Bob Hadge, Torii partner and Massachusetts-based appraiser, joins Storii Time to talk about the value appraising brings to your home.
Saad: Go.
Mike: Yes.
Bob: What’s up, guys?
Saad: You did it.
Bob: I did it.
Mike: I believed in you.
Saad: I believed in you too.
Bob: I’m glad you guys did because I’m like, this is not happening.
Saad: I’m sorry for starting a little late. I know, Mike, you got some showings coming up. Bob, thanks for joining us today.
Mike: Yes.
Bob: My pleasure, guys. Thanks for having me.
Mike: Yeah. Bob. And because you’re a wrestling fan and your boys are wrestling fans, just a little introduction to the three gentlemen on video call and the millions and millions watching around the world. This is Storii Time with special guest, Bob Hadge.
Saad: Pretty good. Alright. Oh, good.
Bob: Great.
Saad: You know, Mike told me he’s like, I have a special intro for Bob, and I’m like, yeah. Let’s see what he’s got.
Bob: Whenever I could do Michael offer, I can’t.
Saad: Oh, man. Well, Tony, Liz, got a couple other folks that recently joined some regulars. Like, thank you for joining. Tony’s your Tony’s your son?
Bob: Oh, Tony’s my wife.
Saad: Your wife. Wife. Tony, welcome.
Mike: Faux pas. Son. Good afternoon.
Saad: Well, Bob, let’s jump right into it. I know Mike’s got some showings coming up. So, like, tell us what you’re hearing in the market right now when it comes to appraisals. What’s going on in terms of, like,, are you seeing appraisals come in below, above, like, kind of all over the place? Does it not and there’s no real pattern? Let’s start there.
Bob: There is no pattern in real estate. You think we’re gonna have a slow period or a busy period. The opposite happens when we think the market’s gonna slow down, it just gets crazier. So there is no pattern. What I’m seeing currently right now in the market, it’s still a very it’s still about it’s still a seller’s market. It’s I mean, it’s we’re seeing in appraisals. I’d say probably 80% of our appraisals we’re seeing right now, the purchase price is above the listing price. So it it’s really it’s really imperative that a broker educates their buyers, other sellers that when when this competitive market, they have to react accordingly.
Bob: A good appraiser in today’s market is not gonna have to prove we, unlike brokers, we have to prove all the adjustments that we make to the lenders. We can’t just say, oh, it’s just a better street, and they wanna buy on that street. We have to prove that. In order to prove that, we have to come up with comparable sales, whether they are listings, pendings, or sold in this market, really all three of them, to prove to the bank that’s what’s happening in the in the market right now. If we have a sale on a street and it’s sold back in December, went under agreement in December, but now a street, again, has a sale and it’s 20% higher.
Bob: We have to show the bank, oh, okay. This is what the sales were pending what sold for in December, which probably went under contract in October. Now the same sale is pending for 20% higher. So even if the sale hasn’t closed but it’s a pending sale, that that’s something that a bank will allow to show what’s indicative and happening in the market currently.
Mike: Excellent.
Bob: So Yeah. Go ahead.
Mike: I was gonna say, let’s, like, kind of set the landscape. So your appraisals are primarily used by the bank to basically verify the amount of money that they’re lending out to the purchaser of the home. And since and unless there’s a development where every house is identical to one another, no house is gonna be exactly the same. So you’re trying to I guess, give us, like, a little more knowledge of what you use as pieces of the valuation to actually derive those comps. How long things have been on the market, maybe number of bathrooms, give or take, size of the land, all that.
Bob: You’re right. In a perfect world, which a lot of times in the Midwest, you have, like, all these tract houses there all the same. Oh, yeah. That’s not New England. I mean, literally, one street over can make a difference in value, Whether you’re in the city of Boston, whether in the suburbs. So, I mean, the old adage location, location, location. That’s that’s number one in real estate.
Bob: I don’t have to tell you guys that? But say, for example, we have a house that’s pretty similar, 2,400 square foot colonial, 2,600 square foot colonial, similar age, but one has a garage and one doesn’t. We have to come up with a paired sales analysis, and that is finding a car if our house has a garage and it’s, like, for $20,000 more, we have to find a house that’s similar that has a garage that’s selling for $20,000 more, improve of it maybe having another car that doesn’t have a garage, signed for $20,000 less. So we have to approve our adjustments. We can’t just say it is what it is. We have to prove it. And by doing that, we have to give them as many sales as possible to show that the adjustment was warranted.
Mike: Mhmm. And who is that going to? Like, who are you trying to prove this to?
Bob: My our mortgage companies, our banks, our lenders, and they have to prove it to Fannie Mae and Freddie. Fannie and Freddie. I don’t know if you guys wanna explain who Fannie and Freddie are.
Mike: Yeah.We’ll I think that’s a general knowledge enough for for people that we’ll let that keep going. But yeah. But, okay. So on that. And and what if there are no what if there is no garage or something like that? Like, what if you can’t find it?
Bob: Well, nine out of 10 times you can. But if you have a unique property, then you have to expand your search. So if I’m doing an appraisal in Wellesley, I’ll just say Wellesley for example, and I can’t find something similar to Wellesley. Well, I’m gonna go to Weston, Lincoln, the budding towns that have similar values.
Mike: Okay.
Bob: I’m not gonna if I’m doing Wellesley, I’m not gonna use a comp in to prove my adjustments. You know? And I’m I’m saying it’s because, you know, certain towns are comparable to others. So, you know, if someone’s looking in Wellesley, they’re looking in Lincoln, they’re looking in Weston, those are, you know, that’s just experiences and appraisals that we know that, you know, well, the town, they can’t find this house in Wellesley. What’s the next town, similar town? So it’s a proven adjustment. If we don’t have one in Wellesley, we just go to similar competing towns.
Saad: So are you You are finding lately that, like, on that point that, like, there are more comps than there were for, like, you know, let’s say, six months ago, a year ago, couple years ago?
Bob:The market still has a shortage. We still have a shortage of properties in the market. They’re really they’re not actually,
Saad:I literally had that conversation a couple of times earlier today.
Bob: It does. And that’s why we we that’s why we haven’t seen prices really coming down because there’s more buy there’s more more buyers than there are sellers. Yeah.
Saad: So And and and there’s there’s a couple of recent headlines, about, like, national headlines, obviously. But about, like, now there’s, like, triple the amount of sellers than there are buyers. It’s gonna mark Yeah.
Mike: Exactly. Florida’s skewing every number. Yeah.
Bob: Yeah. I mean, New England is really, I guess, every market can say, but New England’s very rare. I mean, we’re we’re, you know, we’re made up of older houses, newer houses, historic houses. I mean, a lot of these Midwest towns of Florida, they’re not unique like New England. So you know, it’s a lot harder to be a realtor or a mortgage broker, an appraiser, because we come up with experiences that most other states don’t have.
Saad: Yeah. I mean, other states hear about the price per square feet here. They’re like, what? It’s fine.
Bob: We’ll do an appraisal. And a lot of times, the people we it’s banks who review our appraisals are in North Carolina. They’re in, like…you adjust for a parking space in the back bay, $250,000. And they’re like, what do you mean? I’m like,What do you mean? They go that you can buy a house here. But as a good appraisal, though, you include if you’re adjusting $200,000 for a parking space in the Back Bay, which is not unheard of, I include sales of parking spots and and and include that in into into the report. I’ll say, here’s this is what my adjustments are, and here’s and then now we don’t have to put it in the sales grid as you know with a salesman.
Bob: We’ve put in the app. Here’s, sales one, two, and three of recent parking sales in Back Bay. And they might range from $2.30 to $2.70. So, I mean, at least we can support. And the bank, that’s all they care about. If they ever get audited, they can support the adjustments. And as an appraiser, that’s we have to be aware of. We have a good audit. We can say how we come up with these adjustments.
Mike: Yeah. When we are maybe in a competitive situation and waiving some things, like a mortgage contingency and that might include, an appraisal as well, like, what warnings would you give to agents who kind of, like, to get the house, you kinda need to be there. But, like, maybe what are some precautions that they could take?
Bob: If they have an appraisal waiver?
Mike: Yeah. Yeah.
Bob: If you’re representing the buyer, you still have to protect the buyer. I mean, we see a lot of appraisal waivers where the buyer still opt to get the appraisal done. Because, you know, even though they still I mean, they don’t have to pay for appraisal, but if they want it, they still they would have to pay for appraisal. But most buyers are like, I’m gonna spend the $500 on the appraisal to make sure I’m, you know, I’m not really overpaying that much. I mean, they might know they’re overpaying, but if they pay the sale price is 700 and then all of a sudden they get an appraisal at 600, I mean, that’s, you know then it’s a decision they have to make. So are they willing to pay that?
Saad: So I have a question for you on that. Like, appraisal value versus market value. Are those the same thing?
Bob: They should be. Appraise a market value is what the buyer is willing to pay at that time. Appraisal value is what the again, I’m pretty much what the appraiser can prove. If we can’t approve that purchase price, again, the bank lends on the appraised value, not the purchase price. So all of a sudden, the buyer is taking a loan in their purchase price 700. They’re basing everything on the loan of a purchase price 700. The appraiser comes back at 600. Well, the now the bank’s gonna give them a loan on the 600, not the 700.
Saad: Yeah.
Bob: So I mean, I am also a broker, guys, because I told you. I always tell my brokers. They always I’ll go into it and do an appraisal, and they said, oh, I was gonna give you comps, but we can’t do that. I’m like, yes. You can’t.
Saad: Yes. Why can’t
Bob: They think that they’re influencing the value of the appraisal. Now if you’re a good appraiser, they’re not gonna influence you. But you have to give them reason I mean, because of I mean, you guys are eyes and ears. You’re out there every day. There might be some private sales that we’re not privy to, that you are. That’s information that we can use. But, I mean, it’s when I say give them sales, if we’re if I’m appraising a thousand square foot ranch, please don’t give me a comp that’s a 2,000 square foot colonial.
Bob: Mhmm. Because it’s not a comp. But I encourage in this market, I encourage brokers to give the appraisers comps as well as pending comps.
Mike: Yeah. And that’s wild.
Saad: Ahead of the appraisal or No?
Bob: When they meet the appraisal.
Mike: influencing would be threats or bribes, not more information.
Bob: Exactly.
Mike: I think that’s pretty more information, the better at that point. I well, something that we we talked about at launch that I would love the expansion on is the below ground square footage being included in, the total square footage of the house and how you value that.
Bob: That’s it. You know, everything is with the car a market accepted. And but Fannie Mae does not allow us as an appraiser to count living I’ll give you a sale of a split entry raised ranch type of house. Yeah. But I think we all know what type of size. So as you come in the front door and you get up come in the front door, you get on, like, four or five stairs and there’s a lower level. It is the basement even though posture is above grade. And then you go upstairs and you have usually your living room, dining room, kitchen, and main bedroom living area. Most brokers say it’s a thousand square foot raised ranch up top and another thousand square feet basement. Most brokers, and they can do that because they’re a broker, can list that as a 2,000 square foot property. As an appraisal, we cannot. We’re appraising it and we’re calling it a thousand square foot house. They do get value for the lower area, of course, because it’s valuable, but it’s not counted as living area. So sometimes I just had a situation, same exact thing. It was a raised ranch. The broken list is a 2,400 square foot house, four bed, five bedrooms, two of the bedrooms below gray. So it’s not 24, it’s a 1,200. It’s not five bedroom, it’s a three. And she was giving me colonials of five bedrooms, you know, 24. I go, that’s they’re not similar.
Bob: And it it just I mean, I’m not saying that the broker was was, you know, was wrong and good. But you have to understand when you go to price this out, you have to price it out with something that’s similar.
Saad: Right. Is it and is that just for split levels or raised ranches as you mentioned?
Bob: Basements can never oh, yeah. I never say never. But basements can’t be ever counted as living area. However, you go to the South end, some of those units
Mike: Completely. What if it’s entirely underground?
Bob: And I Yeah. It’s done. Zero? It’s just what they call market accepted, and they I can prove by giving them nine comps that have sold that are similar.
Saad: Mhmm. Yeah. That’s fast.
Bob: I mean, there’s nothing black and white in real estate. We know that. Mhmm. There’s nothing black and white. Look at this look at this new inspection on this coming up. We won’t even get into that.
Mike: Yeah. The home inspections.
Saad: Zero square zero square feet. Infinity dollars per square foot.
Mike: Yeah.
Saad: Yeah. Are there particular so one thing I wanna go back to, Bob, is you were talking about, like, everything’s going above asking. Right? Mike and I I mean, we talk about this every day. Like, we’re finding because we do a lot of business in the city. Right? We have a lot of clients, buyers, and even listings in and around the city. Right. You know, definitely seeing some above asking, but condos seem to be sitting. A lot of them.
Bob: So let’s talk about that. Let’s talk about the city because, I mean, the city is is only it’s only on the wall. Prior to 2021, I think we can all of us agree. The city was was much more getting much more money going above asking much more frequently than it is now. What we’ve seen as appraiser, since ’20 since COVID, the city’s coming back, but the suburbs have gone crazy. People like, okay. I want space. I’m gonna spend you know, I just I grew up in the South End in on Union Park. A house across the street just sold in Union Park $12,000,000. I mean, people like, okay. If I’m gonna spend $12,000,000, I want 30 acres. I want an eight you know, a 12,000 square foot house. I mean, it’s people have moved out from the city. The city is definitely coming back. I’m seeing it now in appraisals. They’re not getting as much asking above as the suburbs.
Bob: And, yeah, there seems to be abundance in certain towns. I’m a get you know, in the city certain section of the city that condos us in because there’s just there’s there’s so many of them right now.
Saad: Yeah. I mean, especially, I think, like, we were talking about that, like, that five fifty to seven fifty, 800,000 range. Like, there’s a lot of them.
Bob: There’s a lot of them.
Saad: You know? There’s a lot of them.
Bob: And the second, even in the burbs, I mean, you have a you have a single family house between 6 and 900, it’s gone. Gosh. Soon as you hit Yes. Over the $11,000,001, 1,000,002, they’re gonna sit a little longer. Even in the suburbs, they’re sitting a little more longer.
Mike: Yeah.
Bob: But you have that price range between 6 and 900, they’re just gone. Gone. I mean, I just I just you know, I I put a couple of agreement in that price range, it’s gone in a day. It took me three weeks, but I put an agreement today on, you know, on a a 1,200,000 house in the suburbs. I mean and that’s where a broker has to, you know, educate if they’re representing the seller. You know, listen, if you you have a house, higher price range, we might have to take I could you know, if your house is automatic 4.3, if people are looking at, sometimes, you know, now they’re they’re they can afford a larger house, but they have to sell their house. So now we’re we’re getting offers in that price range with home contingencies.
Bob: You know, before, like, well, I’m not taking a home contingency. Well, yeah, you might have to right now because they know they we you know, it used to be very common to take a home with a a a you know, offer with a home contingency. So, I mean, there’s just it there’s I think that whether you’re you’re everything to sell it or buy it, the best thing you can do for them is educate them as best you can in the market. Yeah.
Mike: Because it’s, you know
Bob: Yeah. You know, if if I’m making if I’m making an offer, and it’s they’re coming in way high, then the listing price say, listen. This might not appraise. So prepare them. If it doesn’t, then, you know, then the mortgage will say, okay. And you don’t necessarily have to come up with the difference. We might have a higher PMI, things like that. But the you know, just so there’s no wild surprise factor in the in the scenario, that’s, I think, where us, you know, as brokers need need to just educate educate the buyers themselves and say, listen. It’s not, you know, it’s, again, not black and white.
Mike: Yeah. Being a step ahead is definitely, like, what we’re kinda where we earn our money, at that point. Speaking on the burbs, ADUs. It’s my understanding that, like, as these because I’m seeing for the first time, home is being marketed as, like, there is an ADU. This is good for conversion to be, like, a rental property or an extra property on the land or what have you. Probably until we start seeing, like, home like, I imagine you’ll see a trend of homes with ADUs selling maybe at a certain price even further than something without one. Does is it just gonna take some time to see that trend for you to start incorporating that as part of the appraisal, or is it already in in play?
Bob: It’s already happening. Just for people who don’t know what ADU is accessory dwelling unit. Yeah. Again, as an appraiser my house I’m appraising has a ADU, I have to give them a comp, at least one comp of the ADU.
Mike: Okay.
Bob: Because I have to I have to say, a, this is market accepted. Because everything’s with the banks isn’t market accepted. If we can prove it’s market accepted, then I have a problem. So even if it’s a pending sale, a couple active saying, there’s nothing that’s similar to sold. But here are two or three on the market right now that have similar ADUs. And that’s also, again, we’re talking about if I don’t have one in my same town, go to a competing town. And as long as I can show them the ADUs, if it’s they’re okay with that. I’m seeing more I don’t know. Maybe you guys can answer this. I’m seeing more ADUs coming up in the city of Boston anywhere right now.
Saad: Yeah. Mhmm. That well, I mean, we had a we had another agent, who actually is on the Everett, board of zoning appeals. So he’s he was talking about, he was talking about how he started to see them, like like, plans being submitted in towns, like like, ancillary town towns around Boston as well. But I agree with you, like, Everett, for example. But I agree with you that definitely the city of Boston, that seems to be with most of the buzzes, most of the action around ADUs.
Bob: Yeah. Well, it’s awful that. I don’t know why. She’s off having ADUs.
Saad: Yeah. And, Bob, can you tell us, like, in terms of in terms of, like, just somebody who’s, like, a first time home buyer. Right? What should they be keeping in mind when it comes to actually, even if they’re not a first time home buyer, but, like, just new to this market, like, the new the like, whether they’re new to the Greater Boston market, the the way the market is right now, what should they be keeping in mind when it comes to, like, just, you know, entering this market and and having success as it pertains to appraisals. Any tips and tricks?
Bob: I mean, there’s certain things that definitely add value, and and and appraisals are all about value. We’re an appraisal is an estimate of market value of in this situation of real estate. So that’s that’s what our job is. And what okay. So what adds value? The major things that add value, new kitchens, new bathrooms, obviously, new obviously, square footage. Square footage adds value. Make roofs. When you get into upgrades of cosmetics, you have to be careful because that’s just personal. That doesn’t Mhmm. That doesn’t severly add particular value. I mean, you have I’ll speak for my father-in-law. He has fountains everywhere. He thinks they’re beautiful. You know, that’s not value. That’s his first. You know?
Saad: She’s telling me. Tony’s on this. Tony’s still on the line. Yeah.
Mike: She’s on
Bob: dinner right now. So Yeah.
Mike: That appeals to the Mediterraneans. I’m telling you.
Saad: So Yeah.
Bob: Obviously, number one thing with value is location. You can tell you it’ll be all the first time homebuyers.This neighborhood, you can get more for your house, more for your money than this neighborhood because this other neighborhood demands more money. But you can get the same hunt same 900 square foot ranch here for 20% less than you can if you go over four blocks over to another neighborhood. Mhmm. So locations so you get you know, what is your client willing to sacrifice to get a better value?
Mike: Gotcha. So
Saad: Love it.
Mike: Yeah. That’s where the knowledge comes into play of, like, okay. These two blocks are $50 per square foot more typically than these over here.
Bob: Yeah. It really is. I mean, you know, I’ll go back to the city with the South End. I mean, you know, you go back to say there’s certain streets in the South End that get way more more money than the other streets, and they literally across Mass Ave. You cross Mass Ave, you know, you get closer to Mass Ave. And Mass Ave is becoming incredible, lady, with all the invite all the, construction going on there.
Mike: Shops, restaurants.
Bob: Yeah. It’s amazing. I mean, it there’s still parts of, you know, the Union Park, Waltham Street, Bradford. That’s called the the Super 7 Street down there. And then you get to West Newland Street by, you know, closer to Back Bay. There’s certain neighborhoods that just get more, and that’s in and that’s where you have to educate your buyers and buyers and say, listen. You know, it’s all about location, and depending what you wanna spend is what you get.
Saad: I think that’s a key thing to keep in mind for everybody, and I think probably people get sick of hearing it. But location is everything.
Bob: It’s an adage, but, I mean, it’s so relevant. It’s so relevant.
Saad: It’s always relevant.
Bob: Yeah.
Saad: It is. Yeah. Listen the market. So, I think if you I mean, there’s a lot to take away from Bob here today and and, obviously, great resource for us, but, like, just keep that in mind as, like, you know, especially in Greater Boston. Right? One block, one street can make a huge difference. Like, is everything.And that’s one of the reasons why, I mean, Greater Boston is what it is. I mean, we’re kind of in a bubble. Right? We’re in a bubble in that we’re insulated with everything else. Not a bubble.
Bob: Yeah. No. We’re protected. As a major city, we’re small. Boston’s a small city.
Saad: Yeah.
Bob: So real estate’s limited what you can buy in the city. So that’s why that’s why it’s I mean, that’s why, you know, places like the Back Bay, you know, South End, Beacon Hill, when things slow down a little bit, even when they have we had a little bit slow, it’s not like that they losing value, which is the increasing the amount of the increasing per year was slowing down. They weren’t going down about The US. They just weren’t going up 25% a year. They’re going 15% a year. Right. Oh, too bad. That’s bad.
Saad: I mean Yeah. So Right.
Bob: And it is. It’s all about location. Like, you guys know that. That’s just it. But, you know, get align yourself with good brokers like yourself, educate your buyers and sellers, and what if they have you guys, they’re all set?
Saad: Yeah. We did not pay him. Yes.
Mike: Oh my god. The flattery is unbelievable. Thank you.
Saad: Bravo. Venue you later.
Mike: Random question now that we’re on, location. Are there any things like, and this is just me off the top of my head. Cemeteries or, like, other, like, places that if you’re near it might change value? I actually don’t know the answer.
Bob: So Absolutely. Cemetery to a certain ethnic group is a no go.
Mike: Oh, yeah. Yeah.
Bob: Yeah. The way the house faces Mhmm. Is a no go. So that’s not you know, all brogues, I’m privy to that. You’ll learn that if you have a certain ethnic group where they could say.
Saad: But does that imply such appraisals?
Bob: No. I mean, so if you’re located across the street from a cemetery, so that what that’s called is an external obsolescence. And what I’m just getting a little technical here. Yeah.
Mike: What that means is A technical.
Bob: What that means, that’s something externally not has nothing to do with your house, but has something outside the house that the buy that the homeowner has no has no, you know, control of. For example, a cemetery or, for example, if you there are train tracks right behind your house.
Mike: Yeah.
Bob: I mean Yeah.
Saad: Yeah. That’s gonna there’s nothing that homeowner could do about those train tracks. So is that gonna impact value? For the most of the times, it does. Not all the time, but the most time it does. But, again, the way we show that is we find another house, and there’s always a way to find another house. Maybe not with the train track behind it, but close to a cemetery, which is another external influence, across street from a garage, which is, you know, another so find something that’s a similar external influence that justifies us making an adjustment. So those items still make a difference.
Mike: I’ve Interesting.
Saad: Yep. Definitely encountered those, cultural differences when it comes to, like, what what, like, what direction a unit is facing, if it’s facing the inside of a street or not, if it’s facing it’s close to a cemetery.
Bob: You know? Yeah. It’s hard for a broker to be aware about that. You learn it by experience. Yeah. I mean, you learn it by experience.
Saad: Absolutely.
Bob: I know if they have a good one, a place in the house, I buy them.
Saad:I think it’ll be really good to have you back on in, like, you know, six months or something like that just to see if anything has changed, if you’re seeing any new trends, I mean, appraisals or something. Yeah. We talked to our clients about, but I don’t think a lot of consumers or even frankly, if you’re an agent listening in, like, you should be talking to your clients about it. Right? So, like, I think Bob can be a great resource for you guys. And, obviously, him being in the market. Is constantly changing.
00:28:06 [Speaker 2]
Saad: So well, thank you for the new folks that joined. Mason, Kim Hanlon, looks like a fellow agent there, Michael Peter. Hey, Ken. You got Mina, Strong CSMD. What’s going on? What’s up? Welcome, everybody. Bob, thanks so much, man. This was awesome. You guys. You know, a winner and still the best appraisal appraiser in the whole world.
Mike: Around you, DKS.
Bob: Alright, mate. Thanks for having me. I appreciate it.
Mike: Yeah. Thank you, Bob.
Bob: Have a good, great night.
Saad: Bob, we’ll talk soon.
This Instagram live is transcribed for your easy reading. If you want to catch Storii Time live, every week, follow @saadmun1r and @photolowski on Instagram.