2008 Cost vs. Value Report: Still Many Happy Returns for Home Rehabs
Remodeling magazine's annual report shows that maintenance-related projects and moderately priced upgrades are providing stable paybacks, even in a slower market.
By G.M. Filisko | December 2008
Despite home price drops in many cities, remodeling projects are holding their own as a way for owners to add value.
Many people are wondering where their money will be safest during these uncertain economic times. When home owners turn to you for your expert advice, counsel them that some things never change: Investing in their home still pays off.
NATIONAL ASSOCIATION OF REALTORS® statistics show that home prices have fallen by an average of 7 percent nationally in the past year. But the value of home owners’ investment in remodeling projects has declined only 3.86 percent on average between 2007 and 2008, according to Remodeling’s 2008–2009 Cost vs. Value Report.
Remodeling produces the Cost vs. Value Report each year in cooperation with REALTOR® magazine. REALTORS® responding to a survey in midsummer said home owners could expect to recoup a national average of 67.3 percent of their investment in 30 different home improvement projects. At the height of the housing boom in 2005, home owners could expect to recoup a national average of 86.7 percent on projects.
Remodeling remains hot in 10 cities, where, on at least some projects, home owners can recover 100 percent of their costs. In Charlotte, N.C., for example, decks, midrange kitchen remodels, vinyl siding, and window-replacement projects all would net more than they cost, in respondents’ estimation. High rates of recovery were seen in both strong real estate markets and weak ones.
Many cities with the highest rates of recovery were smaller—Jackson, Miss., and Billings, Mont., for example—which may point to lower labor and materials costs that are easier to recoup.
Seattle also made the list of cities with a cost recovery of more than 100 percent on decks and minor kitchen remodels. In fact, Pacific Coast cities recorded the best payback on remodeling by a wide margin, as they did in 2007. Although construction costs on the Pacific Coast are nearly 17 percent higher than national averages, the value of renovations at resale more than makes up for those higher prices.
The result is an average cost-recouped percentage that’s 14.8 percent higher than in the rest of the country. The toughest place to get your money back: Midwestern cities such as Chicago, Cleveland, Indianapolis, and Milwaukee.
Top 10 Project Paybacks
Once again, exterior remodeling projects lead the way for recovery on dollars spent in this year’s Cost vs. Value survey. When you compare the national averages, replacement projects that boost curb appeal—siding, windows, and decks—give you the greatest chance of recouping your money. Inside, only kitchen remodels can compare, at least on a national level.
1. Upscale fiber cement siding (86.7%)
2. Midrange wood deck (81.8%)
3. Midrange vinyl siding (80.7%)
4. Upscale foam-backed vinyl (80.4%)
5. Midrange minor kitchen remodel (79.5%)
6. Upscale vinyl window replacement (79.2%)
7. Midrange wood window replacement (77.7%)
8. Midrange vinyl window replacement (77.2%)
9. Upscale wood window replacement (76.5%
10. Midrange major kitchen remodel (76.0%)
The Real Deal: Examples from You
REALTORS® around the country helped us track down home owners who had recently completed remodeling projects. In all cases, the projects cost far less than the job cost estimates provided with the Cost vs. Value survey.
ATTIC-TO-BEDROOM
Location: Oak Park, Ill.
When Rick Nagle and Eileen Deamer of Oak Park, Ill., spent more than $35,000 to convert the attic of their 100-year-old home into a combination master bedroom and office, "resale value wasn’t our concern," says Deamer, a U.S. government employee and the married mother of two.
The transformation turned 600 square feet of makeshift office with a toilet in the middle of the room to a colonial-style bedroom/office with two walk-in closets and an adjoining sage green bath with a walk-in shower. To allow two simultaneous uses, pocket doors separate the bedroom and office spaces.
BATHROOM
Location: Fountain Hills, Ariz.
"This is such a crazy market to try to judge how much a renovation is worth, but having a refurbished kitchen and bathrooms makes almost any house more salable," says Shari Gay, ABR®, sales associate at RE/MAX Sun Properties in Fountain Hills, Ariz. The owner—Gay’s sister—added Saltillo clay floor tile throughout the 1,800-square-foot home, including the new bathroom. Bathroom finishes included a new cherry vanity cabinet, a tile shower, oil-rubbed bronze fixtures, and a soothing, sophisticated yellow color scheme, which all add up to a great look.
Total cost? About $5,000. "She’ll at least break even on the upgrades," predicts Gay. "If this were a boom market, she would get even more."
KITCHEN
Location: Honolulu
A kitchen is the heart of most homes. That’s why Hollywood set designer Wally White decided to spend most of his $15,000 renovation budget on upgrading the kitchen of his Honolulu studio condo. To spruce up the existing white cabinetry, which he left to save costs, the owner added bursts of color with celadon green granite countertops and walls painted in a complementary shade of light green. An undermounted white porcelain sink, a six-light halogen fixture on a dimmer, and brushed stainless steel faucet completed the look. It paid off.
White grossed $45,000 when he sold eight months later. "The unit sold for more than any other studio—and most of the one-bedroom condos in the building," says Susan Weinik, a sales associate with Realty Executives Oahu.
BASEMENT
Location: West Brighton, N.Y.
In a modest 1950s ranch in West Brighton, N.Y., a midrange basement upgrade suited Bernard Fallon’s mother-in-law, Ligaya Nocon, just fine. After purchasing her home "on the high end of the market," according to Fallon, broker at Fallon Associates Realty in Rochester, N.Y., Nocon kept basement renovation costs under $9,000.
She created a cottage feel by whitewashing the knotty pine paneling rather than replacing it. She also reupholstered the existing bar to cover wear and warmed up the room with wall-to-wall carpeting instead of wood or tile. "We just dressed it up for the personal enjoyment of my mother-in-law," says Fallon, "but I think it will help sell the property later."
The Specs
To help respondents determine the resale value of improvements, the survey provided specifications for each project:
· Attic Bedroom Remodel. Convert unfinished attic space to a 15-by-15-foot bedroom and a 5-by-7-foot bathroom with shower. Include a 15-foot shed dormer, four new windows, and closet space under the eaves. Insulate and finish ceiling and walls. Carpet floor. Extend existing HVAC to new space; provide electrical wiring and lighting to code. Retain existing stairs, but add rail and baluster around stairwell.
Minor Kitchen Remodel. In a functional but dated 200-square-foot kitchen with 30 linear feet of cabinetry and countertops, leave cabinet boxes in place but replace fronts with new raised-panel wood doors and drawers, including new hardware. Replace wall oven and cooktop with new energy-efficient models. Replace laminate countertops; install mid-priced sink and faucet. Repaint trim, add wall covering, and remove and replace resilient flooring.
Basement Remodel. Finish the lower level of a house to create a 20-by-30-foot entertaining area with wet bar and a 5-by-8-foot full bathroom; construct 24 linear feet of finished partition to enclose mechanical area. Walls and ceilings are painted drywall throughout; exterior walls are insulated; painted trim throughout. Include five six-panel factory-painted hardboard doors with passage locksets. Electrical wiring to code. Main room> Include 15 recessed ceiling light fixtures and three surface-mounted light fixtures, as well as a snap-together laminate flooring system. Bathroom> Includes standard white toilet, vanity with cultured marble top, resilient vinyl flooring, two-piece fiberglass shower unit, a light/fan combination, vanity light fixture, recessed medicine cabinet, towel and paper-holder hardware. Bar area> Include 10 linear feet of raised-panel oak cabinets with laminate countertops, stainless steel bar sink, single-lever bar faucet, undercounter refrigerator, and vinyl floor tile.
Upscale Bathroom Remodel. Expand an existing 35-square-foot bathroom to 100 square feet within existing house footprint. Relocate all fixtures. Include 42-by-42-inch shower with ceramic tile walls with accent strip, recessed shower caddy, body-spray fixtures, and frameless glass enclosure. Include a customized whirlpool tub, stone countertop with two sinks, two mirrored medicine cabinets with lighting, a compartmentalized commode area with one-piece toilet, and a humidistat-controlled exhaust fan. Use all color fixtures. Use larger matching ceramic tiles on the floor, laid on the diagonal with ceramic tile base molding. Add general and spot lighting including waterproof shower fixture. Cabinetry includes a custom drawer base and wall cabinets for a built-in look. Extend HVAC system and include electric in-floor heating and heated towel bars.
Why Renovation Pays
Why are renovations holding their value better than home prices today? "When housing slows down, people stay put and renovate their house to make it more livable," says Paul Zuch, president of Capital Improvements, a designing, building, and remodeling company in Dallas. And by renovating before they sell, home owners get to enjoy the new space themselves, not just make the home more appealing to buyers. "It just makes sense," says Zuch.
Recent renovations also make buyers’ lives easier. "Home owners who remodel their home are providing a service to future buyers," says Eileen Nelis, a broker at Savvy and Co. in Charlotte, N.C. "When buyers purchase, they don’t want to do all that painting and remodeling, and they don’t want that price tag. They may be willing to make improvements down the line, but when they purchase, they want to open the door and have everything complete. It reduces their stress."
Making home improvements can also reduce sellers’ stress by heading off that time-honored negotiating technique—pecking away at the sales price by pointing out imperfections. "If sellers have done some improvements and dressed up their property, the improvements will help sell it," says Bernard Fallon, broker at Fallon Associates Realty in Rochester, N.Y. "If sellers don’t want to improve their property, buyers will tick off the repairs and try to take them off the price."
That doesn’t mean that every home owner should do every renovation, even in a more stable real estate market. Take Tulsa, Okla., where median home prices actually edged up slightly more than 2 percent in 2008, according to NAR. REALTORS® in Tulsa reported that, of the 30 remodeling projects surveyed, only 16 netted home owners at least 80 percent of the cost.
"Not every neighborhood will support the additional work," says Jim Hemphill, a sales associate at Coldwell Banker Select in Tulsa, "but in older, more established neighborhoods, if you redo a kitchen or bathroom or add a master bath or bedroom, you’ll get your money out."
Despite the value, the weak economy is likely to slow seller spending on remodeling, at least in the short term, predicts the most recent Leading Indicator of Remodeling Activity computed by the Joint Center for Housing Studies at Harvard University.
The LIRA for the third quarter of this year estimated that owners’ spending on home improvements will decline at an annual rate of 12 percent by the second quarter of 2009, continuing a two-year downward trend. Spending is unlikely to recover until the housing market turns around, according to the Center.
Yet, despite declines in overall remodeling dollars spent and a still shaky housing market, "people’s homes are still one of their best, most solid investments," notes Zuch. "Even though the markets have gone through some adjustments, it’s still smart to invest in your home."
How to choose a Real Estate Appraiser
People who want to get a professional estimate done on the market value of a piece of property will often choose to hire a real estate appraiser. Because of the importance of getting an accurate and detailed appraisal in the selling or purchasing of real estate, it is important to choose a qualified and experienced real estate appraiser. When choosing a real estate appraiser, you should look for one that has a large amount of professional experience and that meets all national licensing requirements and professional standards for the appraisal industry. A professional appraiser will be local and have knowledge about the area covered. Because getting an accurate estimate of your real estate’s market value is an important step in determining your property’s listing price, it is important to choose a reliable and independent real estate appraiser. A professional appraiser has many forms of contact and business information. A phone number, address, and email should be made available to potential customer through the phone book and a website. Before choosing a real estate appraiser, you should make sure that they have the qualifications and experience that is needed to do a good job. Some things to look for when choosing a real estate appraiser are whether or not they are a member of professional organizations. Organizations such as the Office of Real Estate Appraisers (OREA), National Association of Independent Fee Appraisers (NAIFA), Appraisal Institute, local Board of Realtors in the area covered, Chamber of Commerce, or various state and local certification board. Since most professional real estate appraisers will be a member of some professional organization, you should find out exactly how much professional experience they have in real estate appraisals. Real estate appraisers with many years of professional experience will usually have a track record of providing accurate and detailed appraisals.
Here is my check list for hiring a professional appraiser:
1) Must be in the local phone book, the very least consideration in hiring a professional.
2) Must have address in local phone book (if not how can you send any correspondence, are you hiring an appraiser working illegally according to zoning?) This is the responsibility of the appraisers’ client which may not seem to be a big deal but if you consider the fact that vacant rental office space is hurting our community and the reflection of unprofessionalism on clients hiring these appraisers you can see just how a big deal it truly has become.
3) Must have a website. The website will have information about the different types of appraisals offered. It will have information for new buyers and new sellers to help them know what the appraisal means in valuing their property. This website will answer any question that a customer may have about appraisals. The website will explain the process needed once one knows what type of appraisal is needed. Ordering an appraisal through the website shows professionalism by saving time for the customer and provider of service. All contact information will be listed such as address, phone number, and email address.
4) Must be a member of appraisal organization that sets a higher standard of professionalism. These organizations include National Association of Independent Fee Appraisers (NAIFA) and Appraisers Institute. The organizations that the professional appraiser is a member of will be listed on the website and will explain why the organizations are important.
5) Must be a member of local organizations such as the Chamber of Commerce. A professional is involved in local communities and local business networking. A member that is involved in local organization is active in the community. A member has access to community information otherwise not available.
6) Must be a member of the local Board of Realtors. The Board of Realtors provides information about the buying and selling of property in the area covered. An appraiser must be a member to receive this information.
7) Must only take appraisals from localized area. A professional will be an expert on a surrounding area and focus their work in the area they know. An appraiser from out of the area will not understand the market and the information about the market are not made directly available to them. This is the number one complaint about real estate appraisers.
8) Must look, act and talk like a professional. Appraisers must keep up with the appraisal industry. (Any appraiser still hand drawling a sketch is in the prehistoric appraisal era & a risk to the client)
Fannie Mae's Announcement 07-25 addresses five Fannie Mae Selling and/or Servicing Guide topics to update and/or clarify existing requirements, and communicates new requirements, as itemized below:
Download FNMA_Announcement_07_25.pdf
Click below for an excerpt . . .
Use of Automated Valuation Models (AVMs) to Support the Cancellation of Mortgage Insurance (MI) Coverage Servicing Guide Part II, Section 102.05 Borrower-Initiated Cancellation Based on Current Property Value.
Use of Automated Valuation Models (AVMs) to Support the Cancellation of Mortgage Insurance (MI) Coverage
Servicing Guide Part II, Section 102.05 Borrower-Initiated Cancellation Based on Current Property Value.
Fannie Mae has received several inquiries related to the use of an Automated Valuation Model (AVM) to establish the current property value to support cancellation of mortgage insurance (MI) coverage. As stated in the Guide, a borrower is allowed to request cancellation of borrower-purchased MI coverage for any conventional mortgage, regardless of closing date, when that loan reaches a specified loan-to-value ratio. But the Guide requires that value be established by a current appraisal based on an interior/exterior property inspection.
For certain mortgage loans, Fannie Mae allows cancellation of MI coverage based on the current appraised value if the mortgage loan and the borrower meet stated conditions. The use of an appraisal provides a real time analysis of market activity, including a physical inspection of the subject property, to arrive at an accurate valuation.
However, an AVM, relies on public record information to determine estimated value without any assessment of the current condition of the property. As such, Fannie Mae will not permit the cancellation of MI coverage based on the estimated value provided by an AVM, since a real estate appraisal completed by a qualified appraiser is the most appropriate standard and most reliable indicator for determining property value.
In 2001, the Appraisal Institute's Director of Sereening Stephanie Coleman, MAI, SRA, drafted a white paper concerning the ethical elements of readdressing, reassigning or reappraising a property. In light of the July 1 effeetive date of the 2006 Uniform Standards of Professional Appraisal Practice, Coleman has revisited that document and provided updates, printed below. Appraisers are often confronted with one of a variety of questions relating to the same general problem. The scenario is as follows: You completed an assignment for a client some time back--maybe a year ago, a month ago, a week ago--and now another party wants your opinion of the value of the same property. The request may be simply to "readdress" the report you prepared for the previous client. Or the request may be to "recertify" the report, or "reassign" it. Other times, the request may be for you to provide an "update" or a "letter update." And other times the requesting party has no knowledge of, and therefore doesn't mention, the previously prepared report. How should you respond to such requests? First, make sure you understand what is being requested. The requesting party might not know what he or she needs, or might use labels or terms such as "recertification" to mean something quite different from what appraisers would take them to mean. Once you are clear on what the requesting party is asking you to do, the following Q & As might help you decide how to respond. Q. To whom can I give the assignment results? [ILLUSTRATION OMITTED] A. Assignment results are your opinions and conclusions developed specific to an assignment. Examples include your final value opinion, your highest and best use conclusion and your indications of value from any of the approaches used. The Confidentiality section of the Ethics Rule of USPAP and the Appraisal Institute's Code of Professional Ethics provide that an appraiser must not disclose confidential information or assignment results to anyone other than the client and persons specifically authorized by the client; state enforcement agencies and such third parties as may be authorized by due process of law; and duly authorized professional peer review committees. Assignment results may be presented in a written report or in an oral (verbal) report. Sometimes, if an appraiser is not careful, assignment results are revealed inadvertently. For example, an appraiser who in casual conversation tells another appraiser, another client or anyone else, "I appraised that property for $1,000,000" is divulging assignment results. Q. To whom can I give a copy of the report prepared for a client? A. This question addresses a physical, written report. Keep in mind that not all portions of the report are confidential. For example, in an appraisal report, factual data such as sales comparables are not confidential. Descriptions of the location (neighborhood description, region description, etc.) are not confidential. However, since an appraisal report contains assignment results, which are covered in the Confidentiality section of the Ethics Rule of USPAP and the Appraisal Institute's Code of Professional Ethics, the authorization process stated above applies. This means that a copy of the report--showing confidential information and assignment results--can't be given to, revealed to, or shared with anyone other than the client and persons specifically authorized by the client; state enforcement agencies and such third parties as may be authorized by due process of law; and duly authorized professional peer review committees. Q. Can I accept a new assignment covering the same property for another client? A. Yes. However, you cannot disclose, without permission, any confidential information contained in the report prepared in the previous assignment for a different client. So you must ask yourself: In completing a new assignment involving the same property for a second client, will I need to disclose information that was considered to be confidential by the first client? If so, you can't take on the assignment without obtaining prior permission of the first client to release that confidential information. In many cases, performing a new assignment for a second client will not require the appraiser to divulge any confidential information. Revisit USPAP's definition of "confidential information" to be sure: Confidential Information: information that is either: * Identified by the client as confidential when providing it to an appraiser and that is not available from any other source; * Classified as confidential or private by applicable law or regulation. A common misconception is that you must be "released" by the first client to accept the assignment with a subsequent client. The only "release" required regards confidential information. The first client does not need to give you permission to proceed with another assignment for a second client unless confidential information is at stake. Another common misconception in performing valuation assignments is that if the value opinion in the second assignment is exactly the same as the value opinion in the first assignment, then communicating the value opinion in the second assignment breaches confidentiality with the first client. This is not true. USPAP's definition of "assignment results" is "an appraiser's opinions and conclusions developed specific to an assignment." By definition, the assignment results are different by virtue of the fact that there are two different assignments--even if the numbers are the same. Note the difference between saying to Client B, "I appraised this same property for Client A for $500,000" and "My value conclusion [in the context of this assignment for you, Client B] is $500,000." The first statement breaches confidentiality by divulging assignment results, the second statement does not. Still another common misconception is that taking a subsequent assignment with another client would be a "conflict of interest." One cannot have a conflict of interest unless one first has an interest. Entering into an appraiser-client relationship to complete an assignment does not mean that the appraiser then has an interest with regard to that client or that property. It can't. Such a notion would be inconsistent with the underlying principle in USPAP that the appraiser's role is to be independent, impartial, objective and unbiased. Should you disclose to the subsequent client that you were previously engaged in another assignment regarding a property? There is no requirement in USPAP or the Appraisal Institute's Code of Professional Ethics to do so. Such a requirement, if it did exist, would suggest that an appraiser would necessarily be biased by virtue of the fact that he or she was involved in a prior assignment. Again, that simply cannot be. Such a notion would be inconsistent with the requirements of USPAP's Ethics Rule, as recited in the appraiser's certification, for the appraiser to be unbiased. The appraiser must use his or her discretion in deciding whether or not to reveal information about a prior assignment to a subsequent client. There are situations in which the very fact that the first client had the property appraised is in itself sensitive information, if not confidential information as defined by USPAP. (Note that it is characteristic of professionals in many other fields to keep the identity of prior clients confidential.) One caveat about taking on assignments with property owners: appraisers who are contacted by property owners about providing valuation services for which the intended use is in conjunction with mortgage lending must advise those property owners that the assignment must be engaged directly by the lending institution. This is a requirement under federal law, and the regulatory agencies have been adamant about it. Further, an appraisal report prepared for a client who is the property owner should clearly state that it is not intended for use by a federally insured depository institution in a federally related transaction. Q. Can I readdress a report, or change the name of the client, but otherwise give the same report to another client? A. No. It is improper to "readdress" a report to another client for three significant reasons. First, simply changing the name of the client and then forwarding the "readdressed" report to the second client does not change the first appraiser-client relationship. An appraiser-client relationship, once established, is cast in stone and cannot be changed. Typically, the reason the second party wants to be named as "client" is that they want the appraiser-client relationship, and all the rights and obligations thereof, to be between them and the appraiser. The only way to accomplish this is for a new appraiser-client relationship to be established. In short, the only way to be named as "client" in the report is to actually be a client. "Client" is defined in USPAP as the party (or parties) who engage an appraiser in a specific assignment. To be named as the client in a report, one must be the party who engages the appraiser. (Tip: An excellent way to firmly establish an appraiser-client relationship is to have a written engagement letter with the client.) Second, simply changing the name of the client and then forwarding the "readdressed" report to the second client could harm the confidential nature of the appraiser's relationship with the first client. While this could be avoided by obtaining the first client's permission to provide the report to the second client, it still does not resolve the third reason why it is improper to "readdress" the report--which is that to do so is misleading. In an appraisal assignment, if the appraiser simply changes the name of the client, the appraiser is not following the requirements under Standard 1 of USPAP to identify the client, intended user(s) and intended use with regard to this second client in the proper sequence. According to the definitions of "intended use" and "intended user," both must be identified by the appraiser "at the time of the assignment," not after the appraisal process is completed and the report is finished. Even if the original appraiser/client relationship is disclosed, this problem cannot be overcome. Q. What should you do if you're asked to "readdress" a report? A. A request to readdress a report should be treated as a request to accept a new assignment involving the same property, as in the prior question. Again, the question as to whether or not you can do so depends on the issue of confidentiality. Once that issue is resolved, the next questions to be answered are: * Who are the intended users? * What is the intended use? * What date of value is needed, according to what value definition?* What assignment conditions (extraordinary assumptions, hypothetical conditions, supplemental standards) apply? * What is the appropriate scope of work for this new assignment? * What level of reporting is needed? In many such cases there may be little additional work in performing a new assignment for another client. Perhaps when all is said and done, you will be providing virtually the same data and analysis, and even the same value conclusion (though you won't discover this until you have completed your analysis). However, you must consider all the assignment parameters for this new assignment, which could well be different from those of the previous assignment. Further, keep in mind that in providing a report to another client, you are extending your liability to that client. As appraisers, we are not in the business of "selling reports"; we are in the business of providing our expertise and opinions. Every time an addition is made to the list of intended users, our liability grows. From a practical standpoint, both the appraiser and the client need to recognize that their business relationship involves this factor. In sum, a new client means there is a new assignment, which necessitates the preparation of a new report. One additional point regarding assignments for lenders: Appraisers should be aware that the appraisal requirements of FIRREA allow a regulated lender to use a report that was prepared for another "financial services institution." This means that Lender B can use a report that was prepared for Lender A, even though Lender A shows as client on the report. Lender B does not have to be named as client, according to the FIRREA requirements. However, usually Lender B will want their name on the report. Why? Because Lender B wants the appraiser-client relationship, and all the rights and obligations thereof, to be between them and the appraiser. What does this mean? It means that as far as the appraiser is concerned, there is a new appraiser-client relationship--i.e., a new assignment. Q. Can I reassign a report to another party? A. "Reassigning" may mean different things to different parties, so again, be sure you know what the requesting party is asking. In the context of this discussion, "reassigning" means signing over one's rights and obligations with regard to the report to another party. For example, when a report is prepared for and given to Client A, that report is no longer yours to "give," or assign, to anyone else. An analogy would be if you sold your car to Party A, you couldn't then sell it to Party B, as it is no longer yours to sell. Client A could assign their interests in their report to Client B, but the appraiser would not be part of this process (and should not be asked to be). Q. Can I recertify a report to another client? A. When the request is to "recertify," clarification with the client is imperative. "Recertify" tends to be an abused term. Often it is erroneously used to mean "reassign," or "readdress," or "update." Often it is not clear what clients mean when they use the term "recertify," and appraisers need to help remedy the confusion. Appraisers certify their reports (i.e., they may include a certification per SR 2-3 in an appraisal report), but this certification has nothing to do with the ownership of, or rights to use, the report. A "recertification of value" is an entirely different concept. As defined in Advisory Opinion 3 of USPAP, a "recertification of value" is an assignment in which the appraiser determines whether or not the conditions of an appraisal have been met. This sort of assignment is not an appraisal at all, because in and of itself, it has nothing to do with developing an opinion of value. Q. Can I sign or issue a "reliance letter" that says another party (not identified in the report as the client or an intended user) can rely on a report I previously prepared? A. No. Such a letter would, in effect, add that party as an intended user after the completion of an assignment, and you cannot do that.Conclusion Requests for valuation services are presented to appraisers in an assortment of ways, and the appraiser's first tasks are to ascertain (1) exactly what the party is requesting and (2) whether what the party is requesting is appropriate given their intended use. The general rule is that when a new client enters the picture and a new appraiser-client relationship is formed, a new assignment is involved. This new assignment will require the appraiser to at least reconsider or reanalyze the process outlined in USPAP's Standard 1, especially with regard to identification of intended use and scope of work. A new report will be provided, appropriately identifying the party who engaged the appraiser this second time around as the client. In a "reappraisal" situation such as this, the work involved in developing the value opinion and preparing the report will, in most cases, be far less than it was the first time around. The new report prepared for this subsequent client may, for all intents and purposes, look strikingly similar. The value conclusion might even be the same. But much has changed. The appraiser has considered all the parameters for a new assignment to meet the needs of the new client, given their intended use including scope of work, selection of report option, type and definition of value, date of value, etc. The appraiser has agreed to extend his or her liability to this new client in allowing that party to rely on his or her value opinion. Once a report is provided to a client, it cannot be tampered with. Changing the name of the client ("readdressing") is misleading because it falsifies the true relationship between the appraiser and the party who engaged the appraiser in that particular assignment. It is improper for clients to request that reports be tampered with in this manner. It is unethical for appraisers to comply with such requests. Note: The Appraisal Standards Board of The Appraisal Foundation has provided additional guidance on these topics. See Advisory Opinion 25, Clarification of the Client in a Federally Related Transaction; Advisory Opinion 26, Readdressing (Transferring) a Report to Another Party; and Advisory Opinion 27, Appraising the Same Property for a New Client. These Advisory Opinions are published with USPAP. Also see FAQ #73 in the 2006 edition of Frequently Asked Questions published by The Appraisal Foundation; this FAQ deals with "reliance letters." For more information on, or to order, the FAQs, visit The Foundation Store at www.appraisalfoundation.org. This update is also posted on the members only side of the Appraisal Institute Web site at www.appraisalinstitute.org/membersonly/restrict/wht_papers_rprts/readdressing.asp Stephanie Coleman, MAI, SRA, is the Appraisal Institute's Director of Screening. As such she is available for a variety of member requests and inquiries regarding ethics and USPAP interpretation. She can be reached at scoleman@appraisalinstitute.org or 877-777-6939. by Stephanie Coleman, MAI, SRA, Appraisal Institute Director of Screening
Most people understand that adding a new room or upgrading a kitchen or bathroom adds value to their property. But is it always worth the expenditure, especially if there is not other overriding requirement, and how much of the cost can you expect to recoup when you decide to sell?Here are some online resources to help you find those answers and make betting decisions about which project to tackle first...Kitchen and bathroom remodeling projects are returning more of a homeowner's investment than ever before, according to the 2005 Cost vs. Value Report published by the National Association of Realtors (NAR) in REALTOR® Magazine and by Hanley Wood LLC in Remodeling magazine (also remodeling online).Click here to download full report (in PDF format) from LowesMoving web page. Click here for Bankrate.com's report summary: "Top 5 Projects To Boost Home's Value For Resale".According to their annual 2004 Cost vs. Value report, published at the end of 2004 by Realtor Magazine, remodeling of 25 year or older bathrooms received the highest percentage recoup of costs at time of sale (90.1%), followed by addition of a deck and then by window replacements.For the top 10 improvements nationally and their average costs, click here.Return Value On Renovation Projects Revealed By Report:What's the payback for remodeling? Annual report compares construction cost with resale value in 60 markets.Each year since 1988, Remodeling Magazine's Cost vs. Value Report has compared construction costs for common remodeling projects with the value they add at resale in 60 US housing markets. This year's Report has all 15 legacy projects (formerly, ten were surveyed each year in rotation), plus the "upscale" versions of five projects introduced two years ago. New this year are upscale versions of roofing and siding replacement projects. (Source: Remodeling Magazine) Click here for full story. (See StartRemodeling.com's summary article.) According to The Early Show's, Ray Martin, "remodeling seemed like an obvious choice over the past few years: Any money spent improving your home was sure to be money well spent. With home values surging and low interest rates on home improvement loans, it appeared home improvements were a wise investment. But, ...with home values stagnating, even falling in some areas, and home improvement loans that charge interest rates of eight percent or more, the home improvement value proposition has changed. If you don't want to have your home improvement ending up being a gift to the buyer of your home, Martin said, you need to do a lot of homework before you spend a nickel on any sizable home improvement project." Of the 22 home improvement projects analyzed in the report, only two - upper-range siding replacement and a modest bathroom remodeling project - appear to create more home value than what they cost. This seems to indicate that most home improvement projects should be considered not as an investment, but as an expense from which some, but not all the costs can be recovered upon the sale of the home. (Source: CBSNews.com)
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Maybe you feel like you don't need an "appraisal" but you'd still like some help gathering local property and sales data. We can provide low cost sales and listing reports that will guide you through the maze of raw data. Our reports help you to make an informed buying decision. We understand the complexities of buying a home and know what you are going through and will do our best to make it easier for you by giving you a high quality, professional appraisal that you can depend on!
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Mortgage Broker vs. Loan Officer
When you're looking to get a mortgage loan, you may work with a loan officer or you may choose to work with a mortgage broker. People often confuse the two job types even though both will glean the same results: a new home. However, it is important to understand the difference between the two types of jobs so you know what to expect from them during the mortgage application process.
A mortgage broker is an individual or firm that acts as an independent agent for both the borrower and the lender of a mortgage loan.
Mortgage brokers are the middle man between you and the lending institution, which can be a bank, trust company, credit union, mortgage corporation, finance company or even an individual private investor. A mortgage broker will analyze your financial situation to determine which lender is the best fit for your loan needs. He or she will submit your mortgage application to one or more lenders in order to sell it, and works with the chosen lender until the loan closes. He or she receives a commission from the borrower if the loan closes.
A loan officer is a representative of a lending institution, such as a bank, who works to sell and process mortgages and other loans originated by their employer. They often have a wide variety of loans types to draw from, but all originate from that specific lender.
Also known as a loan representative or account executive, loan officers represent the borrower to the lending institution and will guide him or her through the selection, processing and closing of mortgage loan. Loan officers can be paid a commission or salary for their services.
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