When Alvin “Chip” Wagner was a child, he often tagged along when his father, a Flossmoor-based home appraiser, went to work. “He’d pull up to a house and ask me, `What do you think this is worth?’ and I’d guess,” recalls Wagner, 33. “Then we’d walk through the house and he’d ask me again.”
By the time he was a teenager, Wagner could estimate a house’s value accurately. Except for the time he spent at Bradley University earning a degree in business management, Wagner has been appraising homes ever since. He appraises 200 to 250 homes a year from his home-based firm , A. L. Wagner Appraisal Group in Naperville.
Although homes and their price tags have grown since his grandfather, then his father, entered the business, his profession hasn’t changed that much, says Wagner. “My job is to determine the market value of the house, not to give my opinion of the house,” he says. “Appraising is an art, not a science. The appraisal is never exact because you can’t count a buyer’s or seller’s emotions or motivations. I saw one house sell for more than its value because the buyer’s best friend lived next door.”
Wagner’s finished product is slicker than his grandfather’s, thanks to his computer and digital camera, but has the same components. In addition to the home value, the 10- to 30-page document can include: maps, legal description of the property, photos and sketches of the house and property, and Wagner’s resume and credentials.
Wagner’s clients include homeowners, mortgage brokers, banks and corporate-relocation companies.
Homeowners hire Wagner to appraise their homes so they can qualify for cancellation of private mortgage insurance (PMI). “When you buy a house with less than 20 percent down, your lender requires you to buy PMI, which costs about $600 to $1,600 a year for the average home in the Chicago area,” Wagner explains. “Then, after you’ve paid down a certain amount of your mortgage or when your house appreciates a certain amount, you can drop the PMI. Every time there’s an article in the paper reminding people of PMI removals, I get a lot of calls from homeowners who want to know if they qualify yet.”
Other homeowners need appraisals for divorce or estate-planning. They need market values of their homes for lists of assets.
Mortgage brokers and banks hire Wagner to appraise homes for people who are seeking mortgages or home-equity loans.
When a homeowner is transferred and his employer offers to buy his house, the employer hires a relocation firm to sell it. The relocation company hires Wagner to conduct an appraisal. “Fewer employers offer this benefit than years ago,” says Wagner. “But there are still many in the western suburbs that do.”
Wagner’s least favorite is the foreclosure appraisal. “Then, the lender hires me to do an `as is’ appraisal,” he says. “It needs to know the condition of the house. Sometimes the homeowner leaves angry, so there may be damage. It’s a myth that foreclosures are just in low-income areas. I’ve seen million-dollar houses foreclosed. People lose their jobs at every level.”
Wagner’s average appraisal takes four hours, including research, touring the neighborhood, inspecting and photographing the house and drafting the report.
Wagner begins each appraisal by using his computer to access Multiple Listing Service (MLS), where he finds listings of comparable homes (comps) that have sold recently or are currently for sale. “I usually try to find about 15 comps in the same neighborhood or close by and the same school district,” he says. “The hardest ones to appraise are the most unique ones, like dome houses or log houses. They have no comps that are similar, but they make my job more interesting.”
Before inspecting the house, Wagner drives by the comps, noting how they compare to his client’s house.
The closest comp serves as Wagner’s basis. He adds and subtracts values according to variations in numbers of rooms, square footage and amenities. “People ask me how much I add, for example, for a fireplace,” he says. “I tell them it’s a matter of opinion; there is no little black book with the answers. In one case, a fireplace could add $3,000 to the house’s value. In another, it could be $5,000.”
As he tours the neighborhood and inspects the house, he tallies the house’s pluses and minuses compared to its comps. “Pluses include a park across the street, a finished basement, nice window treatments that stay, garage door opener, upgraded siding or flooring, fenced yard, patio, deck or great curb appeal,” he says. “Minuses include a bad view, busy street, lack of privacy in the back yard or backing up to commercial property. If the house doesn’t have something all the other houses in the neighborhood have, such as a three-car garage, that’s a minus.”
The Realtors’ mantra, “Location, location, location,” applies to his business, too, says Wagner. “A house on one side of town can be worth twice what the same house is worth on the other side of town,” he says.
Wagner begins each home inspection with a meeting with the homeowner. He reviews the purpose of the appraisal and asks the homeowner what changes have been made to the house since it sold last. He asks the homeowner if he plans to leave any unfixed items such as window treatments. He checks the homeowner’s real estate tax bill and reviews the plat of survey, which shows the home dimensions and lists easements and encroachments on the property.
“I always ask to see the title, too, to make sure the homeowner is actually the homeowner,” says Wagner. “Once, a son tried to get a home equity loan on his father’s house.”
As Wagner tours the home, he measures room dimensions and checks for broken fixtures. If it is a relocation appraisal, Wagner photographs the house, too. “The relocation company wants to see if there are, for example, any colored walls that they should paint to help sell the house,” Wagner explains. “Most buyers want white or off-white walls and carpets.”
The owner of a dachshund named Casey, Wagner says he has no problem befriending homeowners’ dogs. He was bitten once, he says, but the offender was a cat.
Between inspections, Wagner drafts completed appraisals. His goal is to complete each appraisal within three to five days of the inspection.
Wagner teaches his trade at the College of DuPage in Glen Ellyn. To maintain his license as a certified residential appraiser, he becomes the student, taking several continuing education courses each year.
These days, says Wagner, more and more mortgage lenders want “desktop appraisals” that don’t include inspections. “Some of the lenders give more consideration to the buyer’s income and credit history and less to his amount of home equity, so they don’t need a traditional appraisal,” he says. “For home equity loans, sometimes all the lender wants is a `drive-by appraisal.’ If the homeowner’s credit report is good and the homeowner has a lot of equity, the lender just wants to know if the homeowner’s estimated home value is in the right ballpark.”
Ditto for the homeowner selling his own home, says Wagner. “He doesn’t need the full report. He just needs to know about what to list his house for,” he says.
Regardless of these trends, there will always be a call for the traditional appraisal, says Wagner. “The demand fluctuates with the real estate market, so you have to be willing to work 80-hour weeks in the spring and have slower times around the holidays,” Wagner tells his students. “If you keep up with the trends, you can anticipate your busy times. I know, for example, to expect more home equity loans in January because people spend too much at Christmas. Then, it will pick up again in August when people need money for their kids’ college tuition.”
