Appraisers are frequently in the background in the real estate business. Lenders are usually the ones who choose them, and the main question everyone concentrates on is: will the property appraise out (meaning the property achieves a necessary appraised value to get a loan).
I recently spoke with Kent Gibbons of Gibbons Appraisal Service, Inc. about the appraisal business. He’s been doing residential appraisals in the Greater Eugene area for 17 years. He reminded me that when he’s appraising, he arrives at a value of a property on the date of appraisal.
There are three methods appraisers use to arrive at value: comparable sales approach, cost approach, and income approach. Appraisers will often use the three methods and reconcile them in a report to arrive at an opinion of value. I often joke that the three ways of appraising a residential property are: comps, comps and comps. That is, comparable sales are the most important factor in determining a residential property’s value.
We talked about how to quantify Lane County’s market decrease over the last year or so. The best way would be to look several same-house sales in each of our neighborhoods. Unfortunately, we don’t have the sales volume to adequately do this. So, our methods of valuation are imperfect (but what isn’t?). As a general number, my rule of thumb is that our market has declined about 10% in 2008, but that’s not a hard and fast rule.
Lenders have grown more risk conscious and are scrutinizing appraisals more. Kent is now looking at recent sales, pending sales and actively listed properties to arrive at his opinion of value. Our changing market keeps all real estate professionals on their toes.
While the majority of Kent’s work comes from lenders, he’ll gladly do residential appraisals for individuals. If you’d like to reach him, his phone is 520-3767.