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On 2/11/2020 at 10:06 PM, tri-man 47 said:

I hear ya.  My wife and I have a small (~900 sq ft) summer cottage - no heating or cooling.  Plain vanilla place, but with lifetimes of memories.  We share ownership with my two sisters and their hubbies (place was passed down after both our parents had died).  Younger sister and BIL announce out-of-the-blue in August that they've bought their dream house ...a full-year, $1M+ home on a lake - our same lake.  So now they want a buy-out to exit the family cottage, which is fine.  But BIL (a true cheapskate and wheeler-dealer) doesn't like the fair price we offer and goes and gets an appraiser.  Based some Zillow pricings we saw, we figured our cottage is worth, maybe, $240K or so.  The appraiser uses four comps that are all $400K, three- or four-season homes (not summer cottages) and prices us at $360K ...industry standard not to deviate by more than 10%.  I'm convinced my BIL gave the appraiser a "go high" signal.  Current status is no resolution and what's probably permanent damage to the sibling relationships.  :hot:  I'm still considering filing an official complaint about the appraiser.  The comps were 2-3 years old (inappropriate) and one comp where the sale hadn't even finalized yet.  He worked way too hard to make $400K his starting point.

For what its worth, these situations are becoming more and more common due to demographics - lots of family groups with property getting older and these disputes are becoming a cottage industry of sorts for valuation professionals and lawyers.  It should go without saying that resolving these things short of litigation should always be your goal. Even if it costs you what seems like a ton of money lost in a negotiated buy-out, its still better than paying litigators to fight it out in court.  That said, it doesn't hurt to at least be aware of your legal position when you enter into a negotiation.  If there is an LLC agreement, it will (or should) say what process is followed when one member wants out.  If its just a situation where you each own a certain percentage, it is most likely the case that the BIL may have no legal claim to force a buy out.  If you were to value his percentage interest (rather than the whole property), it would have very little value in terms of his ability to separately market and sell it.  Depending on how its structured and what the law in your state says, he may be at your mercy.

Secondly, in the business world (real estate purchase, finance, M&A, tax, financial reporting, etc.) there would be no expectation for you to accept and rely on an appraisal someone else procured and paid for.  Its a nice data point that may be mildly interesting for your negotiations, but in no way can he claim it should set the market for a buy-out between parties on opposite sides of a deal.  If you want to use an appraiser to set the market, you should suggest you hire one jointly, find a good one and let him know this is not a simple $400 bank appraisal where he can do a drive-by and pull a few comps.  Each owner should be responsible for their percentage of the appraiser's fee; you only communicate with the appraiser by email with everyone being copied; you tell him exactly what the use is - that he will be setting a price for purposes of one owner selling his interest to the others; and you agree to be bound by the resulting opinion of value.

Finally, if you're mad at the first appraiser, I would recommend taking a closer look at his report.  What was the fee?  What is listed as the "purpose" or "intended use" of the appraisal?  Those designations drive the approach and certain assumptions and can change the value.  An appraisal for insurance purposes is going to get a different number than one done for sale/purchase, collateral finance or tax.  On the level of a small residential property, this is not a sophisticated piece of work, but there are some concepts behind it that are not inherently obvious.

 

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1 hour ago, CletiusMaximus said:

For what its worth, these situations are becoming more and more common due to demographics - lots of family groups with property getting older and these disputes are becoming a cottage industry of sorts for valuation professionals and lawyers.  It should go without saying that resolving these things short of litigation should always be your goal. Even if it costs you what seems like a ton of money lost in a negotiated buy-out, its still better than paying litigators to fight it out in court.  That said, it doesn't hurt to at least be aware of your legal position when you enter into a negotiation.  If there is an LLC agreement, it will (or should) say what process is followed when one member wants out.  If its just a situation where you each own a certain percentage, it is most likely the case that the BIL may have no legal claim to force a buy out.  If you were to value his percentage interest (rather than the whole property), it would have very little value in terms of his ability to separately market and sell it.  Depending on how its structured and what the law in your state says, he may be at your mercy.

Secondly, in the business world (real estate purchase, finance, M&A, tax, financial reporting, etc.) there would be no expectation for you to accept and rely on an appraisal someone else procured and paid for.  Its a nice data point that may be mildly interesting for your negotiations, but in no way can he claim it should set the market for a buy-out between parties on opposite sides of a deal.  If you want to use an appraiser to set the market, you should suggest you hire one jointly, find a good one and let him know this is not a simple $400 bank appraisal where he can do a drive-by and pull a few comps.  Each owner should be responsible for their percentage of the appraiser's fee; you only communicate with the appraiser by email with everyone being copied; you tell him exactly what the use is - that he will be setting a price for purposes of one owner selling his interest to the others; and you agree to be bound by the resulting opinion of value.

Finally, if you're mad at the first appraiser, I would recommend taking a closer look at his report.  What was the fee?  What is listed as the "purpose" or "intended use" of the appraisal?  Those designations drive the approach and certain assumptions and can change the value.  An appraisal for insurance purposes is going to get a different number than one done for sale/purchase, collateral finance or tax.  On the level of a small residential property, this is not a sophisticated piece of work, but there are some concepts behind it that are not inherently obvious.

 

All very interesting.  Thanks for taking the time to lay this out.  More comments on my end FWIW:

- We have no written agreement.  My mom left the cottage to her four children.  My brother wasn't interested (lives in Ohio, not SW Michigan), so we got an appraisal, tweaked the numbers a bit (for needed work/costs), and paid him off over ten years (or less).  Three of us paying off his 25% interest wasn't a big deal.  Since then, our working assumption has been that each of our now-1/3rd share would pass to our children.  We never talked seriously about any of us wanting 'out' of the cottage ownership.  My sister (Mary) and BIL were apparently considering buying their own lakefront home for the past year or two, but never brought that up and what the implications might be.  They bought their place in late-August, and didn't even mention anything during early July when we spent many days together during our annual stay at the cottage.

- side note #1: older sister (Jane) and spouse have made some rumblings about possibly exiting the cottage as their only son (also in Ohio) isn't interested.  However, Jane is deeply attached to the cottage, and they've been in no itching hurry to consider a buy-out.  So they haven't been seriously looking to exit.

- side note #2: Jane has been saying for several years that she didn't want any debt when she retires, and she just this year moved down to a PT position.  Again, Mary and BIL didn't say anything about their possible exit ..which would force a new debt burden on sister Jane.

- implication of #1 and #2: Mary and BIL want to be bought out.  Jane and BIL don't want new debt ...and at some distant point, will want out. Only feasible solution: My wife and I buy out both of them.  We pay enough over the next ten years to Jane (for her buyout) so her cash flow to also buy out Mary is neutral.  Jane and BIL get a longer payout, but still have cottage usage over coming years.  The implication is that my wife and I are suddenly faced with a joint buyout of 2/3rds of the cottage's value, which IS a big deal, given the suddenness of this. 

- I fully agree that the appraisal doesn't bind us in any way.  It's theoretically a fair guide to the cottage's market value.  To wit, looking back to clarify, the stated intent is to establish a market price using a Sales Comparison approach.  We had offered a fair price for the cottage after they announced their new home purchase.  BIL - who always has to Work The Deal - said we should get a new appraisal.  Jane (and spouse) and I (and spouse) told them it was pointless: Given the surprise element, given the big burden thrown on my wife and I, and given a couple of recent sales very near our place provide some measure of market, we said an appraisal wouldn't change the dynamic.  We said the price we offered is what we feel we can afford.  Despite this, BIL initiated an appraisal on his own.  The 'client' is listed as my mom's estate (?), and he paid $350 out of our shared checking account.  We believe the appraiser is someone he has worked with before, possibly through his financial institution (where BIL is a top exec). 

- Appraisal fun facts: (1) the appraisal states that the cottage would "typically be torn down and a new home built.  Truly the value is in the site on Silver Lake."  The lake frontage is 40 ft.  He valued it at $360,000, based on comps to year-round homes.  (2) The appraisal is dated August 20, 2019.  The listed expiration date of his license: July 31, 2019.  (Do we have recourse against him for the latter??)

TL:DR: I have a money-loving, wheeling/dealing BIL who can't resist trying to squeeze a max price from his own siblings-in-law.

 

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Can the appraisal I am about to have in any way affect my current taxes that I pay?  This is for a cash out refi.

Just wondering if this is somehow reported somewhere that could increase my property taxes.

Edited by ghostguy123

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18 hours ago, tri-man 47 said:

All very interesting.  Thanks for taking the time to lay this out.  More comments on my end FWIW:

- We have no written agreement.  My mom left the cottage to her four children.  My brother wasn't interested (lives in Ohio, not SW Michigan), so we got an appraisal, tweaked the numbers a bit (for needed work/costs), and paid him off over ten years (or less).  Three of us paying off his 25% interest wasn't a big deal.  Since then, our working assumption has been that each of our now-1/3rd share would pass to our children.  We never talked seriously about any of us wanting 'out' of the cottage ownership.  My sister (Mary) and BIL were apparently considering buying their own lakefront home for the past year or two, but never brought that up and what the implications might be.  They bought their place in late-August, and didn't even mention anything during early July when we spent many days together during our annual stay at the cottage.

 

 

This part is a great example of what is keeping many lawyers in business these days, and paying for our kids to go to fancy schools.  This isn't to be critical of you or your family.  I've seen several situations, and am aware of many more, where you can add another comma or two to the property value at stake and the situations are even more shoddy in terms of the parties' legal rights.  We are looking at one now that involves $100m of property spread out in the US and abroad where it is honestly completely impossible to tell who owns what, with all the different entities, gifts, side agreements, etc.  Its very common to have arguments over the myriad of different circumstances that pop up in these situations. 

 

18 hours ago, tri-man 47 said:

- Appraisal fun facts: (1) the appraisal states that the cottage would "typically be torn down and a new home built.  Truly the value is in the site on Silver Lake."  The lake frontage is 40 ft.  He valued it at $360,000, based on comps to year-round homes.  (2) The appraisal is dated August 20, 2019.  The listed expiration date of his license: July 31, 2019.  (Do we have recourse against him for the latter??)

TL:DR: I have a money-loving, wheeling/dealing BIL who can't resist trying to squeeze a max price from his own siblings-in-law.

 

I would forget about recourse to the appraiser.  I'm not sure what that's going to get you.  He probably has an indemnity and all sorts of protections, conditional language and CYA in his engagement agreement and his report.  Was the report dated in August, or did he just back-date the "as-of" valuation date?  This seems odd, especially if he's using comp sales after that date (which would be malpractice).  The license thing is an issue maybe if he were a witness in a litigation matter or something, but really not relevant in this case and not something I would focus on in your negotiation.  The main point is just that this guy's opinion has very little relevance to your discussion, or at most sets the absolute ceiling on value, because everyone knows he's a hired gun and not a disinterested neutral party.

 

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4 minutes ago, ghostguy123 said:

Can the appraisal I am about to have in any way affect my current taxes that I pay?  This is for a cash out refi.

Just wondering if this is somehow reported somewhere that could increase my property taxes.

Almost certainly not.  The local taxing authority is going to use its own appraisal to set your tax number.  An appraisal done for mortgage lending is a different animal.

 

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6 minutes ago, ghostguy123 said:

Can the appraisal I am about to have in any way affect my current taxes that I pay?  This is for a cash out refi.

Just wondering if this is somehow reported somewhere that could increase my property taxes.

No.  

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19 hours ago, tri-man 47 said:

All very interesting.  Thanks for taking the time to lay this out.  More comments on my end FWIW:

- We have no written agreement.  My mom left the cottage to her four children.  My brother wasn't interested (lives in Ohio, not SW Michigan), so we got an appraisal, tweaked the numbers a bit (for needed work/costs), and paid him off over ten years (or less).  Three of us paying off his 25% interest wasn't a big deal.  Since then, our working assumption has been that each of our now-1/3rd share would pass to our children.  We never talked seriously about any of us wanting 'out' of the cottage ownership.  My sister (Mary) and BIL were apparently considering buying their own lakefront home for the past year or two, but never brought that up and what the implications might be.  They bought their place in late-August, and didn't even mention anything during early July when we spent many days together during our annual stay at the cottage.

- side note #1: older sister (Jane) and spouse have made some rumblings about possibly exiting the cottage as their only son (also in Ohio) isn't interested.  However, Jane is deeply attached to the cottage, and they've been in no itching hurry to consider a buy-out.  So they haven't been seriously looking to exit.

- side note #2: Jane has been saying for several years that she didn't want any debt when she retires, and she just this year moved down to a PT position.  Again, Mary and BIL didn't say anything about their possible exit ..which would force a new debt burden on sister Jane.

- implication of #1 and #2: Mary and BIL want to be bought out.  Jane and BIL don't want new debt ...and at some distant point, will want out. Only feasible solution: My wife and I buy out both of them.  We pay enough over the next ten years to Jane (for her buyout) so her cash flow to also buy out Mary is neutral.  Jane and BIL get a longer payout, but still have cottage usage over coming years.  The implication is that my wife and I are suddenly faced with a joint buyout of 2/3rds of the cottage's value, which IS a big deal, given the suddenness of this. 

- I fully agree that the appraisal doesn't bind us in any way.  It's theoretically a fair guide to the cottage's market value.  To wit, looking back to clarify, the stated intent is to establish a market price using a Sales Comparison approach.  We had offered a fair price for the cottage after they announced their new home purchase.  BIL - who always has to Work The Deal - said we should get a new appraisal.  Jane (and spouse) and I (and spouse) told them it was pointless: Given the surprise element, given the big burden thrown on my wife and I, and given a couple of recent sales very near our place provide some measure of market, we said an appraisal wouldn't change the dynamic.  We said the price we offered is what we feel we can afford.  Despite this, BIL initiated an appraisal on his own.  The 'client' is listed as my mom's estate (?), and he paid $350 out of our shared checking account.  We believe the appraiser is someone he has worked with before, possibly through his financial institution (where BIL is a top exec). 

- Appraisal fun facts: (1) the appraisal states that the cottage would "typically be torn down and a new home built.  Truly the value is in the site on Silver Lake."  The lake frontage is 40 ft.  He valued it at $360,000, based on comps to year-round homes.  (2) The appraisal is dated August 20, 2019.  The listed expiration date of his license: July 31, 2019.  (Do we have recourse against him for the latter??)

TL:DR: I have a money-loving, wheeling/dealing BIL who can't resist trying to squeeze a max price from his own siblings-in-law.

 

Am I wrong in thinking whether the home is year round or seasonal not having as much of effect/impact on the value of the property as Tman is placing on its percieved value?

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On 2/12/2020 at 6:26 PM, Galileo said:

 You have a $360K storage shed???:jawdrop:

Location, location, location.

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On 2/13/2020 at 5:54 AM, AAABatteries said:

What is typical when the house doesn’t appraise for the purchase amount?  Buyer and seller split the difference or what?

This hit me back in 2011 when house prices were taking a dump.  My lender made it contingent on the sales price matching or no deal.  

When it came back about 20k short the seller freaked out a little.  They had to ultimately come out of pocket about 65k at closing.    

They did little petty #### to show their displeasure like "forgetting" to remove a crappy swingset and a bunch of trash in the attic.  They also wanted to sell me their refrigerator instead of just leaving it for basically what a new one was, I was like take it.  They left it.  

 

 

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On 2/13/2020 at 5:54 AM, AAABatteries said:

What is typical when the house doesn’t appraise for the purchase amount?  Buyer and seller split the difference or what?

This hit me back in 2011 when house prices were taking a dump.  My lender made it contingent on the sales price matching or no deal.  

When it came back about 20k short the seller freaked out a little.  They had to ultimately come out of pocket about 65k at closing.    

They did little petty #### to show their displeasure like "forgetting" to remove a crappy swingset and a bunch of trash in the attic.  They also wanted to sell me their refrigerator instead of just leaving it for basically what a new one was, I was like take it.  They left it.  

 

 

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Guy was here 10 minutes.  I dont think he measured anything.  He seemed to rely more on what I said about things than what he actually assessed.  

Why am I paying 480 bucks for this?

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44 minutes ago, ghostguy123 said:

Guy was here 10 minutes.  I dont think he measured anything.  He seemed to rely more on what I said about things than what he actually assessed.  

Why am I paying 480 bucks for this?

more importantly, how do i get one of these $1000/hr jobs?

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5 hours ago, comfortably numb said:

Am I wrong in thinking whether the home is year round or seasonal not having as much of effect/impact on the value of the property as Tman is placing on its percieved value?

:popcorn:

 

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2 hours ago, Psychopav said:

Location, location, location.

True ...but that works out to $9,000 per foot of lake front. :loco:

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2 hours ago, ghostguy123 said:

Guy was here 10 minutes.  I dont think he measured anything.  He seemed to rely more on what I said about things than what he actually assessed.  

Why am I paying 480 bucks for this?

My guy took about 35 mins.  Pictures, questions, walk through.  $800 out here in WA.  
 

I have no idea how this gauges value other than making sure we aren't hoarding, letting things rot, etc.  Expense line item on the closing costs. 

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I just had an offer accepted on a house here in Austin. My mortgage broker said an appraisal was not even necessary as there were so many sales in the area supporting the price. My realtor thinks we might have offered a bit too much because although the neighborhood has a lot of supporting sales and, we are actually in a inferior School district within the neighborhood. Homes less than a block away that would be natural comparables have strong sales prices and I'm afraid that because my house is in a lesser district I might be backwards in the house if I need to sell anytime soon.

Do appraisers typically add or subtract value due to school district within a single neighborhood? I ask because the broker said I don't need an appraiser, which would save me five hundred bucks, but if the school district affects the value of my house I would like it to show in the appraisal so that I might have some negotiating room with the seller. But if the appraiser isn't going to factor that in, there's no need for me to spend the money.  

Because the mortgage broker doesn't need the appraisal and I would have to pay out-of-pocket, I can find my own appraiser and possibly direct them 2 accpount for school districts.

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30 minutes ago, cosjobs said:

I just had an offer accepted on a house here in Austin. My mortgage broker said an appraisal was not even necessary as there were so many sales in the area supporting the price. My realtor thinks we might have offered a bit too much because although the neighborhood has a lot of supporting sales and, we are actually in a inferior School district within the neighborhood. Homes less than a block away that would be natural comparables have strong sales prices and I'm afraid that because my house is in a lesser district I might be backwards in the house if I need to sell anytime soon.

Do appraisers typically add or subtract value due to school district within a single neighborhood? I ask because the broker said I don't need an appraiser, which would save me five hundred bucks, but if the school district affects the value of my house I would like it to show in the appraisal so that I might have some negotiating room with the seller. But if the appraiser isn't going to factor that in, there's no need for me to spend the money.  

Because the mortgage broker doesn't need the appraisal and I would have to pay out-of-pocket, I can find my own appraiser and possibly direct them 2 accpount for school districts.

Federal Fair Housing act  applies to me as agent.   I cant talk about how good or bad a school district is.    Can lead to a lot of trouble. 

I cant imagine an appraiser not being subject to the same law and have never seen comments or values changed on an appraisal.  How could an appraiser possibly know that info anyways?  

 

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I'm pretty sure from my dealings appraisers don't deal with school districts when factoring a house price. I would think the comps factor in to the equation regarding school districts 

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6 hours ago, Getzlaf15 said:

Federal Fair Housing act  applies to me as agent.   I cant talk about how good or bad a school district is.    Can lead to a lot of trouble. 

I cant imagine an appraiser not being subject to the same law and have never seen comments or values changed on an appraisal.  How could an appraiser possibly know that info anyways?  

 

 

14 minutes ago, comfortably numb said:

I'm pretty sure from my dealings appraisers don't deal with school districts when factoring a house price. I would think the comps factor in to the equation regarding school districts 

School  district info is readily available to buyers here. Most listings will tout the fact if they are in a good district and it is often the primary motivator in families choosing a home here.

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20 minutes ago, cosjobs said:

 

School  district info is readily available to buyers here. Most listings will tout the fact if they are in a good district and it is often the primary motivator in families choosing a home here.

I dont think a realtor (at least in NJ) can list the school district in their listings, iirc. Its public knowledge that the buyer has to research on their own. Kind of like crime statistics. 

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32 minutes ago, comfortably numb said:

I dont think a realtor (at least in NJ) can list the school district in their listings, iirc. Its public knowledge that the buyer has to research on their own. Kind of like crime statistics. 

The school district is definitely in the listings here.  It's a huge part of the property value, and if the appraiser isnt factoring that in then what's the point of the appraiser?  

If important things arent being factored in then they are no better than zillow.

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5 minutes ago, ghostguy123 said:

The school district is definitely in the listings here.  It's a huge part of the property value, and if the appraiser isnt factoring that in then what's the point of the appraiser?  

If important things arent being factored in then they are no better than zillow.

Yep

Districts are huge, even from 1 street to the next. I may be confusing my info on what can be listed by an agent.

 

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FYI, appraisal adjustments (looking back at the "high" appraisal on our cottage):

heating/cooling: $3-5,000

garage: $5-8,000

second bathroom: $6,000

condition: $10-20,000

square footage: $18 per sq ft

Finished basement/lower level (875 sq ft): $21,000

--

@comfortably numb, this quantifies some of your speculation about the difference between a summer cottage vs. year-round home.  Simplistically, the difference is heating and cooling, which is priced at $3-5,000.  However, that doesn't take into account the structural dynamics of insulation, double-pane windows, finished (vs. drop-down) ceilings that are all key components in making a heating system effective and efficient.

The square footage is noteworthy as well.  The approach is purely linear.  A 500 sq ft difference might be incremental when comparing, say, 2,500 vs. 3,000 sq ft (a 20% increase in space), but the difference of 900 sq ft and 1,400 sq ft (a 50% increase) is more dramatic, and pricing it at $9,000 (500 x $18) seems low [which was one of the comps].  

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2 hours ago, cosjobs said:

 

School  district info is readily available to buyers here. Most listings will tout the fact if they are in a good district and it is often the primary motivator in families choosing a home here.

We have links to the websites for each local school on our listings.  You can say close to schools.   If you say close to very good schools, that violates federal law.  

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If s school district is much better than the one next to it and the prices are actually higher, that will be reflected in the sales comps.   

Appraisers all use that hard to read standard report form.  No where on it is any line where price can be adjusted by school district.

  There are so many items that can be adjusted on a comp to try and make it an apples to apples comparison and I cant possibly figure out what set of data points an appraiser would use to adjust for a school  district.  It's against federal law also.  

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10 minutes ago, tri-man 47 said:

FYI, appraisal adjustments (looking back at the "high" appraisal on our cottage):

heating/cooling: $3-5,000

garage: $5-8,000

second bathroom: $6,000

condition: $10-20,000

square footage: $18 per sq ft

Finished basement/lower level (875 sq ft): $21,000

--

@comfortably numb, this quantifies some of your speculation about the difference between a summer cottage vs. year-round home.  Simplistically, the difference is heating and cooling, which is priced at $3-5,000.  However, that doesn't take into account the structural dynamics of insulation, double-pane windows, finished (vs. drop-down) ceilings that are all key components in making a heating system effective and efficient.

The square footage is noteworthy as well.  The approach is purely linear.  A 500 sq ft difference might be incremental when comparing, say, 2,500 vs. 3,000 sq ft (a 20% increase in space), but the difference of 900 sq ft and 1,400 sq ft (a 50% increase) is more dramatic, and pricing it at $9,000 (500 x $18) seems low [which was one of the comps].  

Ah interesting. 

Seems like it is factored in

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Just now, Getzlaf15 said:

If s school district is much better than the one next to it and the prices are actually higher, that will be reflected in the sales comps.   

Appraisers all use that hard to read standard report form.  No where on it is any line where price can be adjusted by school district.

  There are so many items that can be adjusted on a comp to try and make it an apples to apples comparison and I cant possibly figure out what set of data points an appraiser would use to adjust for a school  district.  It's against federal law also.  

Right, that's what I was alluding to.

As I understood it the market will effectively adjust to the school districts but an appraiser wont have a line item per se that they can say in this school district +80k for x school and +20k for y school

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1 minute ago, comfortably numb said:

Right, that's what I was alluding to.

As I understood it the market will effectively adjust to the school districts but an appraiser wont have a line item per se that they can say in this school district +80k for x school and +20k for y school

Exactly.  

Appraisers have to back up their data. There is no data that could ever prove that.  And school district rating site scores constantly change and are subject to very awful data sources.  

Upgrading a bathroom has a known value that can be backed up.  3 vs 2 car garage has a known value.  

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What I haven’t ever really figured out is appraisal values in selling a house. We live where the market is still really good with high demand and limited supply. Pretty much anyone we know listed their house and it sold in a day with a dozen offers, ultimately selling for above asking price. Yet some folks have mentioned the price was way higher than what it appraised at and that became a potential problem for people getting financing. If that many people made offers and got in a bidding war, wouldn’t that show what the house was worth . . . not what some appraiser says it is worth?

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2 minutes ago, Anarchy99 said:

What I haven’t ever really figured out is appraisal values in selling a house. We live where the market is still really good with high demand and limited supply. Pretty much anyone we know listed their house and it sold in a day with a dozen offers, ultimately selling for above asking price. Yet some folks have mentioned the price was way higher than what it appraised at and that became a potential problem for people getting financing. If that many people made offers and got in a bidding war, wouldn’t that show what the house was worth . . . not what some appraiser says it is worth?

I agree that a purchase contract price between willing buyer and seller, after a sufficient marketing process, and particularly with multiple bids from multiple potential buyers, is by far the best indicator of FMV. Most appraisers agree with this, but sometimes unique situations with comps can throw off their models.  Although it doesn’t necessarily drive the underwriting decision, on some level the bank has to ask itself what its collateral is worth in the event of a default + foreclosure.  
 

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27 minutes ago, Anarchy99 said:

What I haven’t ever really figured out is appraisal values in selling a house. We live where the market is still really good with high demand and limited supply. Pretty much anyone we know listed their house and it sold in a day with a dozen offers, ultimately selling for above asking price. Yet some folks have mentioned the price was way higher than what it appraised at and that became a potential problem for people getting financing. If that many people made offers and got in a bidding war, wouldn’t that show what the house was worth . . . not what some appraiser says it is worth?

 

14 minutes ago, CletiusMaximus said:

I agree that a purchase contract price between willing buyer and seller, after a sufficient marketing process, and particularly with multiple bids from multiple potential buyers, is by far the best indicator of FMV. Most appraisers agree with this, but sometimes unique situations with comps can throw off their models.  Although it doesn’t necessarily drive the underwriting decision, on some level the bank has to ask itself what its collateral is worth in the event of a default + foreclosure.  
 

Appraisers can only use known facts.  It's not a fact that a home will sell for the agreed upon price.  They can only use closed sales.  I've seen them list a pending, but not use it. 

Ideal search for then is to get 6 to 10 sold homes in the same sub or a mile radius.  Three months back if they can get 6 to 10.  

If 5 are 3 months old, and that's all he really has, he has to use those.  

I cited an example of that a few days ago.  

Most appraisers will give a little leeway when prices are rising.  A few are by the book anal and won't. 

The appraiser is hired by the lender in most cases to make sure the value is correct for making the loan.  Appraisers are frequently audited these days and cant nearly get away with what they used to before the meltdown.  

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1 hour ago, Getzlaf15 said:

If s school district is much better than the one next to it and the prices are actually higher, that will be reflected in the sales comps.   

Appraisers all use that hard to read standard report form.  No where on it is any line where price can be adjusted by school district.

  There are so many items that can be adjusted on a comp to try and make it an apples to apples comparison and I cant possibly figure out what set of data points an appraiser would use to adjust for a school  district.  It's against federal law also.  

Yeah, both school districts are in the same neighborhood and can change form one block to the next. THere are no other boundaries between the districts within the neighborhood.

Why do I care? When I go to sell, I'm fairly certain my value will be negatively impacted by being in the lesser district. Since I will face that reality at sell time, I'd also like to benefit from it at buy time.

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On ‎2‎/‎13‎/‎2020 at 5:06 PM, tri-man 47 said:

All very interesting.  Thanks for taking the time to lay this out.  More comments on my end FWIW:

- We have no written agreement.  My mom left the cottage to her four children.  My brother wasn't interested (lives in Ohio, not SW Michigan), so we got an appraisal, tweaked the numbers a bit (for needed work/costs), and paid him off over ten years (or less).  Three of us paying off his 25% interest wasn't a big deal.  Since then, our working assumption has been that each of our now-1/3rd share would pass to our children.  We never talked seriously about any of us wanting 'out' of the cottage ownership.  My sister (Mary) and BIL were apparently considering buying their own lakefront home for the past year or two, but never brought that up and what the implications might be.  They bought their place in late-August, and didn't even mention anything during early July when we spent many days together during our annual stay at the cottage.

- side note #1: older sister (Jane) and spouse have made some rumblings about possibly exiting the cottage as their only son (also in Ohio) isn't interested.  However, Jane is deeply attached to the cottage, and they've been in no itching hurry to consider a buy-out.  So they haven't been seriously looking to exit.

- side note #2: Jane has been saying for several years that she didn't want any debt when she retires, and she just this year moved down to a PT position.  Again, Mary and BIL didn't say anything about their possible exit ..which would force a new debt burden on sister Jane.

- implication of #1 and #2: Mary and BIL want to be bought out.  Jane and BIL don't want new debt ...and at some distant point, will want out. Only feasible solution: My wife and I buy out both of them.  We pay enough over the next ten years to Jane (for her buyout) so her cash flow to also buy out Mary is neutral.  Jane and BIL get a longer payout, but still have cottage usage over coming years.  The implication is that my wife and I are suddenly faced with a joint buyout of 2/3rds of the cottage's value, which IS a big deal, given the suddenness of this. 

- I fully agree that the appraisal doesn't bind us in any way.  It's theoretically a fair guide to the cottage's market value.  To wit, looking back to clarify, the stated intent is to establish a market price using a Sales Comparison approach.  We had offered a fair price for the cottage after they announced their new home purchase.  BIL - who always has to Work The Deal - said we should get a new appraisal.  Jane (and spouse) and I (and spouse) told them it was pointless: Given the surprise element, given the big burden thrown on my wife and I, and given a couple of recent sales very near our place provide some measure of market, we said an appraisal wouldn't change the dynamic.  We said the price we offered is what we feel we can afford.  Despite this, BIL initiated an appraisal on his own.  The 'client' is listed as my mom's estate (?), and he paid $350 out of our shared checking account.  We believe the appraiser is someone he has worked with before, possibly through his financial institution (where BIL is a top exec). 

- Appraisal fun facts: (1) the appraisal states that the cottage would "typically be torn down and a new home built.  Truly the value is in the site on Silver Lake."  The lake frontage is 40 ft.  He valued it at $360,000, based on comps to year-round homes.  (2) The appraisal is dated August 20, 2019.  The listed expiration date of his license: July 31, 2019.  (Do we have recourse against him for the latter??)

TL:DR: I have a money-loving, wheeling/dealing BIL who can't resist trying to squeeze a max price from his own siblings-in-law.

 

You say no written agreement. Was it written in her will?  Who is the cottage deeded to? Also, if you three already bought out the 4th sibling, there had to be an agreement then on ownership. Now it's a three way ownership. Why do you have to buy him out just cause he wants out? I would think you all have to agree. I you don't then it stays the way it is. Also, if you do want to buy him out at a fair price, have a few realtors come in and price it out for you saying you are thinking of selling. Those are typically free. Some do go high cause they want the listing and end up dropping the price once they have you signed and it wont sell, so if one is much higher than the others you can toss that one. But if they are all around the same price then that should give you a pretty good idea at what it's worth.

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On 2/13/2020 at 5:06 PM, tri-man 47 said:

All very interesting.  Thanks for taking the time to lay this out.  More comments on my end FWIW:

- We have no written agreement.  My mom left the cottage to her four children.  My brother wasn't interested (lives in Ohio, not SW Michigan), so we got an appraisal, tweaked the numbers a bit (for needed work/costs), and paid him off over ten years (or less).  Three of us paying off his 25% interest wasn't a big deal.  Since then, our working assumption has been that each of our now-1/3rd share would pass to our children.  We never talked seriously about any of us wanting 'out' of the cottage ownership.  My sister (Mary) and BIL were apparently considering buying their own lakefront home for the past year or two, but never brought that up and what the implications might be.  They bought their place in late-August, and didn't even mention anything during early July when we spent many days together during our annual stay at the cottage.

- side note #1: older sister (Jane) and spouse have made some rumblings about possibly exiting the cottage as their only son (also in Ohio) isn't interested.  However, Jane is deeply attached to the cottage, and they've been in no itching hurry to consider a buy-out.  So they haven't been seriously looking to exit.

- side note #2: Jane has been saying for several years that she didn't want any debt when she retires, and she just this year moved down to a PT position.  Again, Mary and BIL didn't say anything about their possible exit ..which would force a new debt burden on sister Jane.

- implication of #1 and #2: Mary and BIL want to be bought out.  Jane and BIL don't want new debt ...and at some distant point, will want out. Only feasible solution: My wife and I buy out both of them.  We pay enough over the next ten years to Jane (for her buyout) so her cash flow to also buy out Mary is neutral.  Jane and BIL get a longer payout, but still have cottage usage over coming years.  The implication is that my wife and I are suddenly faced with a joint buyout of 2/3rds of the cottage's value, which IS a big deal, given the suddenness of this. 

- I fully agree that the appraisal doesn't bind us in any way.  It's theoretically a fair guide to the cottage's market value.  To wit, looking back to clarify, the stated intent is to establish a market price using a Sales Comparison approach.  We had offered a fair price for the cottage after they announced their new home purchase.  BIL - who always has to Work The Deal - said we should get a new appraisal.  Jane (and spouse) and I (and spouse) told them it was pointless: Given the surprise element, given the big burden thrown on my wife and I, and given a couple of recent sales very near our place provide some measure of market, we said an appraisal wouldn't change the dynamic.  We said the price we offered is what we feel we can afford.  Despite this, BIL initiated an appraisal on his own.  The 'client' is listed as my mom's estate (?), and he paid $350 out of our shared checking account.  We believe the appraiser is someone he has worked with before, possibly through his financial institution (where BIL is a top exec). 

- Appraisal fun facts: (1) the appraisal states that the cottage would "typically be torn down and a new home built.  Truly the value is in the site on Silver Lake."  The lake frontage is 40 ft.  He valued it at $360,000, based on comps to year-round homes.  (2) The appraisal is dated August 20, 2019.  The listed expiration date of his license: July 31, 2019.  (Do we have recourse against him for the latter??)

TL:DR: I have a money-loving, wheeling/dealing BIL who can't resist trying to squeeze a max price from his own siblings-in-law.

 

Have the BIL buy you out for your lower price and then he can sell it.  Another way, sell it and you take your cut and the BIL takes what 's left.
You could list it at the BIL's price and show him that no one is buying at that price. If the BIL only wants you to pay him without all of the hassle
I just listed, tell him to take a hike.
 

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@ffjunk, we recently had done paperwork to put the property jointly in the names of us three siblings and spouses.  (We let it set too long still in my mom's name and including the fourth sibling).  Good thought on bringing in some realtors to get their viewpoint ...but see below.

@nightmare, BIL has offered - twice - to buy us all out.  However, the cottage has been in the family for 97 years.  As children, we adored it, and now the next generation (our two grandsons, 3 and 1 1/2, and a few grand nephews and nieces) adore it as well.  A couple of the 3 year olds from that next generation already ask questions about the cottage.  They can't wait to return to it again.  Even though we told sis and BIL that our two children want to keep it in our immediate family, they twice suggested buying us out and throwing away the last tangible memory of our mom (and dad, who passed away in 1975).  To my family, and to my older sis, the cottage is priceless (Older sis' husband is not emotionally attached, but he knows how meaningful it is to my sis and to their two granddaughters.  He and I get along great.)  In effect, we've told younger sis and BIL that they can't force us to pay them what they want ...in effect, take a hike if you don't like the price we feel is fair and affordable.  Things would have been different if they'd have alerted us to this possibility last summer when we were together instead of backing us up against the wall and essentially saying 'buy us out ..at the price we set!'

But today, new ballgame.  :hot:  :cry:  :hot: .  We got a letter in the mail from their attorney!  We can basically either (1) accept a 'substantially discounted' price of $270,000 as the basis to buy them out (vs. a questionable appraisal of $360,000), or (b) by law, given the joint ownership, they can force the cottage to be sold via auction ..less attorney's fees, of course.  As I've stated, we've offered $240,000 as the basis (we actually first offered $255,000, which was $270,000 less $15,000 for vastly needed improvements, but they never commented on that, instead insisting on an appraisal.)   So this means they'll get an extra $10,000 (their 1/3rd share) from what we offered ...paid over ten years (same length as when we bought out the fourth sibling).  BIL just.has.to.win.  [Hell, when they bought their new home on the same lake, the owners threw in a pontoon boat for free - probably worth the whole $30K differential.]

So of course we'll accept the $270,000 to avoid losing the cottage.  I toy with quietly getting our own appraisal, or I could the realtor route.  But we have two weeks to decide.  What's so crazy is seeing them throw away any future family relationships by taking legal action on us ...over $10,000.  Their daughter gets married this coming summer; our daughter gets married next fall.  They'll be living nearby on the same lake we and our children and grandchildren will be visiting for years to come.  Their DIL is best friends with my DIL.  None of that matters to them.  They only see the money, not the family legacy, and BIL just has to gain his edge.  I don't know whether to be mad at my sister or to feel pity that she's fallen in line with his way of thinking.  My mom must be rolling over in her grave.

 

 

 

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21 minutes ago, tri-man 47 said:

@ffjunk, we recently had done paperwork to put the property jointly in the names of us three siblings and spouses.  (We let it set too long still in my mom's name and including the fourth sibling).  Good thought on bringing in some realtors to get their viewpoint ...but see below.

21 minutes ago, tri-man 47 said:

But today, new ballgame.       .  We got a letter in the mail from their attorney!  We can basically either (1) accept a 'substantially discounted' price of $270,000 as the basis to buy them out (vs. a questionable appraisal of $360,000), or (b) by law, given the joint ownership, they can force the cottage to be sold via auction ..less attorney's fees, of course.  As I've stated, we've offered $240,000 as the basis (we actually first offered $255,000, which was $270,000 less $15,000 for vastly needed improvements, but they never commented on that, instead insisting on an appraisal.)   So this means they'll get an extra $10,000 (their 1/3rd share) from what we offered ...paid over ten years (same length as when we bought out the fourth sibling).  BIL just.has.to.win.

 

Wow. That's just awful. I definitely would get real estate appraisals and maybe you and your other sis pay for another appraisal. The way he is being, keep it to yourselves if it comes up higher. Sounds bad and 2 wrongs don't make a right but it makes it even. If they are lower present the evidence. Tell him you don't want to go to court and no one wins that way and you want to work it out. But also look at it this way, he doesn't deserve to be there and sounds like he doesn't value any other opinions but his own. You will probably deal with other issues later on if he is involved so it's better that he is out. More room for you and your sis.  And look at it this way, for the extra 10 K your selfish brother-in-law is gone. Worth it in my opinion.

You can't put a price on a family vacation home. The memories you have and will create will be priceless. Now get a written contract between you and your sis when you become co-owners so this doesn't happen again.

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That sucks T-Man47.  You could probably fight back on this in several different ways, but I would recommend moving forward.  Perhaps a counter-offer, just to force him to really draw a line in the sand over a few thousand bucks just for fun.  The one thing I would recommend is getting your own lawyer to review whatever buy-out agreement they come up with.  You should pay the legal fess out of the joint cabin account like he did for the appraisal.

 

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@ffjunk, I’d mentioned earlier in the thread that older sis has been saying for years that she doesn’t want any debt when she retires, and she’s moving into that phase. The solution is we’ll begin buying them out as well so their cash flow is neutral.  We’ll be sole owners.  Older sis will loosely have some continued usage since her hubby does some of the tasks like turning on/off the water for the summer season. Older sis and her hubby have always felt the price we offered was fair at $240K, given a couple nearby sales (not included as comps).  :shrug: 

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1 minute ago, CletiusMaximus said:

That sucks T-Man47.  You could probably fight back on this in several different ways, but I would recommend moving forward.  Perhaps a counter-offer, just to force him to really draw a line in the sand over a few thousand bucks just for fun.  The one thing I would recommend is getting your own lawyer to review whatever buy-out agreement they come up with.  You should pay the legal fess out of the joint cabin account like he did for the appraisal.

 

The shared account is now down to zero.  This is about the time we all feed in $1,400 each (so x 3) to cover RE taxes, utilities, and modest maintenance costs.  Bottom line, yeah, we just need get them out of the picture.  Except, for the fact, of course, that we’re siblings and are lives are intertwined.  We will have a lawyer review the buyout doc.  Thx.

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This is what sucks about family and business. 

Your side will forever be hurt by this. He goes on thinking he did you a HUGE favor by letting that property go so cheap.

This chapter of your life starts with you guys thinking he is a greedy bastard and his chapter starts with him feeling you guys are ungrateful.

I'm lazy to go back...did he initiate an appraisal on his own with no ones consent and used the cottage fund to pay for it?

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I'll be captain obvious-there is no winning here. Just buy the guy out and cut as much ties with him as you can.

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5 hours ago, cosjobs said:

Yeah, both school districts are in the same neighborhood and can change form one block to the next. THere are no other boundaries between the districts within the neighborhood.

Why do I care? When I go to sell, I'm fairly certain my value will be negatively impacted by being in the lesser district. Since I will face that reality at sell time, I'd also like to benefit from it at buy time.

Texas appraisal can't be contingent on districts. They have to fold that in in other ways

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I'm in a similar situation as tmanz and it sucks.  Having a lot of parties involved in a recreational property is a nightmare.   Someone will end up butt hurt.   

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TmanZ are they trying to 1031 exchange the property or what?

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5 hours ago, comfortably numb said:

This is what sucks about family and business. 

Your side will forever be hurt by this. He goes on thinking he did you a HUGE favor by letting that property go so cheap.

This chapter of your life starts with you guys thinking he is a greedy bastard and his chapter starts with him feeling you guys are ungrateful.

I'm lazy to go back...did he initiate an appraisal on his own with no ones consent and used the cottage fund to pay for it?

Correct.  He initiated it and used the shared account.  It’ll be very interesting to see the reaction of his three grown children as they come to find out that the shared family gatherings quite likely won’t be happening any more.

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7 hours ago, tri-man 47 said:

Correct.  He initiated it and used the shared account.  It’ll be very interesting to see the reaction of his three grown children as they come to find out that the shared family gatherings quite likely won’t be happening any more.

Yeah - screw that guy.  Buy him out as cheap as possible and then tell him to get lost.  I haven’t read all your posts but is the guy thinking he can get his money and then will still be invited to stay there?

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2 minutes ago, AAABatteries said:

Yeah - screw that guy.  Buy him out as cheap as possible and then tell him to get lost.  I haven’t read all your posts but is the guy thinking he can get his money and then will still be invited to stay there?

No. He is buying a 1M home on the lake on his own.

Yea, I would be super pissed about the using of shared funds with any notice or transparency. 

I know this doesn't help but, assuming you can afford it, do what you can to keep what is obviously a treasure for you and your family. It's only money.  

There will always be a divide from here on out but you can still make many memories. 

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6 hours ago, AAABatteries said:

Yeah - screw that guy.  Buy him out as cheap as possible and then tell him to get lost.  I haven’t read all your posts but is the guy thinking he can get his money and then will still be invited to stay there?

One of his proposals was to accept a buyout in line with what we proposed ...but then retain rights for six years to be able to rent out what would then be our place for four or more weeks each summer ...just so they could generate income on it.  This ignored the facts that (a) the other sis and BIL, who will also be getting bought out, wouldn't share in that income, and (b) we might want to rent it out more ourselves to cover our much higher costs.  :loco:

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19 hours ago, culdeus said:

TmanZ are they trying to 1031 exchange the property or what?

I expect he'll either (a) flip it for more profit, or (b) turn it into yet another rental property.  Probably the latter.  He has four rental properties, and they'd mentioned they were selling one to help fund their new $1.1M place.  Much of his life over the last two or three decades has been consumed with the rental stuff...fixing up places, doing repairs, dealing with tenants.  He has a busy job as a top exec at a credit union, but then he layers the rental crap on top of that.  What's ultimately the most bothersome in all of this is the effect on my sister's quality of life.  She had a tiring 20 years as a second grade teacher.  But then she has him running around at all hours of the nights and weekends handling the rentals.  Instead of focusing on the two of them, BIL has been consumed with his love of money.  And now, he drags that into family matters as well and forever ruins ongoing family events.  They've got their dream home on a lake ...but through his greed that has alienated the siblings, I fear that it turns into something of a prison of loneliness and isolation for my sister.  But damn, they're getting an extra $10,000!

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