Q: I read your piece on "low-ball offers" on Oct. 15, in particular the part where you said help has arrived Sept. 1, when appraisal reports begin including new sections designed to more accurately compare competing properties and their overall condition. They are taking into account recent improvements to the home. Based on the above information, I decided to go for a federal Home Affordable Refinance Program refinance. I am getting ready to protest the fact that the appraiser did not assign any value to the most expensive and highest returning solar equipment installed on my house.
Page 3 explains (the appraiser's) position in the second paragraph: "They are technically considered to be a superadequacy at this point in time."
Is that appraisal policy? Does the state of Nevada support the fact that a $25,000 home photovoltaic system would come in on an appraisal the same as a gilded toilet?
I would like to know what the official appraisal policy is on energy-saving upgrades installed on a house, also water-saving upgrades. I have done both and do not think my appraisal reflects that. Did my appraiser miss a class in appraising solar energy add-ons? Have you had that class yet? I am not selling my house. I am trying to take advantage of the HARP program to refinance an underwater loan. A $25,000 increase in my appraisal would have helped a lot.
-- Alvin R., Las Vegas
A: Local homeowners frequently question appraisals that they believe undervalue their home. The larger issue is that our local housing market continues to be dominated by bank-owned homes that are often left in poor condition and need substantial repairs. These bank-owned homes are often the only "comparable" sales they have to go on when appraising the value of a home in normal condition or with various upgrades.
I've been informed that some help in this area came Sept. 1, when appraisal reports from Fannie Mae, the nation's largest source of funding for home mortgages, began including new sections designed to more accurately compare competing properties and their overall condition. These new appraisal reports affect a sizable percentage of local homes on the market. This should help appraisers take into account recent improvements to homes, at least those with mortgages funded by Fannie Mae.
To better answer your questions, I consulted R. Scott Dugan, a state-certified appraiser in Nevada since 1969. He said "solar and energy-saving items do add some value in the market place." However, he added, such upgrades are generally appraised at much less than what the homeowner paid for them. Like a swimming pool, spa or similar amenity, he suggested such systems should be taken into account by appraisers, even though they may only contribute a small percentage of their original cost to the overall value of the home.
"Assuming the homeowner spent $25,000, some type of adjustment should have been made for these items," Dugan said, "but these items would not have contributed the full $25,000."
When homeowners make relatively expensive upgrades to an inexpensive home, they often recoup a smaller percentage of their investment. He said this was likely a factor with your home, which appraised at about $115,000, below the median price.
Even if no other homes in your neighborhood have the same kind of upgrades you added to your home, he said appraisers can look for similar situations in other local neighborhoods, "even if it's 10 miles away," to support some type of adjustment for these features.
Paul Bell is the president of the Greater Las Vegas Association of Realtors and has worked in the real estate industry for 30 years. To ask him a question, e-mail him at email@example.com. For more information, visit www.lasvegasrealtor.com.