Portland Area Real Estate Appraisal Discussion

Appraisers Do Not Give Value
December 2nd, 2014 6:20 PM

Portland Appraiser Hand Giving Value

We are now officially in the holiday season — the season of giving.  As an appraiser, I am asked frequently by homeowners, real estate agents, and even by other appraisers, “What do you give for BLANK value?”  (“BLANK” in this context can be anything related to real estate from a window, to a garage, to vacant land, to an entire structure.)  The question is one that troubles me because of the word “give.”  My response to such a query is always, “Appraisers do not give value; we estimate value.”

Each property and every locale are different.  There is no set value for any specific real estate or property feature.  The Super Appraisal Blogger, Ryan Lundquist put it best, “A Little Black Book of Value Doesn’t Exist in Real Estate.  When an appraiser makes value adjustments, each must be supported using appraisal techniques that can withstand peer review.  For instance, garage space in a high-rise downtown Portland condominium likely has a much different value than garage space in a suburban Portland location.

The three tools that an appraiser has to determine the value of anything (including adjustments for individual features or the value of the entire property) are the cost, the income, and the sales comparison approaches.  When applied correctly, all of these methods are market derived and credible.  Each of the three approaches has many variations that the appraiser can use to estimate value rather than give value.

The Cost Approach uses estimates of new home cost (or features) and depreciates that cost based on condition or the market acceptance.  A garage might have a cost new of $20,000 and the market-derived depreciation data (including condition and market response for other factors) suggest a value of something different.  Appraisers are uniquely aware that cost often does not equal value; therefore, we consider depreciation carefully. 

The Income Approach is based around many different ways to assign present value to the likelihood of future income.  For example, a garage might add $100 per month in rent to a particular property.  Using the simplest of income approach methods, if similar sales suggest value is roughly one hundred times the gross monthly rent, we might conclude that the income approach suggests that the garage value is $10,000.

The Sales Comparison Approach uses similar sales of carefully-selected properties to estimate value.  To isolate the value of a specific feature, appraisers might use paired sales of properties that are similar except for that feature.  Since strong individual paired sales are often unavailable, an appraiser might use several adjusted pairs, statistical regression models, or groups of sales to isolate a particular feature.  A sample of similar properties without a garage compared to a sample of similar properties with a garage might provide the evidence that an appraiser needs to strongly and quickly support a garage adjustment.  In this example, appraisers need to be careful that the properties with garages do not tend to have other value-added features (that the properties without garages do not tend to have) that were not controlled for in the sample.

Did I leave anything out or do you want to join in the conversation?  Let me know in the comments below.

If you find this information interesting or useful, please subscribe to our blog and like us on Facebook.  Also, please support us by making Portland real estate appraisal related comments on our blogs and YouTube videos.  If you need Portland, Oregon area residential real estate appraisal services for any reason, please request appraisal fee quote or book Gary F. Kristensen to speak at your next event.  We will do everything possible to assist you.

Thanks for reading,


Posted by Gary Kristensen on December 2nd, 2014 6:20 PMPost a Comment

Subscribe to this blog
Good stuff, Gary. I definitely appreciate the link and mention too. Very cool and unexpected to see today. I like how you mentioned the three approaches to value to explain how appraisers come up with the final value. It's easy to think appraisers are in the business of giving value, but we really recognize or measure value more than anything. Sometimes an owner might spend $50K on improvements, and then ask, "Why did the appraiser not GIVE me $50K of value for all I did?" The reality is the appraiser might have recognized through research that the market was only willing to pay about $20-30K for those improvements. Keep up the great posts, Gary.

Posted by Ryan Lundquist on December 2nd, 2014 7:16 PM
You are right. Careful comparable selection makes the whole process more transparent. And with the UAD abbreviations and requirements confusing the issue on appraisals used for mortgage purposes the fewer and better supported the adjustments, the better.

Posted by Mike Turner on December 2nd, 2014 7:48 PM
Thank you for the comment Ryan. You're right, I get that a lot too. "The appraiser only gave me BLANK."

Posted by Gary Kristensen on December 2nd, 2014 7:49 PM
Thank you for the comment Mike. You're correct that in the past appraisers might have been able to get away with just "giving" a value for something. Now we're being watched like hawks and could end up without any work if we don't support our adjustments.

Posted by Gary Kristensen on December 2nd, 2014 7:53 PM
Great post Gary. I will use this as reference when people ask me the same question!

Posted by JeffHamric on December 3rd, 2014 9:05 AM
You're welcome Jeff. I'm glad that I could "GIVE" you something of value... lol :-)

Posted by Gary Kristensen on December 3rd, 2014 9:22 AM
Great post! This is a question that is commonly asked but not very simple to answer. Thank you for breaking it down and explaining this topic clearly.

Posted by Mike Brandlin on December 3rd, 2014 11:30 AM
Thank you for following and for your comment Mike.

Posted by Gary Kristensen on December 4th, 2014 1:02 AM
Good post, I recently had realtor ask how much value I gave for blank, but blankety blank blank does mean blank. All kidding aside I explained to her there is no magic number that all appraisers use and all value is derived from the market.

Posted by John Tsiaousis on December 12th, 2014 7:30 PM
Lol John and thank you for joining the conversation. Measuring the market is key to any quality appraisal work.

Posted by Gary Kristensen on December 13th, 2014 12:20 AM
Gary, your last comment in the feedback section pretty much wrapped it all up "Measuring the market is key to any quality appraisal work." You couldn't have said it any better. That's why A Quality Appraisal is the top appraisal firm in the Portland area. Good stuff!

Posted by Michael Coyle on December 16th, 2014 10:46 AM
Thank you for the comment Michael.

Posted by Gary Kristensen on December 16th, 2014 11:10 AM
Good stuff Gary. I recently came across your youtube videos and appreciate the peer input. As a 12 yr. veteran appraiser I've come across a lot of these questions. The way I've come to explain these issues is simply saying that it doesn't necessarily matter how much something costs but rather what someone is willing to pay for it. After all I wouldn't pay you the same/more for a 10 year old blank than it would cost me to build it new exactly the way I'd want it.

Posted by Mike P on January 1st, 2015 9:50 PM
Thank you Mike for the comment. That is a great way to look at value.

Posted by Gary Kristensen on January 1st, 2015 10:53 PM


My Favorite Blogs:

Sites That Link to This Blog: