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Understanding Your Home's Appraised Value: An Interview with Rich Dykstra of Heritage Real Estate Appraisals, LLC

By Rich Dykstra

Tell us a little bit about your background and your company.

I started out as a property assessor for several small townships in Muskegon County over 20 years ago. In order to gain experience and increase my level of responsibility I worked at several different jurisdictions in Muskegon, Kent and Ottawa Counties. I achieved a higher level of responsibility and skill in the assessing profession when I received a Michigan Advanced Assessor Officer certificate in 1996.

I obtained my State Licensed Appraiser license from the State of Michigan in 1998 by fulfilling educational and experience requirements then in place. I performed a few appraisals during the first few years while full time employed with various jurisdictions.

I served in the assessing profession for a total of 17 years, completing my tenure as a property assessor at the City of Ludington, MI in 2009. Prior to retiring at Ludington, I partnered with a Certified General Appraiser in the Ludington area for a few years prior to going out on my own, at which time I started my own company, Heritage Real Estate Appraisals, LLC.

I immediately began specializing in residential appraisals, in order to distinguish myself from my mentor and colleague, the Certified General Appraiser, who specialized in commercial work. I liked commercial appraisals, but there wasn't enough of it in this small resort market to warrant doing it exclusively. But the residential market was growing- at least it was in 2006, when all real estate values were booming.

I retired from my assessing profession in 2009. That opened the way for me to expand my residential practice. It has steadily grown over the past 5-6 years. While I remain a "one-man-shop" I am now performing 150-200 appraisals per year, and growing.

What is the basic approach that an appraiser uses to determine the value of residential properties?

The basic approach all residential appraisers use is the sales comparison approach. Using the above-ground living area of the subject, we search for other homes with a similar above-ground living area and that are within the neighborhood. When combined with many other similar attributes to the subject, we then select at least three that are close to the subject in construction, characteristics, amenities etc. Making adjustments as necessary, we then arrive at an estimate of value for the subject. The driving indicator for the residential appraiser is the knowledge that a given buyer will not pay more for a property than he/she can find in a similar property.

Can you briefly talk about replacement cost and what that means for a home's appraised value?

All new homes depreciate in value over time. That is the nature of all construction materials: they will decompose/destruct and/or become less useful over time. Lots of time. Homes are generally built to last around 80 years. Many last much longer. Appraisers calculate the replacement cost of a structure in part by estimating the amount of depreciation that has taken place since first constructed. Replacement cost is only one of the ways that an appraiser arrives at an estimate of value. The sales comparison approach is another of the methods used. What the appraiser then does is reconcile the two methods in order to determine his/her final estimate of value for the subject property.

How does an appraiser typically analyze comparable house sales?

As stated in # 2 above, the key is above-ground living area. After that are various other considerations: number of bedrooms, number of bathrooms, fireplaces, woodstoves, number and size of the auto garage, lot size, view & characteristics, etc. All these issues, and more, are taken as a whole whereby the comparable is adjusted with the aim of making each of them as similar to the subject as possible.

What might account for a difference between a home's estimated market value and its final selling price?

Buyers are fickle. And they are unpredictable. We cannot know all the factors that motivate people to complete one purchase, but not another. Or, it is not possible to know why one buyer will pay X amount for one house, but refuse to pay X +$1 for the next house. Appraisers estimate market values, but we do not read minds or understand the psychology of all buyers. That's why our conclusion is called an "estimate of market value". It's not necessarily the last word, or the last estimate. It is just one person's professional opinion.

What advice do you have for people who aren't happy with the appraised value of a home?

Get another appraisal performed by a different appraiser. In an active market, there is a great possibility is that a second appraisal will arrive at a concluded value that is within 10% of the first.

What's the best way for people to contact you and your company?

My website: www.yourbestnumber.com
My email: rich@yourbestnumber.com
My office phone: 231-845-0355

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