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Understanding Your Home's Appraised Value: An Interview with Anthony Prendergast of Anthony Prendergast Appraisals

By Anthony Prendergast

Tell us a little bit about your background and your company.

For starters, I'm a Certified Residential appraiser, certified in MA. I perform residential appraisals to establish market or disposition value, I also perform appraisal reviews, and some retrospective valuation assignments. My office is in Worcester, and I maintain a coverage area in central MA. I've been appraising since 2001, and I've been an Independent Appraiser for more than 10 years. My education background is in Urban Studies- a combination of sociology, demography, and government, which has dove-tailed nicely with the multi-disciplinary demands of being an appraiser. The profession requires a person to be proficient across a wide range of skills and knowledge, and my pre-employment education was helpful.

What is the basic approach that an appraiser uses to determine the value of residential properties?

The appraiser will inspect the property for its physical characteristics, and whatever features might exist that have a beneficial or adverse effect on its value. The appraiser will also examine the market data for recent sales and active listings of homes that are similar in characteristics to the property being appraised, as well as for general property and value trends. So, the appraiser gathers a volume of data about the property and the market, then uses this information to establish a range of value and, within that range, an opinion of the property's market value. However, each assignment is its own unique process, because property characteristics vary greatly, and the market is constantly changing with new data entering on a daily basis.

Can you briefly talk about replacement cost and what that means for a home's appraised value?

Some appraisals include a value opinion arrived at by the "cost approach", where the appraiser uses cost data on building materials and labor to estimate the expense of reproducing or replacing a dwelling. Any client may ask for the cost approach to be included in a residential appraisal. A client might want to know if it's more or less expensive in a given market for a consumer to buy land and build a house, as opposed to going to market and buying existing stock. The answer might affect a purchase or investment decision. But many entities who rely heavily on appraisals, such as FNMA, do not require an appraisal to include the cost approach. Generally speaking, market-driven sales data is more pertinent than cost aggregates, because people mostly buy and don't build. And since logically at least one approach to value must be performed, and the sales comparison approach is always performed for residential properties, it far outweighs the cost approach in acceptance.

How does an appraiser typically analyze comparable house sales?

After gathering data from the property being appraised, the appraiser examines the market for sales and listings. The more similar a sale is to a property being appraised, the more suitable it is for analysis as a "comparable". There are objective measures of age, size, and lot size which have to be considered- a good "comparable" would be very similar to the property in one or more of these factors. Other important features such as location, condition, amenities and appeal may require the appraiser to extract what value the market puts on those features, if any, and how they contribute to the whole. Time is also a factor- all other things being equal, more recent sales should be understood as better indicators of a current market value than more dated sales. Not all homes are going to be "comparable" across all the possible value-related features, so the appraiser has to analyze multiple purchase alternatives before the process is completed.

What might account for a difference between a home's estimated market value and its final selling price?

An appraiser's opinion of market value for a house might differ from the home's final selling price for many possible reasons. In a market value assignment, for example, the appraiser is asked to form an opinion of the most probable price a property should bring at market. There are times when one buyer or seller may value a home, or certain features of a home, differently than what market data indicates. There are times when discounts to expedite sale are offered, depending on market uncertainty or how the seller values time. The appraiser's definition of market value necessarily includes a reasonable competitive marketing period. In cases where there's a significant discrepancy between a sales agreement and a value opinion, the market data is pointing the appraiser to a conclusion about value which does not correspond to the parties' sale agreement. In such a case, a person making a lending or a purchase decision is well served by an objective party such as an appraiser, to report on the market in a way that is meaningful and not misleading, with a value opinion supported by relevant and proven data.

What advice do you have for people who aren't happy with the appraised value of a home?

I suppose it depends on why they're unhappy. It's been well said: the appraiser is a bearer of market news. The appraisal is driven by data about the home and the market. As an appraiser, my objective is using the best data to establish my opinion on the most probable sale price and market value, as well as to support my conclusions. If a party is unhappy because they have reason to believe the appraiser didn't consider meaningful data, then they should let that be known, and / or provide their data. Other people may have more intuitive concepts of value, that are proved inaccurate when put to a data test, so reading the report is always advisable. The most common reporting form is a "Summary" appraisal. The appraiser has examined more market data than most people are aware of, and has summarized this data in the report. But some things may be obvious to an experienced appraiser and not so clear to a person with less experience performing (or reading) appraisals, so an unhappy party should ask any questions they have.

What's the best way for people to contact you and your company?

Our website is www.anthonyprendergastappraisals.com.
Phone: 508-864-3279.

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