county appraisal $58k low, what to do?

[BooksAreNerdy]

Land (20 acres) Cost $80k in 2011.
Home built in 2012/13 for $270k. This includes trenching, water lines, septic, garage etc.
We have spent $10k on fencing and a lean-to shelter.

Bank appraisal for final loan value was $350k in spring 2013.

We would like to list the home for sale in spring 2015. The January 2014 county appraisal is $292000.

We obviously can't list/sell for $58k less than we have invested. Does the county appraisal matter in list price?

I'm feeling shell shocked and disappointed after the meeting with our Realtor. She did say that some homes are selling for more than county appraisal, but homes just aren't appreciating in value here yet. She mentioned that things could change by the next appraisal, you never know.

Is it possible to request a better appraisal than just a drive by for our next one in January before we list?

The Realtor said that the appraisal is based on square footage and comps. Our house definitely has $58k worth of upgrades.

Any thoughts?

[AlexK]

The county appraisal is used to calculate your property taxes, that's it. If it's too low, throw a party with the extra money.

[Another Reader]

If your agent is relying on a County tax appraisal to value your house, fire that person immediately.  The County tax appraisal may have nothing to do with current market value.  The agent should give you a comparable market analysis, with a list of comparable sold properties, pending sales, and active competition.

Asking the County to review the tax appraisal will likely increase your taxes, but would have no effect on the market value of your property.  What you spent on the property is also not relevant.  The only thing that matters is what buyers are willing to pay.

[Cpa Cat]

Don't worry about your county appraisal. It really only gets accurately updated when the house sells, because they have no way of knowing what's going on with the condition of your house.

When you sell, the buyer's mortgage lender will require a real appraisal. As long as that appraisal supports the selling price, then there's no real problem.

If you are truly unsure about the value of your home, then you can hire your own appraiser.

[BooksAreNerdy]

Your replies make me feel a bit better.

I have no doubt of the value. I was the GC for the build and have receipts for every last board, screw, and door knob in this place. :)

Valuing it at $350k is extremely fair, and does not include the 20% 'paycheck' I should have paid to myself for being the GC.

Perhaps we should call in a few more Realtors and get their opinion of fair listing prices. I lost my cool a little when I saw the county appraisal and showed this Realtor my hand by telling her how much we have invested. I should have kept my mouth shut and let her give me her opinion first. Live and learn.

[oldladystache]

We obviously can't list/sell for $58k less than we have invested.

It doesn't make any difference to a buyer how much you have invested. If your place isn't priced reasonably compared to others in the area nobody will buy it.

[Another Reader]

I have no doubt of the value. I was the GC for the build and have receipts for every last board, screw, and door knob in this place. :)

No, you have no idea what the value is.  Your cost has nothing to do with the current market value.  The current market value is what buyers are willing to pay now.  It may be twice what it cost you or it may be half.  The bank appraisal may accurately reflect value today, or it may not.  Only a thorough analysis of what is happening in the market today will tell you what the value is.

[Blindsquirrel]

   Drink a beer in celebration of lower property taxes, in fact have a bunch. Co appraisal matters not as far as the value. We have bought one house at 100k under the county appraisal and sold one for 50k of the Co appraisal.  The market will tell you what the place is worth.

[Cpa Cat]

You could go on realtor.com and search for the houses that are for sale in your area (preferably on your street or adjacent). Then you can compare square footage and interior quality to your own and get a ballpark.

You want to get an idea of the price per square foot range that people are asking and also figure out if you will command the high end or low end of that range. Then remind yourself that these are only asking prices and be prepared to negotiate.

Since you have no faith in your realtor, you should shop around if possible. Hopefully you can find one who will do a better job of convincing you of what your home value is. Picking the right price for your house is part of why you hire a realtor.

That said, you have a bank appraisal that is less than two years old. Unless you have reason to think that your home value has been sinking like a stone, there's no reason to think that the county appraisal is correct. And it's a bit surprising that your realtor put any faith in it.

[Nords]

Perhaps we should call in a few more Realtors and get their opinion of fair listing prices. I lost my cool a little when I saw the county appraisal and showed this Realtor my hand by telling her how much we have invested. I should have kept my mouth shut and let her give me her opinion first. Live and learn.

You keep using the term "appraisal" to refer to the county process, but perhaps the word used on your property tax bill is "assessment".

An appraisal involves a person getting paid to walk the property, fill out a detailed checklist, and compare it to recent sales of similar neighborhood properties.

An assessment frequently is done by a database search, converting the previous year's property sales to $$/sq ft in a neighborhood or ZIP code, and then multiplying your property's square footage to come up with its assessed value.  I've never actually seen a tax assessor walking a property.  Because of the brute-force data-crunching assessment method, they almost always lag the market-- they're lower than appraisals when market prices are rising, and they're higher than appraisals when market prices are falling.

[BooksAreNerdy]

In looking at Realtor.com, I think we could reasonably price around $385k. But it is very hard to say. We are rural, just outside of a college town in NE Kansas. So, prices are lower than a lot of the nation, but this particular town seems to be about 10% higher than similarly sized towns in OK or TX.

Finding comps is hard, because of the size of the property and how close or far other houses are to the corp of engineer land surrounding the lake we border.

When I do compare, I tend to see other properties ranging from 10-40 acres with houses that are older and somewhat out dated. They seem to range from the 250-450 range. Our house is definitely on the high end for finishes, is turn key ready for horses or livestock, partially wooded, and walking distance to trail heads.

What the Realtor showed me was just a print out that valued the land at $74k and improvements around $218. She called it an appraisal. I Just looked at the county's 2014 annual notice of value that we got in the mail back in march. For 2013, the appraised value was $226,400 and assessed was $26,036. For 2014, appraised value was $292,290 and assessed was $33,613. When they did the 2013 value, the house was 3 months from completion.

I did call two other Realtors and have set up appointments to discuss listing the property. I think the Realtor we met today typically deals in less expensive homes in town.

[Another Reader]

A college town in northeast Kansas means Lawrence to me.  I do recall there is a premium for living in Lawrence proper.  There appear to be two lakes proximate to Lawrence, one of which is labeled an Army Corps of Engineers lake on Google maps.  That lake might be considered closer to Topeka.  The smaller lake is nearer to Lawrence. 

The best comparable properties are going to be the ones near the same lake you are on, with similar views and access to the water.  The best agent in your situation is one that lists and more important SELLS houses on this lake.  You need an agent that will advise you of a realistic asking price and the likely marketing time.  My guess is because these communities are not as easy a commute as the suburban subdivisions, that buyers are fairly rare. 

The agent's job is to find and snag the buyer that wants a new house with nice finishes on the lake.  Marketing the property to the right clients is key to a sale.  The agent that showed you the County tax appraisal is not the one for this job.

[Cpa Cat]

Well, since I live in the area, I think you need to ditch that realtor. Property values have gone up since you had your bank appraisal done. Is your house worth much more than the $350,000 that the bank appraiser valued it at in Spring 2013? I don't know - probably a little. My house inside of town has appreciated 10% in the last two years, but outside of town tends to be slower.

It's definitely not worth less. So you know you're probably looking at a ballpark of $350,000 to $385,000.

I probably live in the same county as you. The county assessment on my house is around $75,000 under. I don't know if it's because it never gets updated from whatever baseline they peg you at or if they are intentionally keeping the assessment low because they don't want to start getting a bad reputation for high property taxes/values. I'm kind of guessing the second - that if the county needed the tax revenue, they'd suddenly get more accurate.

[BooksAreNerdy]

Ah! A neighbor! Howdy!

I think you all are right in selecting a different Realtor. I'll update the post after we meet with a few more and see what they think.

[okashira]

A cunning realtor will have a vested interest in selling your home at a cheaper price. A cheaper price means it will sell much faster, which means much higher ratio commission/effort

[BooksAreNerdy]

I agree with that statement. While it would be nice to get max $$$ from the sale, I want to strike a balance between profit and time on the market. Rural properties do take longer to sell, in general. I would like to price it so it doesn't sit a full year on the market. Between 375-385 would pay the Realtor and give us what we invested. Personally, I think if we accepted closer to 360, we would be more likely to sell quickly. I suppose this is why I need advice from a Realtor.

[arebelspy]

Custom built homes often fetch less than expected due to quirks, stuff that the person building it liked that other buyers may not.  This is obviously magnified by the rural issue.

It's unusual to build your own home, then sell it two years later.  So find a Realtor who can give you comps, but keep in mind that you may not get everything you hoped for (and then again, you may, but get hard data).

[Thegoblinchief]

Why are you selling it so quickly?

[BooksAreNerdy]

We have met with two other Realtors, one of which specializes in horse and rural lifestyle properties. This woman knew the market and presented her data very clearly. She was the only one who, rather than just spitting out a number and talking about the appraised value, actually estimated our cost to build, cost of out buildings, and had comps for land nearby as well. Her recommended price was to put it in the $400-425 range.

The comps she showed us (8 of them, from the last 6 months) all sold for about 90% of asking price. They were on the market for between 40-280 days.

If we listed for 425ish, accepted a 90% offer, then paid commission, we would walk away with exactly what we want. I was amazed that her estimations were so dead on.

She said that there is a shortage of properties in this area right now and one of the other Realtors also expressed that there are country buyers right now that are still searching.

We aren't in a huge hurry and won't feel the need to aggressively lower the price. Also, listing over winter isn't a 'bad' for a rural property as it is for a house in town.

For the question of why we are selling so soon after building. Well, we thought this was a dream retirement home. We would be here forever. We have since discovered that we are sacrificing a lot by living here. There is a never ending list of things to do to maintain 20 acres. These projects cost money. The commute to town is insane. I will soon have a child in school and would spend 2 hours a day driving her to and from school. When we purchased the property, there was a wonderful school right down the road, however it has since been closed due to low attendance. The final nail in the coffin was the news that my husband is going to be transferred to Singapore for work Q2 2015. We want to be proactive in selling this place to give ourselves greater flexibility when that move happens. Also, we calculate that if we want to stay here forever, DH would have to work 16 years. To stay here until retirement, then move and buy a less expensive house, would necessitate working 12 years. To move now and rent/relocate/buy a house in cash (120k range), DH could retire in 6 years.

[paddedhat]

For the question of why we are selling so soon after building. Well, we thought this was a dream retirement home. We would be here forever. We have since discovered that we are sacrificing a lot by living here. There is a never ending list of things to do to maintain 20 acres. These projects cost money. The commute to town is insane. I will soon have a child in school and would spend 2 hours a day driving her to and from school. When we purchased the property, there was a wonderful school right down the road, however it has since been closed due to low attendance. The final nail in the coffin was the news that my husband is going to be transferred to Singapore for work Q2 2015. We want to be proactive in selling this place to give ourselves greater flexibility when that move happens. Also, we calculate that if we want to stay here forever, DH would have to work 16 years. To stay here until retirement, then move and buy a less expensive house, would necessitate working 12 years. To move now and rent/relocate/buy a house in cash (120k range), DH could retire in 6 years.

As a retired builder from a rural area, I'm glad to see that you are among the few that figured this out pretty quickly. As I meander through my post FIRE years, I constantly reflect on how many folks that I know that find it necessary to make themselves slaves to their rural properties. It's one thing to be a wage slave who is confined to the cube 50+ hours a week, since you "had" to have that trophy house in the burbs, with all the bells and trinkets. It's another to be able to live comfortably on a large rural spread that owns your butt 24/7/365. It's the never ending story. Fill your head with silly dreams in the Mother Earth magazine, buy your 10/20/40 acres, and a few years later you wake up to find you have dropped six figures in "improvements", you own $40-50K in various equipment to keep the place maintained, and if you slack off and fail to devote 30 hours a week to it, the place starts sliding backwards quickly. Now don't get me wrong, the majority of these folks will all tell you how wonderful life is. Call me jaded, but I think three out of four of them would cry tears of joy if you offered to trade them for a nice modest place with little maintenance, and a pile of cash that was big enough to actually take some time off and enjoy their life. I don't know what ancient philosopher first said these words of pure genius, but.... "you don't own shit, shit owns you"  Good luck, and enjoy the drop in stress after you sell the farm.

[Another Reader]

Consider the possibility that the value is being estimated high to obtain the listing.  Evaluate the comps - look at the pictures and drive by if you can.  If the comps support her assertions, great.  If not, talk to more agents.  You no longer WANT to sell.  You NEED to sell.