Expert: liznarr - 3/18/2005

Question
That's strange, I haven't received it.

You can also send to diana.nguyen@cox.com

thanks!

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Followup To
Question -
Hi Liz,

Can you send me the checklist to diana@ellemoda.net

thanks so much

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Followup To
Question -
Thanks Elizabeth for a very thorough answer.  It helps clear up a lot of questions.  I have just one more for you.  I found the house through www.ziprealty.com and I called up the agent on zip realty  to inquire about the house.  She has set up the appt to meet with the builder and the listing agent.  Oh by the way, the house I gave you the appraised value was just an example of a comparable home in the area.  The house I am interested in is a brand new house that is being built.

The agent I called up from zip realty where I found the house, would she be considered a buyers agent?  Do I ask her directly "are you  representing me and not the seller?".  I don't want to sound rude.  I'm really not sure.  Thanks for you help.

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Followup To
Question -
Hi Liz

I am interested in purchasing a new home.  The home is being built (in it's framing states) and is located in a historic town called  Roswell in Georgia.   The city is planning a city makeover, there will be a lot of improvements to existing buildings, street scaping, new development.  I believe this area will really be a sought after place to live.  The house I am interested in is selling for $649K.  I have compared the house size, # rooms/bathrooms etc. to other comparable houses and have researched the prices on the other homes (running comps) in the area.  

The county tax assessor office has a really cool website where you can search all the information of house properties online.  It gives you the appraised value of the home and the assessed value of the home.  The appraised value is considerably much more.  For example I researched this property (built 2001, 7/5) selling for $639,850.

Appraised Value  

Appraised Land Value $146,900
Appraised Building/Improvement Value 309,200
Total Appraised Value 456,100
 
Assessed Value  

Assessed Land Value $58,760
Assessed Building/Improvement Value 123,680
Total Assessed Value 182,440

Value 2003  

Total 2003 Appraised Value $442,000
Total 2003 Assessed Value $176,800

Value 2002  

Total 2002 Appraised Value $412,500
Total 2002 Assessed Value $165,000

Do you think their asking price is a bit high if their property is only appraised at $442K? They purchased the property in 2002 for $443K. That is almost 200K appreciation.  I noticed the other comparable homes were selling for roughly the same.

What would be a fair price to offer for the home I am interested in?  Do I offer close to the appraised value?  Also, can you explain to me what appraised value and what assessed value is?

There is one more important thing I should note.  Since Roswell is an older town, the neighborhoods are very mixed.  The house I am interested in is next to homes that are less in value and size, approximately 1/3 to 1/2 of the size and about 200K in price.  There are also more expensive homes mixed in there as well, but the majority are the lower end homes.  The main selling point in the house is the the location.  This same house if located in a subdivision (with like homes) would be valued over 800K.  I'm sure that's why it's only selling for $649K in this mixed neighborhood, it might be a hard sell.

I am working with an agent and I want to ask her to do some comp research for me.  I don't know if she will be biased or honest in telling me everything.  Can you tell me what kind of questions I can ask her?

Sorry for the long email, thanks in advance for providing this great service.

Diana
Answer -
Hi Diana,

Thanks for writing All Experts.

Most counties do not actually go through the full and thorough process of appraising a property that an independent appraiser will – they do ride-by appraisals.  Therefore, it can be said that county appraisals done in this manner are generally not as accurate as a “full-blown” appraisal.  They can, however, give a generally-acceptable opinion of value for the county's purposes if the same standards are applied to all properties.  Since counties have access via recorded deeds on all sales within a county, they do have accurate information with which to make comparisons.

The appraised value set by a county is simply the value that the county appraised a property for.  The assessed value -- generally always lower than appraised value -- is a different value that your county actually taxes you on.  There is a formula used for this, and it is applied uniformly to all APPRAISED values to arrive at the ASSESSED value.  To then arrive at the actual resulting taxes due on a property, you have to know the millage for your particular district and make another computation to arrive at the taxable amount.  Your county assessor (where a property is located) can give you all this information if you want to pursue this further.

I noted that you did not give 2004 appraisal/assessed values.  Are values for the tax years 2004 or 2005 available yet in Georgia?  If so, I would suggest also adding the later of these values in your consideration.

I am not clear on the actual status of this house.  You state that “they” (the current owner, I assume) purchased this property in 2002 for $443,000, but yet you said the home is being built and is in the framing state now.  Perhaps you did not give me all the facts, but I'm curious:  If this house was purchased in 2002, why is it still in the framing state?  Is it being expanded?

It's okay for homes within a neighborhood to be mixed, but it is NEVER a good idea to purchase the LARGEST home in a particular subdivision or neighborhood, especially if the difference in heated square footage is significant.  

There is a theory in real estate called progression and regression.  Simply stated, progression means that the larger homes in a subdivision will pull the value of the smaller homes UP.  Likewise, by regression, the smaller homes in a subdivision will pull the value of the larger homes DOWN.  The largest home in ANY subdivision does not appreciate in value in proportion to rate of appreciation for a much smaller home in the same subdivision.  

As far as recommendations on what you might actually OFFER to purchase this home, the county's appraised and/or assessed values are not the benchmarks you should be using.  County appraised and assessed values are usually only benchmarks when you know fair market value of a property and can make comparisons accordingly.  

As you stated you intend to do, your agent needs to do a CMA (Comparative Marketing Analysis) of this property for you.  A CMA will show you what other COMPARABLE homes are selling for, and what other comparable homes have actually SOLD and CLOSED for.  From the information obtained on the CLOSED properties within the same subdivision or neighborhood, you can apply similarities and differences and make adjustments in value to arrive at an estimate of value for the home you want to offer on.  This is basically the same process an appraiser uses, but appraisers also factor in many other things in MUCH more detail.

As far as working with an agent, you should work with an agent who represents YOU – not a Seller, and not both you and the Seller.  This should ensure that you will not get biased answers, but rather honest and forthcoming information.  

The mere mention that you are not sure if the agent you are working with will give you honest answers throws up a red flag for me.   There's no crime in having more than one agent do a CMA for you, either.  Just don't sign a buyer's agency agreement with more than one agent.

I hope the above is helpful to you and points you in the right direction.  
Good luck to you, and write again if you have additional questions.

Regards,

Elizabeth Narr

Answer -
Hi Diana,

Yes, call the agent from zip realty and get directly to the point and tell her that you will only work with an agent who will be representing you EXCLUSIVELY.   Then ask her if she is willing to do that.  

If she is, I would also ask some other questions such as how much experience she has (and how much of that is with NEW construction) and how many homes in that area she has sold.  For the price range you're looking, you want the best representation you can get.  There is paperwork involved for Buyer Representation, and be sure that any paperwork you sign spells out that YOU, not a seller, are the one being represented.  I don't know how Realtors in Georgia work, but I would assume that the Seller is paying the commission.  Just be aware that the payment of commission to YOUR agent by a Seller has nothing to do with representation for you.  

Keep in mind that this is a business decision for you on a huge investment you're about to make.  I know you would not be rude, but you certainly need to be assertive and to the point with what you expect from an agent who will be representing you.

In addition to other things, you will want to ask for a copy of a plat and any restrictions of record.  Walk the property lines BEFORE you sign any offer so that you'll know what you “think” are your property lines actually “are.”

I would make any offer you sign subject to an inspection by a qualified inspector at, say, a couple weeks prior to closing.  Yes, even on new construction you should have a good inspector do an inspection.  Also, state in your offer that any of your punch list items on your walk-through prior to closing must be completed PRIOR to closing, or either funds set aside therefor.  Once you close on new construction with any unfinished items, remember that you are no longer at the top of a builder's priority list.

Since you state that this house is in the framing stage now, make sure that there is a very clear WRITTEN understanding of all the specs for the house, such as allowances for appliances, carpeting, lighting, landscaping (including irrigation), flooring, countertops (granite, corian, etc.).

There's a whole list of things in addition to the above you need to know such as type cabinets in kitchen and baths, fixtures at all sinks.

Some problems I've experienced lately with new construction have been paint and water problems.  Make the builder specify what brand and grade of paint will be used on all the walls and trim.  In the price range of this house, do not settle for a contractor's grade paint.  If you wipe down a wall with a scuff or mark on it, contractor grade paint will literally come off the wall, so ask about paint grade.  If you don't know about the particular grade the builder plans to use, call a local paint store and ask questions.

As far as water problems, specify in your offer that the builder guarantees that you will not have standing water under your house and/or water infiltration into any basement level after closing and that if there is, he will promptly address any issues.  If this house has a basement, and if the yard slopes from the front towards the back, the front brick wall (IN ADDITION to the poured foundation wall for the basement) will very possibly need to be water-proofed.

If you will send me your email address, I'll send you a couple checklist forms that I use for new construction that might be helpful to you.  My email is liznarr@sc.rr.com

Good luck to you.

Regards,
Elizabeth Narr

Answer -
Diana,

I sent the checklist to you at 3:27 PM EST.  It's 5:00 PM now, and your last communication to me through All Experts was time-stamped 4:11 PM which I just opened.

Let me know if you did not receive the attachment.

Elizabeth

Answer
Diana,

I don't understand what happened, but I did not receive any message that your email had not been delivered.

I have, however, just forwarded my message with attachments to both the email addresses you sent me.  The ellemoda address I just sent to is the same as the first one I sent.  I also copied to your cox address.

Let me know at liznarr@sc.rr.com whether or not you receive the email I have just sent you.

Thanks,
Elizabeth Narr