Up to now in our continuing series “the mysteries of appraising” we have discussed the following:
Declining Market (more on this topic Wednesday).
Cost as built “Hey you can’t build that for what you sale comped it at”
And today we take a look at “Where did MY square footage go to?”
This one left me scratching my head for a couple of days and it’s going to take a bit to explain…so here goes.
When appraisers “guess” at value, they often use other properties as comparable’s and one of the main criteria used outside of Location and Bedrooms/Bath count is Square footage.
They diligently measure the home that they are appraising and compare it to others of the same/equal size…….and right about here is where it gets a bit dicey.
Now the way that they get the other square footage is by looking at public records which has 3 separate “square footage” listed for each property, they are:
Building/Living Area Sq Ft
Adjusted Sq Ft
Total Sq Ft
Building Sq Ft, assumes where you live; think what’s under A/C
Adjusted Sq Ft, is some magical number that no one has ever figured out; it takes % of structures and adds it all up.
Total Sq Ft, is everything that you have “hardscaped“, in short think concrete (if you live in little Havana, this includes the whole lot that has been paved over for parking and or illegal structures)
We good so far? Cool…….
Have a deal on the table and here comes “Ace” to do his thing; measures the place, takes some photos and away he goes.
Several days later and some anxious moments we get the appraisal and lo and behold we hit the sales number……..hoo freaking ray!
BUT we notice a little (as in sq ft) missing.
The buyers home has lost some Sq Ft as compared to the tax sheet…..over 600 sq ft to be precise.
Where our Building SQ FT reads 2500, it reads on appraisal as 1900 sq ft…WTF?
Me; “Ace, what happened to my building/living sq ft?”
Ace; “Living means under A/C and you have 1900…I measured”
Me; “What about the other comps, how did you measure them?”
Ace; “I used the tax sheets Building Sq Ft”?
You know where this is going don’t ya………..
Me; “Hey, but my “Tax sheet” said 2500″
AND there’s my Aha moment; if he does not adjust the sq ft down, property comps at 500k and the folks at the bank say “WTF” and order a reappraisal.
Using this appraisers logic (HA) by adding the missing sq ft, my folks bought the property at 170 sq ft, when it comped at 205 a sq ft; in short they made 75k.
BTW; do you need a licesne to appraise?