This issue is very similar to the issue of whether appraisers should know the contract price prior to doing the appraisal. Arguably it would be better that they didn’t and that the financing still go through if the appraisal is within X% of the sales price.

Well then, there’s the difference between you and I. I want to know anything and everything. I want to know as much as possible. I want to test my result against any possible available information. I want to “leave no stone unturned”.

Kary said: “my analysis assumes that the sales price was the FMV.”

When working for a buyer client, I would want to reduce comps that were inflated by concessions. I would also want to eliminate comps where someone paid the same for a 2 car side by side garage as a 2 car tandem. I clearly would NOT treat sales price as FMV. FMV is not what someone paid. FMV is what someone should have paid.

End result might be, “this place is worth $425,000″. Seller might want $450,000 because the guy down the street sold for $450,000. Seller might not take $425,000. But if the buyer pays $450,000 or any point between $425,000 and $450,000 as a result of negotiating with that seller, at least the buyer knows how much he is overpaying when he agrees to a price higher than $425,000. Client wants to pay $10,000 more than it is worth…that’s OK, as long as he knows that going in, and remembers it going out.

That’s a self-fullfilling analysis because you’re assuming a better deal based on the number you think is accurate.

That said, my analysis assumes that the sales price was the FMV. That’s sort of the definition of FMV, but as we both know some people get better deals than others. In picking the four in each group I tried to make the properties as similar as possible, but there’s no way you can make the sellers as similar as possible. No system is perfect.

Personally I don’t like anything that affects my result. Thus, for example, I don’t want to know either the assessed value or the amount the client owes. And when the wife is doing the same task at the same time, I don’t want to know what she’s thinking either.

As to assessor, you have to start with a relevant question vs. a radius. 3 townhomes sold in the same complex for $450,000. Who overpaid? Who got a good deal?

1) Assessed for $370,000
2) Assessed for $350,000
3) Assessed for $300,000

If you look hard, you can find why the assessor had such a huge variance between the assessed values. Looking at the assessed value differences sends out the red flag to look hard.

The one who paid $450,000 for the townhome assessed at $370,000 did better than the other two. The one who paid $450,000 for the one assessed at $300,000 grossly overpaid.

The simple math would be:

If assessed at $370,000 = $450,000 then assessed at $350,000 would be $425,000 and assessed at $300,000 would be $366,000.

$450,000 divided by $370,000 equals 1.22 times assessed value. You start at 1.22 times the assessed value of the subject property to make adjustments, not at the “comp” price of $450,000. If you start at the comp price, you don’t make enough adjustments.

You have the choice. You can look hard for the differences or you can trust the tax assessor and know he had a basis for the variance. I trust the assessor and then look for the differences…the latter being more out of curiosity than need. For a quick valuation, I trust the assessor.

Upon further study, the reason for the differences are:

Both had a two car garage but one was side by side and the other tandem. A 2 car tandem is not worth as much as a 2 car side by side. How much different? Trust the assessor.

Assessor says 2 car side by side is $370,000 and 2 car tandem is $350,000. If $370,000 sells for $450,000 (1.22 times assessed value) then tandem should sell for 1.22 times $350,000 or $425,000 making the tandem worth $25,000 less than the side by side.

You can do the same by taking the difference of $20,000 in assessed value and reducing the offer by 1.22 times that difference. I don’t do that because the assessor is using many other factors, and the difference may not all be attributable to the tandem garage. Various plus and minuses equalled $20,000, including:

Position in complex
Across from tot lot
backs to greenbelt
backs to busy road
busier street in the complex
almost no traffic on street in complex
same square footage but 3rd bedroom is really a den

Depending on the year built, assessments will vary dramatically. Best to use like kind properties and do not compare assessed values of a townhome built in 1972 with one built in 1995.

As with comps, using assessed values as a valuation tool requires like kind samplings. If the assessor says it’s worth 5% less…better to assume he is right than to say he’s wrong and pay that 5% more for the property.

For the 1.5 bath or less properties all sold between 315k and 370k. Here’s the amount the King County assessed value and Zillow were off respectively:

-4k +27k
-39k +37k
-36k +27k
-10k +27k

Zillow was closer more often than the assessor, and also consistently high. The assessor, however, was very close when they were closer. But if you wanted to apply a percentage to either to get an adjustment, you’d use Zillow because it was consistently between 5 and 10% high.

The two bath plus homes went for between 379k and 545k.

-67k +7k
+53k +117k
-89k -10k
-161k +45k

Here the numbers are all over the board. Neither the assessor or Zillow is even consistently high or low. Zillow was closer more often, but that hardly matters when you win one because the assessor was off by 161k.

Anyway, the bottom line is I wouldn’t rely on either source of data for a “starting point” to make adjustments.

LOL…close enough! It’s a Holiday!

Happy Thanksgiving, Kary!

Even within the same street the assessed value numbers are not consistent.

You crack me up. Sometimes I wonder if we really are in the same profession. I didn’t “start a piece on how much my assessment went up” I was talking to Robbie who started a piece on how much HIS assessment went up. I was trying to make Robbie feel better by pointing out that mine went up much more than his.

You’ve never seen one whole neighborhood selling at 1.17 times assessed value and another at 1.24 times assessed value? Before you even think about looking at interior issues, you start with all things being equal the value is X based on assessed value…then you add and subtract based on interior finishes. Every neighborhood will have a different multiplier.

There are many steps beyond that include supply and demand and seasonal factors, but you never ignore the assessor.