Residential Appraisals and Fair Market Value Determination

A real estate appraiser is NOT the one who is consulted with FIRST to determine or establish fair market value of homes for sale on the market ... it was a REALTOR who FIRST set or established the sales price!  A real estate appraiser comes along much later in the process... AFTER the Buyer and Seller have already agreed to the sales price in the real estate contract. An agent representing the buyer has counseled his client already on what to offer for the property by conducting a Comparative Market Analysis (CMA), by rendering a Broker's Price Opinion (BPO), or by furnishing his buyer client with a comprehensive Realtors' Property Resource (RPR) quantitative and statistical report and analysis suggesting the current fair market value of the subject property. Before, or prior to, the Seller and Buyer coming to an agreement on the sales price of a home; rarely, if ever, is a real estate appraiser consulted with first.  

The definition of fair market value is:  the price an able willing Buyer is willing to pay for something under no obligation or coercion, and the price a Seller is willing to sell something who is also not forced to sell or who has no obligation and has not been coerced into selling something.  In other words, "fair market value" is determined by agreement of Buyers and Sellers, NOT by the opinion of value of a real estate appraiser.

An appraiser may "validate" or "rubber stamp" the sales price for the buyer's mortgage lender, investor or underwriter to protect the lender or investor's interest in putting up the money for the buyer to acquire the property; but their opinion of value alone DOES NOT establish fair market value.  Fair market value is always determined by agreement of free, able and willing buyers and sellers, and NOT by real estate appraisers per se.  

Typically, the real estate appraiser's fee is always paid by the Buyer as part of their lender's closing costs.  I have heard real estate appraisers say, "I work for the lender in this transaction". WRONG!! You work for the one who pays you!  Since the buyer is ultimately paying the real estate appraiser's fee as part of the lender's fees and charges, the real estate appraiser's fiduciary duty and loyalty must be to the buyer, and not to the lender directly. The Buyer is the real estate appraiser's client, NOT the lender.  

And since the Buyer is the one who is paying the real estate appraiser, the Buyer (not the lender) should be the one who selects or chooses the appraiser or appraisal management company (AMC) to conduct the financing contingency appraisal pursuant to the sales contract. The lender is NOT a party to the sales contract; it is typically between Seller and Buyer alone.  The sales contract between Buyer and Seller typically does not require third party approval.  The real estate sales contract financing contingency should not be confused with a legal requirement for third party approval such as by a court in a bankruptcy case, where a Trustee has been appointed by the court, etc.  The Buyer and Seller in a real estate sales contract are free to choose whoever they want as the appraiser, and be bound (or not bound) by the opinion of value of the residential real estate appraiser.  A real estate appraiser renders and OPINION of fair market value.  This OPINION is certainly rebuttable.  Real estate appraisers often are not as familiar with a particular neighborhood or subdivision as the Realtors or agents involved in the transaction. 

In certain circumstances such as refinances, the real estate appraiser only does a "drive-by" of the subject property being appraised or valued and does not actually inspect or examine the subject property them self first hand (outside/exterior AND inside/interior) of the property and all of its appurtenances, but looks at the property only from the street or from inside their vehicle; or surreptitiously through on-line pictures or a written description of the property from the listing agent or other party, which may or may not be accurate.  A real estate appraiser should ALWAYS inspect the interior of the subject property being appraised (and all of its appurtenances) and should never be allowed to conduct a street view "drive-by" appraisal only.  

Examining Documents (& Identification) for Notarization

Here is a very good video below which discusses what types of documents may (and may NOT) be notarized, and what type of identification documents are (and are NOT acceptable). This video below is applicable to California notaries public, but the principles and information is substantively the same for the Commonwealth of Virginia.

Please also see my Notary Public page herein for further information on notarizing documents in Virginia and for international use. 

Top 10 Most Affordable International Places to Live (& Retire)

Here is a good article and video from the Washington Post on the top 10 (ten) places to live OCONUS (Outside the Continental United States).

Addressing People By Their First Name (when you do not know them)

Here are a couple excerpts (along with my commentary) from an excellent editorial from the Washington Post which addresses the issue of calling or addressing people by their first name (when you don’t even know them) and denying them a title of respect.

“The practice of denying titles of respect to people violates the most basic requirement of manners, which is to show respect for others. [Addressing people by their first name] happened in a period when the bizarre notion prevailed that the pretense of a universal friendship would solve the word’s problems. When it was recognized that forms of address needed to be equalized, granting titles of respect to all was bypassed.”

On the other hand, the proponents of the “pseudo-friendship model” would argue,

“It has been said that the sweetest sound to anyone's ear is the sound of one's own name.  Dale Carnegie in his book, “How to Win Friends and Influence People,” says that the fundamental act of calling other people by their name puts you solidly on course to establish a sincere relationship with that person.”

There’s a time and place for everything.  People in sales for example want and desire to establish a “sincere relationship” with the person they are speaking to (for obvious reasons) – but building a “relationship” with someone you do not even know should start or begin with respect for that person and not by taking the presumptive and impertinent liberty of assuming you are already “buddies” or “friends” with one another; especially when it’s by telephone or e-mail and you don’t even know or have never met the person.

It’s a good idea and practice to start off more formally (and with respect for the person you are first speaking to) and build your way towards more familiar forms of address or discourse with that person.  Start off with “Mr. / Mrs. / Ms.” (or professional titles such as; Dr. Smith, Congressman Smith, Pastor Smith, Reverend Smith, etc) then at some point you may ask the person if it’s OK for you to refer to them or call them by their first name.  If they give you the green light or OK on that, then you should be “in like Flynn” from that point onward.   ;  )

You wouldn’t walk up to the President of the United States and say, “Hey Barack, how are you doing?” – it would be “Mr. President …”

Just some food for thought and consideration…

Brian

(or should that be Mr. O’Malie ?)

VDOT: Preferred Alternative for Transform I-66 Outside the Beltway Project

Here is a very interesting presentation from the Virginia Department of Transportation (VDOT) which outlines the future development of the much congested and bottle-necked I-66 corridor from Rt. 15 in Haymarket and the Gainesville areas to the I-495 Capital Beltway (and on into DC on I-66 eastbound)

• See also VDOT's "transform66.org"  website for maps, projects, hearings and further information.

This will obviously have an impact on the local real estate market as well here in Northern Virginia (NoVA).

Northern Virginia Median Sales Price Statistics - July 2014 vs July 2015

A comparison of Northern Virginia housing market median sales price stats from July 2014 / July 2015 shows some interesting ups & downs in both the number of sales and the median sales price between these two years.  Take a look below:

She-Sheds, Pub-Sheds & Shed-Quarters

Men have their caves, and now women have their sheds.

"She Sheds" are a new trend sweeping the nation that allow women to escape to their own personal private retreats, without leaving home.

Not only "she sheds" as a place for her, but also "pub sheds" and "shed quarters" for a small office or studio are also gaining in popularity.

 

Preparing Your Home for the Buyer's Eye - When Selling Your Home

Although this video is somewhat dated and campy; the principles, points and tips made in this video (featuring Tony Randall) still hold true today with regard to how to "Prepare Your Home for the Buyer's Eye" when listing and selling your home. 

Mortgage Loan Process Explained - "Home Loan Toolkit" Guidebook

As part of their obligations under the Real Estate Settlement Procedures Act (RESPA) and the Dodd-Frank Wall Street Reform and Consumer Protection Act the Consumer Financial Protection Bureau (CFPB) issued an updated "Special Information Booklet" which is now known as the "Your Home Loan Toolkit."  

The toolkit attempts to modernize and simplify the information presented to consumers and is designed to work better with the new forms and processes under RESPA/TILA harmonization that go into effect on August 1, 2015. 

Download the toolkit at the link below.  

Your Home Loan Toolkit

Clear a Profit on a House in 2014? You Might Not Owe Capital Gains Taxes

If you sold your home for a profit in 2014, congratulations!
More sweet news may be on the way: You might not have to declare your profit as income. In fact, you could be eligible to keep all or part of the profit from your sale without paying income taxes on it.
Now, before you get too excited, you need to know the rules.

 

How to determine your tax exclusion eligibility:

 
There are a few general rules to remember to avoid paying a capital gains tax on your home sale:

• You have to have owned the home and used it as your primary residence for at least two of the past five years before it was sold.
• The maximum profit you can exclude from capital gains taxes is $250,000 for a single person or $500,000 for a couple filing a joint return.
• You can exclude the gain from the sale of your main home only once every two years.
• If you own more than one home, you can exclude only the taxes on the sale of your main home—the one you live in the majority of the time.

 

When to declare your home sale on your tax return:

• If you receive the 1099-S form (“Proceeds From Real Estate Transactions”), you’ll have to report the sale on your tax return.
• If you can’t exclude all or part of your home sale from the capital gains tax, then you’ll have to declare the transaction on your taxes.
• However, if you think you meet the requirements to avoid paying taxes on the profit from your home sale, act quickly at the close. You can certify with your Realtor®, lender, and settlement attorney (or title agent) that you qualify for a tax exclusion when the sale closes. If you didn’t notify anyone when the sale closed, you can still inform them by Feb. 15 of the year following the sale. Once that’s done, you won’t have to declare your home sale on your income tax return.

 

How to figure out your total profit:

 
Determining the size of your profit isn’t as simple as calculating the difference between what you owed on your mortgage and the sale price of your home.
For tax purposes, you need to calculate an “adjusted basis” for your home, which involves in the following:

• The original price your paid for the home
• Adding in the cost of any improvements you made. This doesn’t mean routine maintenance—these improvements need to be substantive changes that added to the value of your home
• Subtracting any items you claimed to reduce your tax bill during the years you owned the home, such as depreciation, casualty losses, or energy credits.

Once you’ve done those calculations, subtract them from the sale price to arrive at your profit.

Some exceptions:

 
Of course, there are exceptions! These exceptions may allow you to qualify for a full or partial exclusion.

• If you are in the military, federal intelligence, or the foreign service and have spent some time working abroad over the past few years, you may be exempt from the rules outlined above.
• You may qualify for a partial capital gains tax exclusion if you sell your house due to a change of employment, change of health, or other unforeseen circumstances, including divorce.

As always with tax issues, consult a qualified tax adviser to ensure you follow the rules and maximize your tax deductions.