After owning our Upper West Side co-op for 7 years, my husband and I recently got over our refi shame (well, mine really) and decided to swap our 4.25% 10/1 ARM for something more permanent and nearly as cheap.
Since we had bought the apartment before the steepest increases of the boom, we weren’t worried about it appraising out too low. But given all the credit-crunch horror stories about drive-by appraisals, I half-expected to greet a co-op-ignorant carpetbagger winging it down from Syracuse for the day to knock off a dozen appraisals at cut rates.
It turned out that the appraiser sent by Citibank--Mitchell, Maxwell & Jackson’s Deena Belford--was not only local but hyperlocal, specializing in the Upper West Side. As she snapped pictures of the apartment, peered inside our messy closets and asked about the improvements my husband and I had made, I lobbed some exploratory questions (“What’s it like visiting other people’s apartments all day?”), then bided my time until after her report before persuading her to do a Q&A here about what it's like to be an appraiser at this particular moment in real estate history.
(In case you’re wondering, Belford valued our two-bedroom apartment at 22% less than a comparable unit directly below us that sold to a neighbor in January 2008, but at about 50% more than we paid in the summer of 2003. And our refi was approved.)
How did you get into the business of figuring out what other people’s apartments are worth?
I finished college 12 years ago with a degree in urban geography, but I didn’t know what I wanted to do with it. A professional organization called the Association of American Geographers had a list of things to do with your degree on its website, like cartographer, urban planner, and real estate appraiser.
At the time, my parents were refinancing their house on Long Island, and what seemed liked the very next day after I'd been looking on the website, the appraiser came. He pulled up in his new Lexus, took some pictures and left. I thought, “Hey, I can do that.” Of course, there is extensive coursework before receiving a trainee license—you start as an apprentice and work with someone before doing appraisal on your own-- and my degree helped somewhat because the concepts were not entirely unfamiliar.
What’s your day-to-day routine like? Do you specialize in particular neighborhoods?
I primarily do the Upper West Side but I do go to other Manhattan neighborhoods occasionally. My company tries to keep us to specific areas so you do get pretty well versed in a specific area.
I try not to do more than 3 or 4 inspections a day. It does get physically tiring, and after awhile the properties start to blend together. On average an appraisal takes several hours to write. The more inspections I do in a day, the more reports I have to write, and it can be easy to get backlogged.
How do you decide how much a property is worth?
When starting a report I look at the historical sale in the project in order to get a sense of the subject's position on a price per share or price per square foot basis. I also look at what is currently on the market in the building. I also look for similar sales and listings in the subject's market area. Sales are public record and we use several online sources to pull together records on each property, like Property Shark, StreetEasy, ACRIS, and subscription-only services like Comps Inc. and Geodata Plus.
Do you work on straight salary or on commission?
We work as independent contractors, and like most appraisers we work on a fee-split basis. The fees for the appraisal are set by the appraisal company’s owner with each client, and there’s a split between the appraiser and the company.
What’s it like going in and out of peoples’ apartments all day long?
Real estate is such a spectator sport in the city. It’s always interesting because I get to see Manhattan from all different perspectives, and I get to see a lot of really interesting properties like the buildings only read about. I wouldn’t say I have real estate envy though.
I do get a lot of decorating ideas. And it’s also interesting when you see multiple units in the same line of a building. You see how people interpret a space— sometimes I will do the appraisal when someone purchases the apartment and then again when they refinance and get to see the changes they have made.
How should an apartment owner prepare for an appraisal, as far as cleaning up and decluttering?
The purpose of the inspection is to assess the condition of the property and its improvements. The bank also requires interior photos of the kitchen, all bathrooms, and the main living area. We will also take a photo of the unit’s view, as well as any additional remodeling, such as built in cabinetry.
Cleanliness has no impact on value. We find closets that are disorganized, teens that have messy rooms, kids who leave toys out and laundry drying in the shower. People are sometimes embarrassed at their closets but that’s sort of the nature of closets in Manhattan. I try to envision the apartment as if it were vacant. I don’t notice if something is out of place.
There are a lot of complaints these days that appraisals have gotten too stringent—that the values are coming in too low, especially on refis. Are people more nervous these days when you come to appraise? Do they ever try to bribe you? Is there anything an owner can do to positively influence an appraisal?
People aren’t more nervous these days, but they’re always really happy to hear I specialize in Manhattan. If it’s a broker, they will tell me horror stories about the appraiser from upstate who wasn’t familiar with co-ops. Those stories do surprise me. Even though they are licensed in New York I don’t know how familiar they would be with property here. I can do an appraisal anywhere in New York, but I wouldn’t.
No one has ever tried to bribe me, though I’ve had a colleague who said the broker or client gave them a bunch of chocolates or something like that. Sometimes it seems like they’re trying to sell the apartment to me. I think it happens more with brokers, who are usually there if it’s a purchase. If it’s a refi, usually I see the homeowner, or sometimes the babysitter or housekeeper.
As far as helping the appraisal process, if the homeowner knows of something specific like a recent sale, listing or contract they should definitely share it with me. I will always look at emails or information like this from a broker or homeowner.
And we appraise refis no differently from purchases.
Do people call you up and yell at you if the appraisal comes in low?
Since we no longer deal directly with the mortgage broker or loan officer, there are less angry phone calls. People are aware that the market has declined, but sometimes may not realize just how much. If the appraisal is for a purchase we are aware of the sale price. Otherwise we are not given a value estimate or a loan amount, so I don't know how much the final value estimate differs from the owner's estimation.
If anyone does call, I always suggest they contact the bank loan officer or mortgage broker and request a reconsideration of value based on whatever consideration it is. Sometimes it works.
What direction do you think the real estate market is headed? How far backward have we gone?
I would say that I have seen things this year resell for less than they were purchased in 2005. But I think it has definitely stabilized. Ultimately, even though it has gone down, it will come back. Markets are cyclical, and they do go down, which people seem to have lost sight of. However, people will always need a place to live and they will always want to live in New York City.
What sort of property holds its value best, in your experience?
I don’t feel that it is a specific property type as much as a market area. For instance, in this recent downturn, more established areas like the UWS and UES fared a bit better than the Financial District, which in my experience had some of the sharpest declines.
Do you own an apartment?
Right now I rent in Long Island City. If I were to buy I would look there first simply because I like the area and would want to stay there. I spend a lot of my day traveling around the city so having access to the 7 train is very convenient.