Chicago Housing Styles

 

Chicago style bungalowReal estate agents and appraisers alike often struggle to define the architectural style for unusual or unique properties. Have you ever gotten a new listing, took one look and started scratching your head and asking yourself how you are going to describe this to prospective clients?

Even more basic properties can present a conundrum when they nod to more than one typical style. The web offers some great resources to both educate yourself on architectural styles and help make a decision once you start completing the listing form on the MLS. The National Association of Realtor’s website offers a good starting point (http://realtormag.realtor.org/home-and-design/guide-residential-styles).    This article covers common styles across the country but since many architectural designs end up including a number of different styles, it’s good to know your Craftsman from your Colonial. Sometimes it’s just a little bit of detail that turns a standard Cape Cod into a Tudor.

Chicago housing styles via Big Shoulders Realty

Chicago housing styles via Big Shoulders Realty

Fortunately, Chicago definitely has some set, easily identifiable housing types.  Big Shoulders Realty, a boutique brokerage firm in Chicago, has an excellent page on their website that provides brief histories and descriptions of housing styles common to Chicago that can be helpful when describing a property on MLS (click on the image above to go to the page).  Then click on the housing style and you are taken to a page that also shows you actual houses in Chicago that are of that style.  It really is the best resource online I have found for the Chicago market (it should be called “Chicago Housing Styles for Dummies”).

But what do you do when you have a more recently constructed property? How do you avoid using the catch-alls “Traditional” and “Contemporary”?  Really, I’m asking.  Feel free to comment below!  General consensus has it that “contemporary” means “of this time” or moment. Something funky, modern-looking or new could fall under that category. For a property where “traditional” seems like the only option, maybe pull out the most prominent feature, like a turret or full front porch or examine the roof line for any elements that point in one stylistic direction or the other.

Rowe Appraisal Group specializes in “non-lender” appraisals and we complete pre-listings appraisals for real estate agents and homeowners all the time.  Don’t hesitate to reach out to us if you ever have any questions.  You can reach us at (847) 863-5776 or email us at roweappraisalgroup@gmail.com.

Property Questionnaire for Real Estate Agents

A couple of days ago I was sitting down to start writing a blog post on how to streamline the initial appraisal process, specifically gathering information on the subject property prior to doing the inspection. Over the weekend I listened to an episode of the podcast “Voice of Appraisal” where Phil Crawford mentioned an improvement worksheet that the Ohio Coalition of Appraisal Professionals (OCAP) has distributed to local area realtors. I recently contacted him and Steve Papin, the president of OCAP, who was kind enough to send me a copy. Here is the PDF (Property Questionnaire), or you can email me and I can send you the Word Doc that is formatted properly).

The main purpose of the questionnaire is to gather information that might otherwise be difficult to obtain. As you can see, the form provides the listing agent an opportunity to list all recent updates and any other details they would want an appraiser to know. Instead of springing all these questions on the agent at the time of the  inspection, by emailing a copy in advance they can have the time to do any necessary research and talk to their clients about the property before you even go there. And since it’s fairly often that a property is on a lock-box, you may not even meet the Realtor. Finally, at the end of the day you’ll have a document that can easily be saved to your work file.

In doing more research on these types of questionnaires, I saw that Ryan Lundquist of Sacramento Appraisal Blog, has also shared a “cheat sheet” that you can download here. This morning I was all set to wrap up my blog post by outlining even more benefits to these forms when I saw that Tom Horn, appraiser and author of the Birmingham Appraisal Blog, posted his own version of the “Property Questionnaire” here. So, clearly something is in the air folks! Tom’s blog post, as always, is top notch and has lots of good tips and suggestions for agents and homeowners alike.

I will most likely be creating my own form based on these three examples to include a section for any other additional features that the agent feels adds value to the property, or specific neighborhood info that the agent thinks is important. I suggest you do the same. Choose your own adventure or tailor one of these questionnaires to fit the Real Estate Agents in your own market! Once I’ve gotten mine whipped into shape, I’ll post it to my blog.

Land Value: Surplus vs. Excess

I recently came across this interesting animated GIF from an article from RealtorMag regarding land values over the last 40 years.  It followed the overall housing market by peaking in 2006 and bottoming in 2011.  When thinking about land value it is important to understand a fundamental concept of surplus land vs. excess land.  Jonathan Montgomery also wrote an excellent post with some additional information on this topic you can read here.


EXCESS LAND is the portion of the lot that is not necessary to meet the existing zoning requirements AND could possibly be sub-divided and sold off as a separate parcel.  
SURPLUS LAND is not large enough to be separated from the existing parcel and therefore, does not have as much value as excess land.


The trick I was taught to remember this is excess land is excellent.  Let's look at the following two slides below from a recent class I took from the Hagar Institute (which I highly recommend for all appraisers).

Source: How to Support and Prove Your Adjustments by Richard Hagar 

Source: How to Support and Prove Your Adjustments by Richard Hagar 

In this example, a 3000 sq. ft. lot is valued at only $3 per sq. ft. as it is considered unbuildable and has minimal utility.  Once you get to 5000 sq. ft. the value per sq. ft. increases to $40 per sq. ft. Therefore, a 3000 sq. ft. lot would have a market value of around $9000, while a 5000 sq. ft. lot would have a market value of $200,000.  

Remember that when appraisers are analyzing land values, we are NOT making adjustments on the total size, but instead the incremental change in size.  This same theory can be applied to many other features of real estate as well (GLA, first bed or bath, first 50' of water frontage, etc.)  If you have any questions please feel free to call me at (847) 863-5776 or leave your question or comment below. 

The Housing Value of Every County in the U.S.

The Housing Value of Every County in the U.S.

I recently came across this map posted on Twitter by Max Galka of Metrocosm.com.  It shows a map of the U.S. with the land area of each of the individual counties being substituted by the total market value of the housing.  Keep in mind that this is the sum of the values for each county, which is going to be skewed by population; nevertheless, this GIF is way too cool not to share.  


I found this map is really hypnotic.  Several times while typing this post I have found myself zoned out just staring at it.  Anyone else?

Also, I would love to see this type of map that separates out all of the Chicago neighborhoods and suburbs.  My guess would be the North Shore, downtown and Lincoln Park in Chicago, and the Hinsdale/Oakbrook area would be the largest.



Appraisal Industry: The Tide May Be Shifting

Appraisal IndustryWith all of the changes happening in the appraisal industry right now, I thought I would share this article I did for Working RE a little less than a year ago that detailed my personal journey. In the article I made reference to some of the positives in the appraisal industry:

Excerpt from the Working RE article titled Taking Success into My Own Hands:

There is a lot of negativity in the appraisal industry and without question, certain things need to change. However, there are also a lot of positives appraisers can focus on to improve their business.

The Appraiser Movement

Today, with the help of technology and social media, I feel the momentum may be shifting in the appraiser’s favor.  The title of the article was “Taking Success into my Own Hands”.  Now, I think there is a new appraiser movement that is taking success into our own hands.  There are new internet shows like Phil Crawford’s “Voice of Appraisal” and Dustin Harris’s “The Appraiser Coach Podcast” that are helping get the word out for on behalf of the residential appraiser.  There are public Facebook groups and private members only groups like “Appraiser Insider” that has not only helped my business, but completely transformed it.  You also have bloggers like Gary KristensenLori NobleTom HornBill CobbRyan Lundquist, and many more¹ who are helping educating real estate agents, homeowners, attorneys, and calling out injustices in the industry.

Just as recently as a month ago, after an AMC tried to demand the entire work file be submitted with their appraisal reports, the bloggers, appraisal shows, and Facebook groups got the word out and due to public backlash, essentially shut that down and within a week the company published a revision to the new requirement.  We also recently saw the first “administrative fee” of $5000 to a company for not paying “Customary and Reasonable Fees” in Louisiana³.  Individual state Coalitions like Illinois’ own ICAP, headed by current president Rick Hiton, are really making some positive headway with state legislators.  Multiple state coalitions are even getting together to discuss ideas and plans for the betterment of the appraisal industry.  Yes, the appraisal industry appears to finally becoming more united.

With what appears could be an appraiser shortage on the horizon, we are going to need some changes to the requirements to becoming an appraiser or  change how trainees can be used and thus facilitate more appraisers coming into the industry.  To that point, I recently received an email from a major national bank who refined its expectations regarding the involvement of appraiser trainees.  They no longer require supervisory appraisers to be physically present with trainee appraisers at all subject property inspections and driving comparable sales.  This will allow us to not only train the next generation of appraisers, but make it financially feasible to do so.  We have seen a lot of “monkey see monkey do” in negative ways with banks and AMC’s in the past, but this is one trend that I would love to see catch on.

I don’t pretend to know where the appraisal profession will be in 5 years with UAD concerns, appraiser shortages, AVM’s, reasonable and customary fees, etc.  There are many more battles that will need to be fought.  But again, a year later, with more public voices out there speaking on behalf of the real estate appraiser, I still think there is still reason for optimism.

Update On My Journey

Like many appraisers right now with rates near all time lows, I have never been busier.   My average fees have never been higher.  I have been able to increase my standard fee over 20% and was even contacted by one client to let me know they were increasing the standard fee without me asking.  I have also been able to leverage my website into more and more non lender work.  This allows my business to be more diversified and not have to worry about interest rates spiking or a major change in order volume from my best clients.  People will never stop getting divorced and never stop dying (divorce and estate appraisals).  Both are a major source of non-lender appraisal work. Working with clients for “pre-listing” or “pre-purchase appraisals” is one of my favorite types of assignments as it allows me to interact more with the client and really explain the appraisal process and how my opinion of value was determined.

I am continuing to reach out to other appraisers in my area and the Appraiser Insider group to discuss strategies and industry topics.  I just finished the second part of a 4-day “Green and Sustainable Buildings” appraisal course from the Appraisal Institute in Palm Desert, CA (the class is actually free as it is being sponsored by Build it Green²).  While currently there isn’t a big demand for valuing solar and other green residential homes in Chicago, I feel there may be in the near future and want to make sure I at least have a basic understanding.

If you have any thoughts or anecdotal evidence of where you may think the industry may be headed, please feel free to post a comment below to continue the discussion.

 

¹ Mike Turner, Michael Coyle, Jonathon Montgomery, Jeff Hamric

² These FREE classes will be offered again in Laguna in September.  Appraisers who complete the courses will have them name listed on the Appraisal Institutes Green Registry.

³ I was just forwarded an email from Pierce Blitch, III, IFAS from Georgia indicating that they too have completed a Fee Survey for Reasonable and Customary.  It appears their bill has passed both houses and was signed by the Governor.  More evidence that change is on its way!

Paired Sales in the Chicago Condo Real Estate Market

Chicago Condo Garden

With all of the discussion regarding the CU (Collateral Underwriter) and using regression analysis to support adjustments, I thought I would share a recent, good old fashioned Paired Sales Analysis (Matched Pairs) to determine an adjustment for a Garden unit vs. a high first floor unit.  The idea behind paired sales is to find 2 or more sales that sold around the same time, in the same location, that are the same with the exception of one feature.  The difference between to the two sales price should give you a supportable adjustment.  The best thing about condo conversions in Chicago, is that when they are converted from apartments, the building and units are often rehabbed and resold around the same time.  Even better, they are often rehabbed by the developer with similar finishes in each of the units.  When the garden unit has the same floor plan as the units above it, it creates a perfect data set to extract a matched paired sales adjustment.  You have similar location (same address), they typically sell with a few months of each other, and are similar in bed and bath count, GLA, etc.

I was appraising a garden unit in on the northwest side of Chicago.  While I was able to find other recent sales of garden units for comparable sales, I needed to use a non garden unit to bracket a particular feature.  After pulling 3 recent garden unit sales, I found out when the buildings were converted and look up the sales prices of each of the units at that time.  Here is the data below:


Chicago real estate apprasier

As you can see above, I have four different paired sales to analyze.  One building actually provided two sets as the two units both sold again recently within 2 months of each other.  The percentage difference ranged from 9.2% – 15.3%.  After average all four percentages, I was able to come up with a 12.5% adjustment for the difference between a garden unit and the unit above it.  When the CU comes back and I am asked why I gave such a large (or small, who knows with CU) adjustment for floor level, I can cut and paste this into the addendum.  Or better yet, just put in into the report in the first place and hopefully avoid the hassle.

While this ended up working out really nice and neat for this appraisal, my fellow appraisers will attest to the fact that finding good paired sales in all circumstances in just a pipe dream.  I just thought I would share one example in which it worked out really well.  I have been testing many of the recent regression tools available for appraisers and have found a couple to be really promising.  Once I learn all of the nuances and techniques, I believe they will be extremely helpful in many situations.  But those of you who have tested them know, they often give some crazy results and other methods will still be necessary.  My favorite so far is PAIRS, by Gandysoft.  Please leave a comment and let me know which software you are finding to be the most useful so far.

Rowe Appraisal Group specializes in real estate appraisals for divorce, estates (date of death), pre-listings and more throughout the Chicagoland area.  If you have any home appraisal related questions, please call us at (847) 863-5776 or email paul@roweappraisalgroup.com.