A Tale of Two Real Estate Appraisals

Before we moved into our first home last May, the house was independently appraised on behalf of our mortgage lender.  Last month, we were given a "Godfather offer" to refinance by the same lender - no closing costs, with an interest rate under four percent.  Once we realized the offer was not too good to be true, we said yes in a heartbeat.  As part of the refinancing process, a different local appraiser assessed the value of the house - for the second time in fifteen months.

This strikes me as a unique opportunity for an analysis and a case study, as not much has changed in the house (or the local market) over the past fifteen months, and because in theory, two appraisers should independently assess the value of the same house in the same way.  Superficially, this was the case, as both appraisals came in at the exact same value.  However, upon further review, it seems that each individual took a completely different approach to reaching that same number.  It may be useful for prospective home buyers to read this analysis, as a low appraisal can sidetrack a closing, and some of the findings below (in my opinion at least) imply individual variability across appraisers.

(Of course, it remains to be seen whether our refinance will close on time, as our loan processor this time around may be the dumbest idiot alive, but that's a complaint for a different audience at a different time.)

***********************************

First and foremost, both appraisers used the same method to assess the value of our home - the Marshall and Swift Residential Cost Handbook.  (It's possible they used different editions, as the website does not indicate how frequently the book is updated, and it's not the type of thing a person can purchase on Amazon.)

Using this guide, presumably the appraiser takes the following steps in determining the value of a home - I should mention here that I am not an appraiser, nor am I a real estate professional, so this is what I assume from reading both appraisals in detail:

1. Determining the "statistics" of the home itself (size, number of rooms, number of finished rooms, etc.) as well as the quality of the structure
2. Determining the size of the property itself
3. Analyzing the "context" of the home (neighborhood, trends in the local real estate market, etc.)
4. With items 1-3 in hand, they then look at comparable properties that recently sold in town or locally, weighting each of these homes' sales prices upwards or downwards, respectively, based on improvements or detriments with respect to the property being appraised
5. Finally, taking a weighted average (sometimes overweighting a house that may be especially similar to the house being appraised) of the recent comps in order to hit an actual value for the property being appraised.

Because the appraisals took place fifteen months apart, each of the houses used in the comparison analysis were different in each appraisal.  Here's what else changed between the two appraisals:

• We added a new, energy efficient central air conditioning system.  The unit we had when we bought the house was 25 years old and our energy bill last July was $400.  Plus, we suspected the unit was about to break.
• Based on our naivete as homeowners, we (probably) do a more amateurish job of general upkeep on the property than the previous owners.  It hasn't been enough for the neighbors to complain, but I think it's the case.
• The housing market in our area went sideways.  An identical home on our block sold for the exact same amount we paid, back in the spring - the house had a finished basement (our basement is unfinished) but our kitchen is much nicer (we think).  So that's more or less a wash.

So far, nothing interesting.  But here is what I mean when I say that the approaches that each appraiser took were completely different:

• The 2011 appraisal listed our home as about sixteen hundred square feet, while the 2012 appraisal listed it as over nineteen hundred (!!) square feet.  That's a huge difference - basically half the size of our basement.
• The 2011 appraisal listed our garage as a one-car garage, while the 2012 appraisal listed it as a two-car garage.  Our garage could not fit two Mini Coopers, even if one were parked on top of the other.  I am not sure how this mistake was made.
• The 2011 appraisal listed the house as being 54 years old; the 2012 appraisal listed the house as being 42 (??).  We should all be so lucky.
• The 2011 appraisal gave us $55 per square foot for our basement, but $0 for improvements.  The 2012 appraisal only gave us about half as much for the basement, but twenty grand for improvements (such as our fireplace, new central air unit, and patio).
• In assessing comparable houses, the 2011 appraiser docked each home a ridiculous $10,000 for not having a fireplace.  (Our fireplace is so small that our realtor warned us that burning more than one Duraflame log at a time would surely burn our house down.)  The 2012 appraiser was more realistic, assessing a fireplace as being worth only $3,000.

*******************************************

In our instance, it is impossible to say which appraiser was "more correct."  After all, they came to the same conclusion.  However, it is clear that the 2011 appraiser was both more accurate and conservative with the size of the home.  On the other hand, last year's appraisal was far more generous regarding the value of the structure itself, allowing twice as much money per square foot for a part of the house (our basement) that is mostly unfinished and currently uninhabitable (unless you are an earwig).

This year's appraiser had the benefit of a house down the street that was identical and had recently sold for an amount just under the agreed, appraised value of our house.  It is possible that having a bad-ass kitchen (if I do say so myself) is slightly more valuable for a home than having a finished basement with no bathroom, as is the case for the house down the street.  More likely, though, the appraisers had different aesthetic tastes (as evidenced by the 2011 appraiser believing ludicrously that our teeny fireplace was worth ten grand), and these tastes impacted their assessments at a pretty fundamental level.

Given the variance mentioned above, I do believe we were fortunate that both appraisals came in at the same amount.  Had the second appraiser not asked me about recent improvements to the house - such as the new central air unit - it is possible that this year's appraisal could have been significantly lower than last year's.   For other people, a low appraisal could mean the difference between a relatively easy transaction and the whole damned deal going down the drain.

So, what would my amateur advice be for someone who is staring at an appraisal they disagree with?

1. Read the details of the appraisal and make sure you agree with them.  An appraisal should have a "Uniform Residential Appraisal Report" which lists all the pertinent statistics regarding the home, neighborhood, and market.  For instance, did the appraiser correctly estimate the size of the house?  Did they accurately state the age of the home?  In one of our appraisals, both of these pieces of information were off.  If you have evidence to suggest that the appraisal low-balled the house's size, or operated under the assumption that house was older than it actually is, it may be either correctable with the first appraiser, or worth springing the money for another appraisal.
2. Also in the "Uniform Residential Appraisal Report," there is detailed information regarding the comps, or recent local sales that the appraiser used to generate data for their analysis.  Take a close look at this information and try to understand the appraiser's underlying assumptions for the value of certain improvements (e.g., a larger garage, major appliances, finished basement, fireplaces and patio/decks).  You might catch the appraiser either undervaluing something that you have, or overvaluing something a bigger house has.  Don't think for a second that my fireplace is worth ten grand, and be skeptical about the assumptions that the appraisers make as well. 
3. Later in the "Uniform Residental Appraisal Report," there is a breakdown of how the value of your home is derived.  I've spent an hour trying to understand the formula, and it still doesn't make a ton of sense, to be honest.  But I can tell that liveable sections of the home, basements and garages are assigned different dollar values (on a per square foot basis, in my basis).  The 2011 appraiser felt that the livable spaces of the house were worth more per square foot than the 2012 appraiser; but the 2012 appraiser saw more value in my mostly-unfinished basement, assigning it almost double the value per square foot of the 2011 appraiser.  My point is, you may notice a systematic under- or overvaluation of these numbers, as well.

It strikes me that real estate appraisal is a highly inexact science, and there is great room for individual interpretation of a home's value.  As homeowners, we are all probably biased about the value of our home, especially if we have been living there for a while and have built lots of memories there.  Our lenders trust these independent appraisers to confirm whether they should give you a mortgage, so in my opinion it is our duty as consumers to hold appraisers accountable for the accuracy of their data.  As with every transaction, the devil is in the details, and hopefully my over-detailed analysis of our two recent home appraisals is helpful to someone out there.

DISCLAIMER: I am not a real estate professional, nor do I appraise anything professionally.  There is some chance that anything I have stated above may be fundamentally incorrect.  I have tried to be diligent to let you know when I am making an assumption in the above post - you should assume that everything I've written is an assumption, as a matter of fact.  Finally, I am sorry if this post bored you.  It is different from what I typically write about, I must confess.

Why Don't We See Each Other More Often?

(Author's Note: This entire post, including the very strange but completely honest 4 AM time stamp, is brought to you courtesy of double espresso.  Double espresso, keeping insomniacs awake since virtually the dawn of time.)

Last night, we ventured to New York for an event in the honor of a close relative on my mother's side of the family.  (My parents are divorced, so I naturally delineate my family into two "sides", as if they were Hatfields and McCoy's.)  The event was attended by many distant relatives, second and third cousins, mostly, and I had no frickin' clue who most of these people were.  My mother and aunt, who have the benefits of closer ties as well as memories of a time when our extended Italian-American family was closer knit, did know more of the guests and at one point my aunt uttered the classic line, "We only see these people at funerals any more."

(Observing other families, I've heard the related phrase "...weddings or funerals", but not in our family.  It's only funerals for us; weddings aren't that crazy huge in our family anymore.)

This led me to think, why is this the case?  And taking it one step further, assuming that it is true that extended families are breaking apart, does it even matter?

********************************

I'll keep my discussion of the obvious reason for extended families to diverge over time fairly brief.  This is the simple fact that - for immigrant families in particular - geographic shifts occur over generations.  This is what happened on my mother's side of the family, for example: my mother was born in the early 1950's in the Bronx, New York.  At that time, her entire extended family lived in a small enclave in the Bronx.  (Her mother and father were both born in the United States as well, but their parents were steerage-class immigrants from Italy/Sicily who made it to the States around 1910.)  My grandfather on my mother's side was both handy and intelligent, and wanted an ostensibly better life for his family, so he purchased a home in "the sticks" - Middletown, New Jersey, specifically the same home where I grew up and my mother and sister still reside.

This story is uninteresting except for that it is extremely common.  Some other relatives on that side of my family joined my grandmother and grandfather in New Jersey; many others moved to the northern suburbs of New York City; some others stayed in New York City for their entire lives.  Measured in miles, the distance between these factions of my mother's side of the family was not that great, but philosophically I think it was fairly significant.  The New Jersey side of the family has its problems, but as a whole, I think it's a pretty smart group of people.  And even half a century later, we've always felt obligated to defend our forefather's decision to move out of the city - for some inexplicable reason, even though New Jersey is an underrated and awesome place to live, we've always had an inferiority complex, compared to the New York side.

ANYWAY, that's my theory for my family.  This is getting way too specific, so let's move on.

****************************************

My mom's side of the family has clearly diverged over time, but some readers might argue that their extended family has stayed close, perhaps through the benefit of extended family reunions.  These reunions are nice, when they occur, but my opinion is they occur at considerable time and expense - and require people who have a great deal of money, as well as the desires to both organize and fund the events.  Some families attempt it once or twice, but like most traditions, they burn out and fizzle over time.  Many others simply cannot afford the financial and emotional investments of reunions, so they settle for the next best thing: weddings and funerals. 

Personally, being cynical by nature, I love the idea that people actually don't want to see their extended families more often - the "weddings and funerals" line that composes the key thesis of this post is just another white lie that people tell themselves because they want to feel what they think is the correct way to feel.  Here's why I like the idea:

• It's fairly established that many people can only keep a fixed number of acquaintances in their memories (there is disagreement on the maximum number, though popular psychology likes to state that it's in the ballpark of 150 friends and acquaintances).  For me, the number is probably more like thirty, but that is because I am a robot with a heart made of silicon - let's say 150 people at most.
• Relatedly, each additional social connection or friendship that a person undertakes carries with it a significant time and emotional investment.  Family ties carry baggage, and grudges with relatives can last generations.  It's certainly possible to remember the good times in a superficial manner (and over a fixed period of time) with distant relatives - at weddings or funerals, for instance - but maintaining relationships with large numbers of relatives over months or years can be incredibly taxing.
• Social media can maintain a desired level of closeness with distant relatives, without so much of the in-person emotional baggage.  Speaking from personal experience, it's way easier to manage the annoying aspects of someone's personality when you have the ability to limit or completely hide their appearances on your Facebook News Feed.

*********************************************

To the extent that maintaining deeper social connections with extended family is emotionally healthy, it is probably a wonderful idea to reconnect with extended members of one's family.  But I really don't think, for most people, that the above statement is true. 

In general, I am currently far closer with my father's side of my family than with my mother's side, but I am ten times closer with my close friends than I am with either side of my family.  That is because, for the most part, spending hours with my close friends is mentally stimulating, engaging, and fun, while spending hours with my extended family is exhausting. 

Why is it exhausting?  Trying to remember dozens of names, trying to remember where you met so-and-so fifteen years ago (at a funeral, most likely), and keeping small talk chit-chat while leaving aside matters of differing philosophy - the extended family on my mother's side is mostly conservative and deeply religious, and I am neither - are not things that come naturally to me, to say the very least.  My extended family mostly seem to be good people, and they mostly seem to be genuine when they ask me about how my life has been - but that's really all.  Given this, there should be absolutely nothing wrong with wanting to keep these relationships at arm's length.

I think at its core, this post is about the value of close friends.  (And also explaining why only older people care about genealogy.)  Arguably, the main reason anyone has a relationship with anybody is because it "helps that individual out".  (I'm speaking really colloquially here on purpose, to leave it to your interpretation of what "helping" might mean.)  To that end, it might make some utilitarian sense for families to break up as they establish themselves in some country over generations and diverge from a socioeconomic standpoint.  People (mostly) want to be friends with people who have similar viewpoints and philosophies and intelligence levels, and I think that as families diverge, those close family bonds change to relationships with close friends.  There's no reason why that change shouldn't be a healthy one.

For my life, certainly, that is a good thing to have happen, and it makes me happy that my grandfather moved to New Jersey almost sixty years ago.  For others, it makes them lament times when their family was closer - but lamenting this is, in my opinion, as silly as lamenting evolution.  Both are inevitable, and both should be recognized for their benefits.  Until the next relative dies, extended family!  (I don't want anyone to die any time soon.)

Restaurant Review: Sushi Palace, Somerville, NJ

Readers of this blogspace know that my wife and I are willing to drive long distances for good sushi.  We both consider ourselves sushi connoisseurs, having dined at most of the casual (and some of the legitimately upscale) sushi establishments in the area.  And why not: sushi, at its best, is an incredibly awesome and ridiculously healthy food, served in a unique style that allows for a considerable amount of culinary creativity.  It also can involve sitting at a bar, which is an activity that I endorse at every available opportunity.

Because we are both trying to eat conscientiously these days, sushi has become a once-weekly menu item for my wife and I for the past several months.  Lately, we've been faithfully driving to U-Yee Sushi in Iselin (forty minutes, round trip) for especially delicious but increasingly time-consuming "utility" sushi.  Earlier tonight, we decided to drive about five minutes to Sushi Palace in downtown Somerville, at the long-unheeded suggestion of one of April's coworkers, for a change of pace in the sushi department.

********************************

The short story is: Sushi Palace, though slightly austere with regard to "specialty" rolls, is a remarkably delicious and reasonable budget sushi choice.  It is a BYOB establishment with a $19.95 per person weekday "all you can eat" option that actually pleases the palate and offers a multitude of choices (from sushi and sashimi to teriyaki and tempura; including soup, salad, diverse appetizers and five ice cream options).

But before I get there, I need to gush a little bit about the awesome plethora of dining options that are generally available in Somerville, New Jersey.  The second biggest positive surprise of where we now live (second only to the front-row seats we receive to country club fireworks each Independence Day) is how fun and delicious it is to eat in Somerville.  Compared to more hoity-toity and gentrified New Jersey towns of the same size (think of Red Bank, New Brunswick, or Morristown), Somerville is not given anywhere near its proper due with respect to culinary quality.

These are just a few mentions off the top of my head, but Somerville has great standard family Italian (the original Alfonso's), great Cuban food (the wonderful Martino's), great Irish pub fare (Mannion's), about seventeen different Asian food places, as well as a multitude of hole in the wall Mexican places, all within a twenty square block, walkable stretch of Main Street proper.  Somerville is way more blue-collar and not as "pretty" as the aforementioned New Jersey towns, but dollar for dollar and inch by inch, it out-noshes all of them.  With the exception of Ethiopian food, I cannot think of a type of food that (a) can be found elsewhere in New Jersey but not in Somerville, and (b) that Somerville does not represent at least adequately well.

Look at the below subset of only the Japanese options in Somerville, and consider this in the context of a town that has only about 12,000 residents as of the 2010 census:

• Shumi Sushi on South Doughty: If you asked a hundred sushi fanatics in the area where the best sushi in Somerville is, 82 of them would say Shumi.  (This is a fact; I did a study.)  I think Shumi is slightly overrated and slightly overpriced, but it is delicious.  Tucked into the back of an inside mini-mall with no outdoor sign, you feel a bit like you are dining in an illicit speakeasy at Shumi.  The fish is extremely fresh but best served as sashimi because the preparation is somewhat dry and lacking in sake and rice wine vinegar. According to the reviews, you can dine there omakase (chef's choice), which I may actually try one day.
• Wasabi on Main Street: an Asian fusion place that also has a sushi bar, it is slightly less well received overall but apparently they have a slamming sea bass crunchy roll.  I've never tried it, but probably will in the future.
• Yutaka, also on Main Street: Mainly a hibachi place; I've only been there for hibachi, on a double date that turned ridiculous when I decided, in a fairly severe misinterpretation of proper social conduct, to chug sake for 90 seconds in response to one of those corny "sake-bomb" gags that hibachi chefs sometimes do.  Anyway, I can attest that the food was fantastic that night (though I became quite drunk on sake).
• And finally (keeping in mind I've definitely overlooked a few places), the aforementioned Sushi Palace, on South Division.

 *******************************

Sushi Palace is exceedingly pleasant, and from the outside, it does not look at all like a place where a group of four could conceivably dine on a four-course meal (and down two bottles of wine in the process) for only $80 + whatever you paid for the wine at the liquor store + tax.  Mostly hidden at the less traveled end of a pedestrian mall, with small side entrance doors, it feels a little badass entering the restaurant - like you're on a secret mission to hunt down sushi.

You may be offered a menu, or the hostess may immediately assume that you want the all you can eat paperwork (it's not a "menu" per se, it is two sheets of paper; you can order anything you want - as much as you want - from both sheets for $20 per person on weekdays).  All you can eat is a good deal, even if you're not feeling particularly gluttonous, as each category on the menu is not limited to the cheapest few options (like many sushi places).  There is even a section devoted to "Special Rolls," which clearly include more pricey ingredients - amazingly, even these are included in the "all you can eat" price. 

The ambiance is more steakhouse than sushi place - you sit in dark leather booths amid mood lighting.  Wine glass racks exist alongside the dark and sleek sushi bar.  Service is fast, polite, and unassuming, and the green tea is delicious and flavorful (unlike many sushi places in this price range, where it is way too weak).  Even on the Fourth of July and while enduring 100 degree temperatures, the restaurant was half-full with families and friends enjoying delicious sushi, which suggests the place becomes decently packed on weekends.

We chose eel and salmon sushi, salmon and tuna rolls, as well as dragon and summer rolls off the "specialty" list, with fresh edamame to begin.  The eel sushi was the fairest and sweetest we've tasted - though it was provided with a small portion of the "typical eel sushi accompaniment sweet sauce" on the side, we did not really need it.  It was also served at the correct temperature (eel served too cold gets too rubbery).

Further, I always consider the simplest rolls (salmon and tuna) a barometer of a sushi restaurant's success, because they are deceptively challenging to make.  Not only must the fish be impeccably fresh (there is no Japanese mayo or avocado to conceal flaws in these rolls) but the preparation must be nearly perfect to match the texture of the fish.  So many "budget" sushi places get this wrong, either by messing up the preparation (less frequently) or simply not having high enough quality fish on hand (more frequently).  Sushi Palace, at least tonight, nailed the balance perfectly - we noshed on the salmon and tuna like it was a bad habit, and these rolls disappeared the quickest.  I then enjoyed a pleasant but fairly generic green tea ice cream (one scoop was enough) for dessert.

Almost by default, the "specialty" rolls were the weak point of the meal (though they were not weak).  The summer roll was deliciously understated, with no mayonnaise aftertaste (I hate mayonnaise in almost every form), and the dragon roll was also decent (but with too much cucumber presence for my taste - I don't like it when something as preternaturally bland as cucumber is the dominant flavor in a sushi roll).  I understand the restaurant needs to make money, but I was also a little surprised to see the "Specialty Rolls" were the same size as the regular rolls. Most people would be satisfied to spend an extra $1 per "specialty" roll if they knew that the chefs would not skimp on the ingredients or the size of the roll itself.

That criticism aside, Sushi Palace was a delicious and unexpected delight.  I definitely recommend it to those in the area who want to eat a lot (or even a moderate amount) of sushi and not waste their entire wallet in the process.

Rating: 4 out of 5 stars (ratings take into account food quality, drink quality, service, ambience/atmosphere, and last but not least, value).

Best for: Sushi when you want to drink wine or Japanese beer (the restaurant is BYO); Sushi when you want to gorge yourself on sushi; a pleasant and quiet couple's meal

Average price: Don't go to Sushi Palace if you're not going to use the all you can eat menu - $20 per person on weekdays, $25 per person on weekends, cannot, to the best of my knowledge, be beaten for sushi of this quality, in this part of the country.