Designated members Danny Wiley, SRA; Rick R. Lifferth, MAI, SRA; and Daniel (Dan) Fries, SRA, discussed in The Wall Street Journal Jan. 25 the challenges of appraising luxury homes, particularly those priced higher than others in its neighborhood, which can make it harder to find comparable sales.
“The higher you go up the ladder in value generally the less data you have," Wiley, chief appraiser for LSI in Irvine, Calif., told the Journal.
One common trap that sellers often fall into is upgrading beyond neighborhood norms — particularly highly customized upgrades such as a recording studio or a water feature that could actually lower a home’s value, the Journal reported.
Buyers typically offer 20 percent below the asking price on highly customized homes, Lifferth, president of Lifferth Appraisal Company in Layton, Utah, told the Journal. Those lower purchase prices work their way into comparable sales data, which then results in lower appraisal values.
Fries, president of Daniel Fries & Associates in Cumming, Ga., told the Journal that it’s not always the homeowners at fault. Rather, the county’s assessment of home values and resulting property taxes can dissuade potential buyers.
Read the complete Wall Street Journal article (subscription required).