Silicon Valley property values continue to rise, but not as much as they did a couple of years ago, according to San Jose appraiser Tim Tolbert. Tolbert, who recently spoke at a Silicon Valley Association of Realtors district meeting in Los Gatos, said the market was insane from February through June last year, but by the end of fourth-quarter 2018, prices had dropped close to their 2017 values. Tolbert said he is now seeing values rising by about 3-4 percent.
Property values are important when buying and selling real estate. An appraisal is an unbiased evaluation of the fair market value of the home conducted by a professionally trained person. Tolbert has been an appraiser for more than 30 years and has seen property values rise and fall, depending on the state of the economy.
An appraisal protects the buyer by ensuring the buyer does not pay more than the home is actually worth. In order to get a mortgage loan, lenders typically require an appraisal of the property being purchased.
When determining the financial value of a home, Tolbert said he visits the home and evaluates the property based on factors like gross square footage, lot size, age of a home, exterior and interior condition of the home, improvements made to the home by the seller, including renovations and/or additions, and sales price.
In addition to the property visit, appraisers look at comparables, similar properties that have sold in the area within three to six months. Tolbert said he also will look into the 36-month history of a subject property, as well as a 12-month listing history of the property. If the property was taken off the market and put back, this will need to be explained. Whether the market is up or down, it should be looked at in 90-day increments, said Tolbert.
Tolbert said Realtors should be aware of the latest Fannie May and Freddie Mac pilots, known as bifurcated appraisals, in which the GSEs send out an unlicensed inspector to inspect the property, take photos and check a list of items via an iPad. This inspector then sends the information to an actual licensed appraiser. This process is a less expensive route, especially since there are not enough qualified appraisers to do the actual work, but Tolbert indicated, “There is always some slippage when the work is not done by an actual appraiser.”
Tolbert noted there are moves by some states to waive appraisals of properties of $500,000 or less in order to reduce the time frame of the transaction. Some lenders are even contemplating waving appraisals altogether.
Due to the limited housing supply, accessory dwelling units have figured in appraisals. Realtors asked how accessory dwellings are being appraised. Tolbert said it depends on the lender. Fannie Mae and some lenders consider non-permitted ADUs if work on them was performed in a workmanlike manner, conforming to typical standards. Tolbert said when he appraises such a property, he adds one more criteria — that the unit “enhances the livability and marketability of the property.”
Information provided in this column is presented by the Realtor members of the Silicon Valley Association of Realtors at www.silvar.org. Send questions on any topic to rmeily@silvar.org.
