Killing a Deal with a ‘Low’ Appraisal


Within the first few weeks of becoming an appraiser, I knew I had a choice to make. I was already being pressured by lenders, real estate agents, and others to ‘hit value.’  Other things were being asked of me that I felt were unethical or even bordering on illegal.  It was clear that some of my peers were giving into such pressures and, at least in the short term, they were being rewarded for it.  I made a commitment early on however, to always live true to my conscience and let chips fall where they may.


Over the years, I have angered a lot of banks, homeowners, and agents when I have valued real estate where the market would support and appraisalpurchasenot where someone else thought it should be.  In some cases, I have felt like I have done the potential buyer a huge favor by saving them the pain of a financial mistake in paying too much for a home.  They do not always see it that way.  Rather than appreciating an appraiser’s professionalism, we are often viewed as the enemy for ‘killing the deal.’  In a rare moment, the opposite happened to me in early September.


I was commissioned by the Veteran’s Administration to do an appraisal for a new construction.  The plans and specs arrived and I began my initial look through.  It was immediately obvious to me that this home was of high-end quality, but had some unusual features.  For example, though the home was made of wood (common in my area), the truss system was steel (not common my area).  The cost of the roof system alone was 4Xs the cost of a normal roof.  To make a long story short, the home did not appraise for the cost of construction.  This was your typical ‘cost does not always equal value’ scenario.


Two weeks later, I got a call from the potential buyer.  “Oh boy.  Here we go,” I thought. I prepared myself to be taken to the woodshed for killing his deal.  What came next was surprising.


He said, “”I cannot thank you enough for what you did for us.  Where most appraisers would just rubber-stamp the deal, you didn’t.  Your appraisal was honest and kept us from entering into a major financial transaction and already being upside down.  There needs to be more appraisers like you!!”  I was floored and told him as much.  I said that in over two decades of appraising, I had never, not once, had a potential buyer whose sale did not go through due to a ‘low appraisal’ thank me for my services.  I asked him if I could use his quote in the testimonial section of my website and he agreed. In fact, he went on to say that if I ever wanted to send anyone to him for a verbal recommendation I could keep his number on speed-dial.


It can be frustrating at times to wonder if our good deeds ever get recognized or appreciated.  Sometimes we might wonder what others think of us.  In the end, I believe that no good deed goes to waste.  What we put into the universe comes back to us.

Are Egress Windows Required in Basements for FHA Appraisals

I get the question all the time, “Do I have to have egress windows in my basement if I am getting an FHA loan?”  The answer is not a simple Yes or No, but it is also not as complex as some make it out to be. Basically, it depends on how much you want the basement to contribute to the value of the home.

If you want the appraiser to count the basement area as livable space, you will need to have at least two ingress/egress points.  This can be two sets of stairs, a stairway to the main level as well as a walkout door, or a stairway and at least one egress window.

If you want a room to be counted as a bedroom it must have an egress window.  What is an egress window you ask?  Here are the requirements from HUD:

Egress Window

  • “The windowsill may not be higher than 44 inches from the floor.
  • The windowsill must have a net clear opening (width x height) of at least 24 inches by 36 inches.
  • The window should be at ground level; however, compensating factors may allow less.

In all cases, use reasonable care and judgment. If these standards are not substantially met, the basement area cannot be counted as habitable space.”


There you go.  If you do not have two ingress/egress points, the FHA appraiser may not count the basement as habitable space (thus there is likely not much value there).  Putting an egress window in is usually not that expensive.  The cost to do so is likely less than the value you will lose by not having one.

Should the Home Owner Accompany the Appraiser on the Inspection?

The doorbell rings.  On the front porch stands the appraiser you were expecting.  She explains that she will first measure the home from the exterior and then will need to walk through each room on the inside.  The questions in your mind are: What do you want me to do? Do you need help? Should I go with you?  These are all great questions, and the answer is: it depends.Viewing Property

Appraisers are used to doing things on their own.  A fair number of homes we inspect are vacant, so our tools are set up for solo use.  Everyone at our firm has a laser measuring device so there is not even a ‘dumb end’ of the tape to hold.  In other words, we appreciate the offer for help, but it is not usually needed.

On the other hand, it is nice to have someone with us who knows more about the house than we do.  Pointing out updates and features that are not readily seen can be helpful to the appraiser.

Every appraiser has a personal preference when it comes to home owner participation.  Some of us like to have them in tow and others would prefer to focus on the task at hand without interruption.  It is simply a matter of preference.  However, it is not really about our opinion when it comes to this matter.  It is more about you.

Having a stranger walk through your home can be an intimidating experience.  Some desire to accompany the appraiser and others would rather the appraiser just do it alone.  At Appraisal Precision and Consulting Group, we want you to do whatever feels best to you.  There are pros and cons to both.  In the end, it is your home.  You are in charge.

An Appraisal is Not a Home Inspection

Appraisal vs Home InspectionWhen purchasing a house, there are two, main inspections that typically take place: One is an appraisal for the purposes of lending and the other is a home inspection for the purpose of peace of mind.  Do not mix the two up.  They are not the same thing.

If you are not paying cash, the lender will probably require an appraisal be completed.  Consequently, an appraiser will most likely come to the home and do an ‘inspection.’  The purpose of this inspection is for data gathering to start the valuation process.  He or she will likely measure the home, walk through each room, take pictures and write notes.  Depending upon the size of the home, the inspection will take anywhere from 20 to 60 minutes (possibly longer).  Most of the appraiser’s work takes place back at the office.

An optional service that is usually ordered by the buyer is a home inspection.  The purpose of this service is to have an extensive and complete look at a home and property for any red flags or repairs that may be needed.  The home inspector will likely spend a much longer time at the house because he or she is looking from foundation to rafters.  A written report is then made, but most of the home inspector’s work takes place on site.

Some make the mistake of thinking an appraiser is also looking in depth at the house and will also report on any defects.  Though appraisers will certainly mention any defects that might affect value, they are not home inspectors.  An appraiser looks at a home in much the same manner that a potential buyer would.  Whatever is readily observable will be noticed, but do not expect the same detail from an appraiser that you will see in a home inspector’s report.  They are different services for different purposes.

Of course, either one of these services may be ordered without a home purchase.  If you are curious on the value of your home or would like to be made aware of any defects you might have, please contact our office.  It would be our pleasure to complete a thorough and professional appraisal or recommend a good home inspector for you.

The Law of Diminishing Returns on Idaho Real Estate

Idaho Real Estate, is subject to a phenomenon called “The Law of Diminishing Returns.”  Actually, the law exists in Wyoming as well.  Okay.  Okay.  The law exists everywhere, but we are only concerned with Eastern Idaho real estate and Wyoming real estate on this blog.

The principle basically goes like this: the more you get of something, the less per unit it is worth.  Let’s first look at it with something other than real estate.  If you go to the bakery and order a donut, it might cost you $.75.  On the other hand, if you buy a dozen maple donuts with creamy pudding oozing out, the cost might be $3.99.  How can that be?  How can a donut be worth 75¢ alone, but only 33¢ when purchased in a box of twelve?  The answer is The Law of Diminishing Returns.

The same principle of economics applies to real estate.  As an appraiser, I hear comments like this one all the time; “My neighbor just sold his land for $15,000 per acre.  Since mine is 10 acres, the land alone ought to be worth $150,000, right?”  Well . . . wrong.  Actually, I am usually a bit more PC about how I answer, but this statement is just not correct.  Just because your neighbor sold his two acre tract of land for $30,000, does not mean land is worth $15,000 per acre.

With land, your initial building lot is always going to be worth more than the subsequent acres.  In other words, your neighbor’s property was probably worth about $25,000 for the first acre and another $5,000 for the additional acre.  Furthermore, as you sell more and more acreage together, the cost per acre diminishes .Usually.

Here is a recent study I conducted on land sales in the Island Park area.

Average Sale Price for Island Park Vacant Land Sales 2005-2014


0-.99 acres = $48,781                      Initial Building Lot           Difference          Additional Per Acre Difference

1-1.99 acres = $93,094                    -49,000                                 $44,000 $44,000

2-2.99 acres = $91,598                    -49,000                                 $43,000 $21,500

3-3.99 acres = $87,446                    -49,000                                 $38,000 $12,600

4-4.99 acres = $68,986                    -49,000                                 $20,000 $5,000

5-5.99 acres = $91,361                    -49,000                                 $42,000 $8,400

6-6.99 acres = 111,875                    -49,000                                 $63,000 $10,500

As you can see statistically, initial building lots in Island Park of less than an acre average an estimated $49,000. An additional acre may add approximately $44,000, but acreage beyond the initial two is subject to the law of diminishing returns and only averages $12,000 per acre.

Of course, the law does not just apply to land sales.  Typically, two decks are worth less per deck than just one.  Four fireplaces may be worth $10,000, while a single fireplace may be worth $3,500.  A 4,000 square foot home will sell for less per square foot (all other things being equal) than a 2,500 square foot home on the same street.

As you deal with buying, selling, or simply valuing real estate in Idaho, Wyoming, or across the country, remember the Law of Diminishing Returns.  It can greatly enhance your decision making abilities.

Divorce Appraisal in Idaho

Regardless of the circumstances, going through a divorce can be a painful and complicated process.  In addition to the emotional trauma, there are attorneys, monetary concerns, compex laws, and mountains of paperwork to deal with.  If real estate (either primary, secondary, or investment) is involved, your headaches get much bigger.  Where do you start?  Who do you hire?  How do you know you are being treated fairly?  Here are a few points to consider when getting a divorce appraisal in Idaho Falls, Pocatello, Blackfoot, or any of the surrounding Eastern Idaho areas.

Choose the Right Appraiser

It is not always the attorney who chooses the appraiser.  Certainly, you will want to seek the advice of your lawyer, but if he or she does not know who would be best, do your homework.  Appraisers come with various levels of expertise and abilities.  You should know how experienced, educated, and trained your appraiser is.  Most importantly, choose someone who has been appraising in your area for a long period of time.  Knowing the market is the biggest criteria when choosing an appraiser.

You will want to find an appraiser who has had expert witness experience.  In other words, find someone who knows how to handle him or herself on the witness stand.  The best appraiser in the world can ruin a case if he or she cannot present well in front of a judge or jury.

Finally, many divorces never go to trial.  Find an appraiser who is willing to do the appraisal report for one fee and a separate billing for retainer and/or testimony.  Your overall costs will be much lower using this payment model.

Be Involved in the Appraisal Process

You do not have to be at the home or property when the appraiser inspects, but it is advised.  You know the real estate best and being there can assist the appraiser in getting the most accurate information he or she will be relying on for value.  Also, if you know of comparable homes which have recently sold in your neighborhood, you may wish to bring them to the attention of the appraiser.

Check the Appraisal for Accuracy

You and your attorney should look over the appraisal report for accuracy.  Appraisers are only human and do make mistakes.  If you have a sprinkler system, but you do not see it listed on the report, communicate that.  Do not wait for a deposition or trial for these things to come up.  You do not want the other side challenging the integrity of the appraiser for small things.  This can hurt the overall credibility of the case.

Communicate with the Appraiser Openly and Often

Appraisers are not used to talking to home owners once they have left the inspection.  This is because a large majority of appraisals are completed for lending purposes and there are convoluted laws regarding communication with the borrower.  This is not the case in a divorce situation, however.  An appraiser should remain an unbiased, disinterested, third-party—of course—but they can be a sounding board and a source of information regarding the market, your home, and your property’s value.


For over 20 years, Dustin Harris has been an appraiser in the Eastern Idaho market.  His experience with attorneys and litigation work is extensive.  He will remain neutral and respectful of both sides and is a professional in every aspect of this difficult process.

If you have any questions or items we can help you with, do not hesitate to call our office.  The precarious road through the divorce process should not be traveled alone.