Whidbey Island Living
Whidbey Island Living is hosted by Reid Schwartz. Reid shares great things to do, places to go, and hidden gems found throughout the communities that make up the island and interviews some of the fascinating people who make this place an amazing place to visit or to call home.
Whidbey Island Living
EP 13 Ask an Appraiser
Have you ever wondered what truly determines your home's value? In this eye-opening conversation with veteran appraiser Alan, we pull back the curtain on the mysterious world of property appraisals and discover that your home's worth can be mathematically broken down into surprisingly precise components.
Alan takes us on a journey through his unexpected career path from religious studies to becoming a respected appraiser on Whidbey Island, offering rare insights into how the profession has evolved since the 1980s. He explains how the 2008 housing crisis fundamentally transformed the industry, creating a firewall between lenders and appraisers through Appraisal Management Companies to prevent the manipulation that contributed to the financial meltdown.
The conversation reveals fascinating distinctions between conventional and government-backed loans, with VA and FHA appraisals requiring more rigorous inspections of everything from attics to utilities. You'll learn why that bare wood on your deck might fail a government appraisal while passing a conventional one, and why the appraiser is checking if your oven works.
Perhaps most valuable is Alan's breakdown of the "value pie" – how an appraiser mathematically determines what your home is worth. Square footage might account for 30% of your home's value, while that stunning water view could represent 12%. Understanding these components helps explain why homes sell for what they do, and why sometimes properties appraise for $250,000 over asking price when multiple offers come in.
If you're buying, selling, or simply curious about real estate, this conversation provides essential context about how property values work in today's market. And the warning about a looming appraiser shortage might just explain why your next home purchase takes longer than expected to close.
Reid Schwartz is not just a real estate broker; he’s a dedicated leader and active participant in the Whidbey Island community. A Navy veteran and 30-year island resident, Reid brings a unique perspective and deep-rooted passion to his work. As a proud Rotarian and a founding board member of North Whidbey Hearts and Hammers, he’s committed to making a difference in the lives of those around him. He also serves as the organization’s Public Relations Director, always on the lookout for volunteers eager to give back.
Whether it’s helping clients buy or sell their homes, connecting locals with community resources, or creating opportunities for neighbors to support one another, Reid is driven by a desire to make Whidbey Island a better place. He’s always looking for creative ways to help—whether it’s growing local businesses or offering a hand to those in need. For Reid, it’s about more than just real estate; it’s about building a stronger, more connected community through kindness, collaboration, and service.
Reid can be reached:
Phone: (360) 929-4808
Email: reid@reidschwartz.com
Website: reidschwartz.com
There's a beer. I mean, I know, I know I know right, I know so Alan hey, we're here to talk about appraisals.
Speaker 2:Tell me a little bit, how'd you get started in appraisals, in the appraisal business?
Speaker 1:Well, I started with the religious studies degree, so you can see that naturally flows. Yeah, absolutely To appraisal.
Speaker 2:Like a house of God. Appraising a house, that's right.
Speaker 1:I graduated from high school here in Oak Harbor and then was in Seattle for a few years going to school, was able to come back and start appraising with Carol Seth who had been appraising one of the early appraisers in Oak Harbor and on the island. You know she was one of those early, the early iterations of some of the first banks on Whidbey. Anyway, that's where she started. So she started appraising in the 80s. Licensing for appraisals for appraisers came on the scene in the early 1990s and that's when she went pretty much independent.
Speaker 2:As an appraiser? Did she just work directly for the bank? Yeah, she worked directly for the bank.
Speaker 1:She worked directly for the bank.
Speaker 1:There's been a lot of changes over time. Oh yeah, it was quite a different working model how we went about appraising properties and valuing them and the requirements of the banks had to adhere to or lack of requirements. So you know, with licensing that kind of created a sweeping change. So then in the late 90s I came and started apprenticing with her relocated back to the island. I was working with her until she retired in about 2005. I had brought one other appraiser on to work with me who subsequently moved on to other adventures.
Speaker 1:But I have been appraising here on Woodby ever since, covering mostly specializing in Woodby Island but a small percentage in Skagit County for Fidalgo Island and Camino Island and kind of off island market. So I just work independently and I work for primarily for lending institutions doing mortgage loans for purchases and refinances. But I also do private work valuations for estates when there's been a passing and they need retrospective appraisals like date of death appraisals when there's been a passing and they need retrospective appraisals like date of death appraisals. Land trusts who are acquiring property require appraisals, various appraisals for tax purposes and so forth. So an appraiser is just engaging with the mortgage market.
Speaker 2:When somebody has a homeowner, you know, when somebody is buying a home, they go, hey. I mean I tell them, hey, it's got to get appraised. The bank is the one that actually orders the appraisal. But how does that go? What's that process? Because they don't go directly to you.
Speaker 1:There is an intermediary. So prior to the great recession of 08, lending institutions could operate quite liberally, engaging appraisers as they saw fit. What kind of emerged on the heels of that collapse in 08 was that there was a lot of manipulation. So values were being manipulated, so work was being either assigned or appraisers were being rejected, based on essentially developing predetermined values.
Speaker 2:You don't want to appraise it for this much. We'll find somebody that will.
Speaker 1:Yes and there were plenty of appraisers who were quite unethical and regularly engaged in that kind of behavior and unfortunately it created a lot of problems Subsequent to that skills of the Frank Dodd Act. As we were trying to recover our financial institutions, they decided to change the whole working model. So essentially, appraisers are engaged through a third party called an appraisal management company and they are the intermediaries between the lenders and the appraisers. And that firewall was established to keep manipulation from happening, to prevent the hidden, undisclosed pressure on appraisers to hit or target values. So, as it is now, there are probably about 130 different appraisal management companies that operate in Washington state. Oh, wow, Just in Washington, yeah.
Speaker 1:Just in Washington. Many of them have become. There were initially. There were some regional management companies. There still are a few of those, but mostly you're looking at national organizations that function in the predominance of states. The individual fee appraiser, like myself, will apply to become a panel appraiser for those different management companies, and they ideally. They do background checks, they look at resumes, they look at work product, they kind of establish the credibility of the appraiser and then essentially send them work to bid on. So usually there are some management companies that will just I have a relationship where they just send me work, I just reply and go get it. Sometimes, though, there are management companies who will put out to bid, so they'll hunt for the lowest bidder.
Speaker 2:And I've heard that term, having a panel, each management company, the group of appraisers, that is their panel, or are there different panels?
Speaker 1:That's correct. Each management company has their own set of appraisers that they approve to do work. What we've seen is that where some of the management companies came onto the scene they teamed up with some of the larger mortgage entities. Because the industry has changed so much we have a real proliferation of a kind of a broker model. So we have a lot of independent mortgage companies that are writing loans. So those AMCs represent a lot of different mortgage companies. So I don't always know who the lender will be that I'm going to work for. But it's usually within that set of appraisal management companies. The only caveat is for, like, veterans Affairs appraisals. So VA has a fixed roster of appraisers. So to do VA appraisals you have to be approved to be on the VA roster and then lenders order directly to those roster of appraisers outside the AMC model.
Speaker 2:And that was something I wanted to get to was when you're doing an appraisal, there's a difference between a homeowner's concern with you know what's going to go wrong on my appraisal. Make it look good, it needs to present well, but when it comes to there's certain things that a VA or I guess any government insured loan, va, fha, usda, do they pretty much all fall in the same rules.
Speaker 1:Yeah, they are very. There's a lot of overlap between the requirements that VA imposes and FHA. It's a little bit more rigorous. So you see things like on the conventional side, appraisers aren't required to stick their head in the attic or stick their head in the crawl space. Va it's mandatory, fha it's mandatory. Fha requires that we test to see if utilities are operational. For instance, is the range oven functioning, is the heating functioning, the lights function. So they go a little bit above and beyond what the traditional conventional market requires. So there's a little bit more. There's a little bit more work there for the appraiser. But they also have some real. They have some unique stipulations or they have a scope of work that they require appraisers to adhere to.
Speaker 2:That's a little bit more rigorous than, say, just traditional conventional loans that you get I've seen come up is uh, that I've not seen on conventional is a gfi, gfcis, oh yeah, um okay, bare wood.
Speaker 1:Yes, bare wood is a big one outside of the house bare wood, rotten wood and decks and stuff.
Speaker 2:Yes, that kind of goes with the bare wood thing I would imagine pretty intuitive.
Speaker 1:Most of the the requirements that I make appraisal subject to, uh, within the FHA and VA circles is it's just that bare wood on fascia, maybe some rotting boards on the deck, those sorts of things. Um, really intuitive. So, and then stuff that's like anyone's going to recognize as a problem Is the floor mushy around the toilet? Has there been a previous leak? Is there mushiness under the vanity in the bathroom? Because there's a slow leak, like things that you're really are going to pretty transparently recognize loosely. That's kind of it.
Speaker 1:The conventional side. They're just a little bit more tolerant, kind of an as-is. But even VA has moved over over the last decade kind of more into that camp where they're willing to accept a property on the inside as long as it's structurally sound and everything's serviceable and working. There's bare wood or damaged floors or those kinds of things. They want us to just appraise it as is. Because there was a history where there was an intimidation that came along with VA appraisers or VA appraisals in which you know there was this implied understanding that VA required a little bit more. You couldn't have a sub-average interior condition. Well, they've completely walked away from that so you can have an inside that's in low average condition, but they want to make sure enclosure is sound.
Speaker 2:Keep the weather on the outside, because the water destroys everything.
Speaker 1:It's amazing and as appraisers, we traditionally one of the things that is required by all lending institutions, but also VA, is that we assign an effective age of the dwelling.
Speaker 1:So the house might be built in the 1940s but it's been rehabilitated, revitalized, got an effective age of like 10 years now and they use that to base how much life is going to be there for that house. Is the house going to last longer than the 30-year mortgage is what they're really concerned about. We assign an actual, an effective age. But the thing that's peculiar to me is that as long as you keep particularly in the Northwest here as long as you keep the roof solid and you have real wood siding and you keep it relatively maintained I was in a house built in the 1930s the other day and I'm, like you know, we start out with like an with an estimated actual age of 70 to 80 years, but this house, you know, is creeping on 90, almost 100, right, and it's still going strong, it's still marketable.
Speaker 1:So it kind of really that whole effective age kind of really revolves around how am I going to compare it with other homes in the market? And appraisers try to look at similar effective age dwellings. So if a house has been taken we have tons of these in our market that they've been quote flipped or rehabilitated and you'll have a house built in the 50s. You walk in the door and it feels like it's five years old or three years old, like it's brand new right. So it has fresh life in it. It's going to have a lot of years ahead of it and, quite frankly, it's more comparable in some ways with much younger actual age homes. So that's kind of how we look at it.
Speaker 2:So when you do an appraisal, what geographic area do you look at? That? A house, so a house, say, over on the east side of Oak Harbor, you know, built in 1960, how big of a geographic area do you look for comps in?
Speaker 1:Really, I think first of all you have to tether into the fundamental problem what is the property that I'm trying to value, or we're trying to value? Who are the market participants that are going to be shopping that and this? A lot of contrast can come when you say another example. Let's take a waterfront, high bank waterfront along Scenic Heights Road, the market area that I'm going to search for comparables for that waterfront, it might be expanded significantly so that maybe I'm moving further south on the island, further north on the island I'm searching a greater geographic proximity, because the typical consumer for that type of product is looking at, well, what's available in the market.
Speaker 1:Typically we don't have a lot of those homes in the market. And two, the location, nuance and appeal is kind of going to be different than if we say, for instance, look at this house in Southeast Oak Harbor. For the house in Southeast Oak Harbor I'm going to look at city limits proper. Ideally I'm going to look in. I'm going to look carefully at within a half a mile to a mile, what is transact. What we've seen recently is sales drop significantly. So the sales volume has dropped off in our market. There's fewer data points to analyze.
Speaker 1:So when there's fewer data we go back further in time and we search out more broadly. But generally speaking, you know city limits proper. I'm going to be looking city limits proper. The exception is going to be where we've got something that's got a significant view influence or it's a very high quality dwelling, it's a very good or excellent quality dwelling that's much larger. So we're going to have to maybe search further. So in that sense that's kind of how. That's how I'm going to look.
Speaker 1:What I'm not going to do is go to city limits of coopville and pull a comparable for city limits of ocarbor caveat, there's always caveats unless I'm appraising maybe a turn of the century and so I'm looking for something that was built in the 1890s or early, early 1900s. And then I might say, okay, I'm going to look maybe more broadly and maybe I need to look at, I need to look at city limits proper of of Coopville or for Coopville I need to look at Langley. So those. There's always exceptions, but the general rule of thumb is that you know, the closer the proximity, the better the indication of what the market's doing Right and when you're looking at those, I mean you're looking at, you know, a ranch compared to a ranch.
Speaker 2:We're not looking at a two-story or a split.
Speaker 1:We depart from that only if, boy, there just haven't been any sales and I'm going to have to take a daylight basement and compare it to a ranch, because they were built, similar age, they're in the similar immediate proximity, similar updating and so forth.
Speaker 1:So, but generally we want to go like for like as best we can, and that really becomes notable, particularly when you talk about like bathroom count and bedroom count. You know, when you get down to a property that has maybe just one bedroom or maybe two bedrooms you know I'm going to try to model that with two or one bedrooms, three bedrooms to four bedrooms, right, we might look at that range. Where it becomes really significant is we look at bathroom utility, and everyone who has a family knows if you've only got one and a half bath, well, that second half bath is good, it's somewhere people can powder their face. But when you got a family with a bunch of kids, that difference between one and a half and two can really drive such that you'll say, hey, what are the people shopping for this product? What are they looking for? Well, they're not looking for a bathroom and a half, they're looking for two bathrooms, right, and so that can really kind of help distinguish and kind of direct where we go looking for comparable properties.
Speaker 2:The bathroom and a half is way better than the one bath.
Speaker 1:But it is always better than one bath and you get over on the east side.
Speaker 2:So when you go you get these jobs from the company that distributes them and you get to choose the geographic area you want to work in. So you said you mostly work here on Whidbey Island.
Speaker 1:Yep. One of the requirements that the uniform standards of professional appraisal practice, which is like the rule book or the law for appraisers, is that we have to have competency in the markets that we appraise in. Question of competency emerges regularly. Amcs appraisal management companies go to offer a job to an appraiser. They want to see that they have geographic competency. They want to see that they have geographic competency. Unfortunately, you know, not every appraiser appraising in Oak Harbor is going to have geographic competency.
Speaker 1:The way that that industry, the way that it's kind of regulated, has allowed room for appraisers from significant distances to come and appraise in our market. Some may have competency but generally speaking, the rule of thumb is AMCs are looking for people who are geographically proximate to the property that they're going to be appraising. I think it's critical If you are working in multiple market areas and multiple neighborhoods, managing that data, tracking the trends it's very difficult to do, particularly if you're only doing one-offs Maybe you're doing one every few months. In a market, just what kind of competency can you develop or accrue over a length of time? So for me, I think that's why I've always leaned hard into being a competent appraiser on Whidbey Island, fidalgo Island and keeping kind of in that market area. But sometimes you may get an appraiser quite a ways away. Sometimes I get offers to appraise in Bellingham, out in the sticks in Concrete or northern Snohomish County. I'll get requests even though I'm not competent or consider myself competent to appraise those. So it's really self-policed.
Speaker 2:There's a lot of time involved in becoming a licensed appraiser. Yes, and how is that affecting? As in many trades, we find people that are retiring and there aren't enough people coming up to replace them. How is? And I would guess that some of them asking you to go here is they don't have somebody to go to concrete.
Speaker 1:They're running into that problem again. I think what happened is going back in time. We can see the fallout from the 08 recession. It was like someone turning the faucet off for appraisers. The mortgage lending just evaporated. We had a lot of attrition in the industry. A lot of people who were considering retiring said well, this is it, final draw, I'm out. A lot of people that just couldn't accrue enough appraisal volume to make it a supportable vocation. So we lost a lot of people. We started to see, probably in the 14, 15, 16, we saw kind of a movement where people were taking apprentices back on again.
Speaker 1:Which brings me into kind of the kind of requirements. So appraisers to be licensed or certified in Washington state have to meet a two-year apprenticeship requirement. It's not just that it's two years, it's a certain number of hours of experience. Depending on the volume of the agency you're working for, you may or may not be able to do the apprenticeship in two years. It might take longer. There's a minimum core requirement of classes that are required with exams. There's a final state exam and there's also an education requirement. Most recently they've kind of rolled back the education requirement. It was a four-year degree. They raced to the polls to the extremes, where there was no education requirement.
Speaker 1:The recession 08 hit and they said, oh my gosh, we need to get competent, qualified people in. Everyone has to have a bachelor's degree. So they kind of went that way, so that made it even harder to bring people in. The third leg of that is that most of our appraisers are independent fee appraisers who work outside of the lending institutions. They work as independent fee appraisers. Some might work in small offices with a couple of appraisers. The predominance are one appraiser offices, like myself. And so what has happened is the burden was shifted from the lending institutions to police themselves to hey, here's a certified state appraiser, they can manage themselves, they can handle that liability, and the banks completely withdrew, and so it left a bunch of appraisers really not equipped to train, bring people up bring people in and and the financial feasibility of bringing on a trainee.
Speaker 1:That for me became the number one resistance or kink point in the hose, because it costs a lot of money, there's a lot of time, there is an incredible lengthy amount of training, there's a lot of time, there is an incredible lengthy amount of training, and then just managing all that is incredibly. We see that in a lot there's a lot of crossover in different industries where there's a similar scenario. So that makes it kind of difficult to kind of roll out a model that works. So the end of it is that we yeah, we were seeing we've seen a massive drop in the number of appraisers out there. Right now it's acceptable because mortgage lending has been at such low volumes. But mark my words, when the tide turns, everyone's going to be screaming about how there aren't enough appraisers and we can all blame the banks for that.
Speaker 2:State appraiser association of some kind.
Speaker 1:They're not state backed, but there are. We have the appraisal institute. We have a few other independent appraisal organizations that have been around for hours I mean for years I should say not hours for years. That have been kind of the institutions that we affiliate with, that provide education, regulatory updates, collaboration, those kinds of things, but they're really not engaged in the kind of educating, training and then pumping out appraisers equipped to go to the market. That requires people like myself, and so there's been really no change there. But I think we'll see it. I think we may see more changes as we kind of emerge out of this cycle that we're in and as we see sales volume look at the date of this recording things are. The stock market's crashing right now and there's a mess. There's a lot going on in the market that could affect is still pretty tight that's tight I mean people like to think it's going
Speaker 2:to pick back up. Yeah, regardless of what interest rate. If interest rates come down, there'll be more sales of individual homes, but we'll still have a housing shortage. We'll still have a housing shortage because we're after 08. We're all those, because all those appraisers got out of business. Yeah, all the builders, I think. In 2006, they built like 1.8 million houses in the united states and by 2009 it was like 430,000. How many people did it take to build 1.2 million houses that didn't have a job? Yeah, it was a mess.
Speaker 1:Yeah, and you know to ground it just down in the human level, like you and I sitting here not only am I an appraiser but I'm a homeowner we get scared, we get nervous, we get afraid of risk and when you're risk averse you know you're not going to take that chance to maybe write on a contract. Write a contract on a purchase or maybe for that small builder who builds fewer units they're like I just don't want to take the risk. And so it all is multiplied so that while you might hear in the national news a surplus of of housing units in many markets or prices declining in many markets I just looked at at north, just to ground it into north would be a city limits proper. Today, on a seasonally adjusted inventory, we have about just over a month supply of inventory. On a one month basis we have about half a month of inventory. A balanced market should be three to six months of inventory. Yeah, so you can see really quick with this.
Speaker 1:We're in a pickle with inventory and it's not being remedied, even though we have a number of bigger plots that are being built. Right now we have several under construction with 30, 40, 50 units that are coming up quickly. They're going into contract quickly, but the used market, the used market is really tight. People aren't leaving those mortgage rates that they have and so it's only aggravated the undersupply that we've had all the way going back.
Speaker 1:The last time we had a surplus or a balanced market would have been on the heels of the 08, maybe up until about 11 or 2012 before we saw a correction to undersupply. And it's been undersupplied ever since. Sometimes just grossly undersupplied where I'll do a value on a property and there are literally no other competing properties Makes it tough and it means there's more competition for buyers and sellers. Sometimes it favors the buyer, sometimes it favors the seller. The ground level it has been a grossly undersupplied market and that's not changed, even though interest rates have come up, you know, even though prices have been a bit more sluggish, with very mild increase year over year we're kind of back to the median average three, four percent.
Speaker 1:Yes, that's exactly where we are.
Speaker 2:Which I think that's one of the things that so many people got. When a really great thing happens, you know you win the lottery. You're like yeehaw let's go shopping.
Speaker 2:And that's kind of what happened during COVID is. You know interest rates came down and you know people just went crazy and that's just not going to. I mean that's you know. Our interest rates are at the average of the last 40 years, 7% is normal. I bought my first house. We had to get an adjustable rate mortgage to get it below 10. Yes, what was that? That was in 1989, I think 89, okay that sounds right.
Speaker 1:Um that's right oh one maybe 88. Fast forward to 01. When I bought my first place seven percent, which actually seven was like yeah, you're looking good baby yeah, there's like nine point something and it went up.
Speaker 2:Well, just, those are all good. Yeah, well, they're fixed, and then they start going up.
Speaker 1:Yeah, you know it's, it's easy to, it's easy to kind of perceive uh, real estate is like this solid, permanent, monolithic kind of entity. But when we look at prices, we really we have to understand that there's a lot of nuance. The market, it rises and fall like the tides. It comes in sometime much higher than it does other days, but it's in constant fluctuation. So it's a slow, rolling movement of prices and it's always been that way. The exceptions are when we have those flaming hot markets like the COVID, and we can see that even against inflation adjusted price changes, we still are, just, we're still under the market peak for inflation adjustment. So what we see is that, like, you can really see that, whoa, that was a flash in the pan. Someone just threw something on a hot Skittle, cooked it up for a couple minutes and then boom, and then we moved on and then we were at the next place and we kind of have seen that, moving out of the COVID era, where prices have settled down, the rate of appreciation, the rate of market competition is nowhere near like what it does. But we get imprinted as market consumers and we think in our head that a value is a value. It's a one-time value.
Speaker 1:Well, I've had my appraisal on my house a few years back and it was X. Well, that appraisal is only valid for the day. I'm taking a picture of the day of that market, all the influences, the inventory percentage pending of that market, all the influences, the inventory percentage pending, the number of buyers and sellers, the number that you know, all of those. It's a snapshot of a day and so I think we always have to come back to that. An appraisal or a value given by an appraiser. It's for a day. Fannie Mae might allow you to use that for a month or two or three months, depending on the market conditions. But generally speaking, if it's that if that appraisal becomes dated, they're going to get a new, fresh one. It's just a snapshot.
Speaker 2:Well, it's just like when somebody buys a house, the value of the house is what a buyer and a seller agree to pay on this day, yep, yep. Not tomorrow, not last week, absolutely, it's right.
Speaker 1:And so, and you know, and that brings something kind of interesting. It's like people get people get, people get afraid. So right now we might see someone, an occasion where they're making there's some competing offers on a property and it's coming up, the price is being driven up above list price. That's happening quite regularly, no-transcript willing to do or not do. And if I, as an appraiser, I'm handed three offers on a property and all those offers are over list price and maybe significantly over list price, immediately I'm saying we've got something going on here. That value is not grounded into the list price by any means. It's grounded into what were the competing offers. And so am I, as an appraiser, going to be able to appraise up to that higher range? Possibly, quite likely. Yes, because, just coming back to what you just said, it's a willing buyer, a willing seller acting in their own best interest. On that day, and on that day we had three people making offers. 20,000 over list. Is the value? 20,000 over list? Well, probably is.
Speaker 2:I sold one a couple of years ago. That was 250 over asking and appraised.
Speaker 1:Whoa, actually you did. Oh, okay, yeah, but we had one. Yeah, I did, but we had four offers.
Speaker 2:Yeah, four offers and three of them were at that same price. Yes, this is a dollar.
Speaker 1:Yes, I mean, it makes me.
Speaker 2:Yeah, that's where I think we first met.
Speaker 1:Yeah, that's where we first met down in Green Bank. Yep, yep. It reassures me, and it should the market participants, the agents writing and accepting those offers, because it's giving us a really good picture of what the market's doing today. Yeah, when it's a one offer and it was on the market maybe for a month, two, three months, I become less tethered to the representation of that single contract offering, as though that's really representing what most buyers and sellers are doing. So the more more offers we get, boy, the easier our job becomes, in my opinion. Yeah.
Speaker 2:Well, this has been fascinating. Thank you very much. Anything you think of that a real estate agent would. I mean you've talked about a lot of things that I think other agents would get a lot of information out of. Anything you could think of that they may not be aware of.
Speaker 1:Yeah, I keep trying to reduce down my view, I keep trying to simplify my view. When I talk about it, it's easy to get into the weeds because, as an appraiser, we're doing something that, yeah, am I assigning a value? Yes. As a realtor, are you assigning value? Yes, but there's a little bit of a there's a different scope of work. There's a different scope of work. There's a different level of methodology. There's, there's, there's a different level of of sophistication, using statistical regression, you know, advanced charting and Excel work and and looking mathematically at the problem in a way that I'm trying to show evidence and support and calculations that verify to a level that most agents, you know, don't go to. So what I, in order to be helpful to look at how I perceive the big picture, if we think of it as a pie and I'm going to talk just about North would be for right now for for a lot, but just let's just talk about Northwoodby.
Speaker 1:So if you look at the pie of value, you can take a pie. The sales price of a property, let's say, is $400,000. Okay, that $400,000 pie I am going to mathematically break up into a number of different, what we call independent variables, the variables that contribute to sales price. So we all got a feeling for what these are. Um, how big is the house, so? Which is square footage? How old is the house? How many years is it? How many bathrooms does it have? How many garages does it have? How big is the site? Right? And and then, does it have a view? Does it not have a view for?
Speaker 2:a single story, two stories, single story style, style has a variable.
Speaker 1:So really we can ground down into very high statistical confidence, um, into about six to eight variables of influence. So we can say with very high statistical confidence that I can map out this $400,000 sale based on square footage accounting for about 30% of value, condition accounting for about 10 to 20% of value, bathrooms counting for about 10, garages counting from about 10 to 15, and then a lot, the size of your lot can be anywhere from maybe five to about nine percent of the sales price. For instance, a view influence of that pie might, might represent anywhere from about six percent to about 15 percent, right? So you so, just if you kind of can take that as a framework, then you can begin to say, okay, so now I'm going to look at a property A, b and C that I think are kind of like my house, and take that pie, drop that pie over the top, and then you can begin to kind of tease out If a view in our market can affect, let's say, 10% of sales price. And I got a house that's got a great view and my house has a marginal view. You know, maybe there's a three percent difference, maybe there's a five percent difference.
Speaker 1:It allows you to kind of use your reasoning skills and subjectively say, hey, um, I can say this non-view and this, compared against this full, beautiful, good quality water view, maybe beat, that might be that entire margin of 12 percent, right, all of it in the difference. Take that 12 percent, put it into four or, let's make it easy, 10 percent into that 400 000, could that view influence about 40 000 dollars? Absolutely, absolutely. And so, and we can do, we can see the same thing with the garage if it has one or two, if that's about, if that's about, 12 percent of value. We can see the same thing with the garage If it has one or two, if that's about, if that's about, 12% of value. We can do the same thing.
Speaker 1:So what is so, if I'm going to have to use a comparable, uh, that's got one garage, um, and I'm going to have to use a comparable, that's got two, you know where's that margin going to fall? Is it about five? Is it about 5%? Maybe there's about a $15,000 adjustment. You know, you can kind of tease some of these things out. So I think, just having that general model map of understanding that are there a mathematically verifiable relationships between those core six to eight variables and sales price, and those, arguably, are what most appraisers should be drilling down into to make their adjustments to compare A to B and A to C. So yeah, I think that's just a great simple way of looking at it. Yeah, the pie, the value pie.
Speaker 2:All right, Alan. Well, thank you very much.
Speaker 1:That's been educational and fun.
Speaker 2:Yeah, you bet and hopefully, everybody enjoys that and learned something.