.


1http://www.taxalmanac.org/index.php/Treasury_Regulations,_Subchapter_B,_Sec._20.2031-1