Corrections or additions?

This article by Kathleen McGinn Spring was prepared for the

April 18, 2001 edition of U.S. 1 Newspaper. All rights reserved.

Value, In the Appraiser’s Eye

After a decade and a half in the residential real

estate appraisal business, Beth Ogilvie-Freda decided to go out on

her own last year, in good measure so that she could cut her hours

and spend more time with her two young children. It didn’t work out

quite that way.

"Now is a crazy time in the business," she says. "Things

are selling in under a month. In under a week. Even before they hit

the MLS." Where not long ago six months on the market was

considered

reasonable, now "if a house doesn’t sell in a month, it starts

to get stale." The rate of activity quickly turned her part-time

business into a full-time venture, where rapidly escalating prices

make accurate appraisal more difficult than it has been in years.

Appraisal is crucial to Ogilvie-Freda’s clients, lenders that supply

the

mortgages that turn an offer to buy a home into a sale. It is a key

support for the mortgage application, letting lenders know what amount

the house would most likely fetch on the market should the homeowner

default on his loan. Appraisers, who are certified by the state, are

behind-the-scenes players, but their input can mean the difference

between a closing or a cratered deal. Buyers, sellers, and real estate

agents are frozen in place while the appraiser goes about his or her

job.

Ogilvie-Freda’s work most often begins right after a buyer and seller

agree on a price and sign a contract. When a buyer contacts a lender,

the lender calls upon an appraiser like Ogilvie-Freda to put a value

on the house. In this market, determining the true value of a house

is no easy job.

"Assessments used to be helpful," Ogilvie-Freda says. "But

now, assessed values are so independent of market value." Going

to one of the meticulously organized filing cabinets in her

light-filled

home office, she pulls out details on recent appraisal jobs.

"Here’s

a $182,000 sale price," she says. "The assessment is $86,000.

Here’s another one. Assessment, $74,800. Sale price, $188,500."

In many area towns the value the tax office put on a house remained

close to what a buyer would pay throughout the 1990s. More recently,

however, Ogilvie-Freda has seen the market propel sale prices in an

arc way above the values tax appraisers found just a few years ago.

Comparable sale data, the touchstone guide for appraisers, is trickier

to use now, too. "I appraised a house in February,"

Ogilvie-Freda

says. "It had been sold just eight months before. The sale price

was 13 percent higher than it had been the last time, and the owners

had done nothing to it." It can take months from the time a

contract

is signed to the time the sales price hits public records. In this

overheated market, says Ogilvie-Freda, the information is already

outdated by then.

It becomes clear the job is much more complex than counting bathrooms

and fireplaces, and noting peeling paint. Appraising is a science,

for sure, but also a highly social art, involving the ability to

keenly

observe the dynamics of communities, to tease information from a

variety

of sources, and, yes, to bond with real estate agents.

A 1982 graduate of Princeton High School, Ogilvie-Freda went off to

Bryn Mawr (Class of 1986) to study biology. But, like many college

students, Ogilvie-Freda needed some cash, so she took a part-time

job in Bryn Mawr with Donald J. Reape and Associates, a group of

appraisers.

When she graduated, they offered her a full-time job, and she

accepted.

After five years with her original employer,

Ogilvie-Freda

joined TRW/Real Estate Loan Services, rising to the position of chief

appraiser and managing Pennsylvania, Delaware, and New Jersey. After

a year with that company, she and a former colleague from Donald J.

Reape founded Independence Appraisal Corporation in Saint Davids,

Pennsylvania. Finding the commute too much, she joined Valuation

Information Technology, working from her home office.

Ogilvie-Freda resigned from Valuation last June to spend more time

with her children. Soon, however, clients began to call and she

decided

to start her own business. She does only residential appraisal for

lenders, valuing houses that are being sold or refinanced. Right now,

the bulk of her work falls into the former category, but sometimes

it is the other way around. She has done valuations on homes that

were being condemned to make way for a new highway, and on rare

occasions

is called in to value a house where an owner and his real estate agent

can’t come up with a mutually agreeable listing price. Other

appraisers

spend their time giving evidence in court, but she says expert witness

work is not for her.

She is married to Mark Freda, a vice president with Goldman Sachs,

who, until recently, served as a Princeton Borough councilman. A

councilman

for 13 years, Freda decided "something had to go,"

Ogilvie-Freda

says, when their second child was born two years ago at about the

same time he began commuting to New York City several days a week.

Ogilvie-Freda met her husband when she was a high school student,

and they both volunteered for Princeton’s Rescue Squad. Her mother,

Hilary Hays, is a psychologist who works in the Princeton University

counseling center and also has a private practice. Her step-father,

Hugh Cline, is a sociologist.

Ogilvie and Freda were married in 1988. Their daughter, Rebecca, is

in kindergarten at the Littlebrook School in Princeton, and does her

schoolwork at a desk right next to her mother’s. Their son, Alex,

is two. The Freda-Ogilvie family lives in Princeton Borough, near

the township line, in a house they have remodeled and expanded

significantly,

but not, Ogilvie-Freda says emphatically, with any thought of raising

its appraised value. "The enjoyment of a home can’t be

measured,"

she says.

But many other things — from the quality of the

tiles on the roof to the moisture in the basement — can be

quantified,

and it’s Ogilvie-Freda’s job to take note of all of them. But, even

more important than noting the details is fitting them into a broader

picture.

For appraisers this picture becomes clear through comparing a house

with others of its ilk — comparables. In a simple world, if two

nearby homes of similar size and condition recently sold for $210,000,

the house under scrutiny would have a value of approximately $210,000.

Deciding just what is comparable, though, is the great challenge.

"It’s very rare you get down to apples and apples," says

Ogilvie-Freda.

In a new housing development comprised entirely of five bedroom

Colonials

with three-car garages, each sitting on half-an-acre of treeless,

former potato field, the job is pretty straightforward. But even

there,

a house that faces a busy street is not completely comparable to one

that sits at the end of a cul-de-sac.

Finding comparables in a development, though, is a snap compared with

finding the matches in a town like Princeton, where a single street

may include everything from a 1,200 square-foot, 50-year-old Cape

Cod with its original pink-tiled kitchen to a soaring 5,000

square-foot

glass-walled contemporary. These leafy streets of cottages and

mini-castles

are especially challenging to appraisers because, Ogilvie-Freda says,

"first, you consider the neighborhood." In residential

appraisal,

it’s that mother of all real estate cliches — location, location,

location.

A three-bedroom ranch in Hamilton will have a different value than

one in Pennington. Pick that house up and put it in the western

section

of Princeton, and it would have a different value than it would have

just few miles away, near the Princeton Shopping Center. The house

could be worth more if it were within walking distance of top-ranked

schools, or less if it were in a mixed commercial/residential section

that included, say, a strip club.

These factors, and so many more, make picking comparables nearby the

way to go — if possible. But it is not always possible.

"Sometimes

I have to go out of the neighborhood to find a comparable,"

Ogilvie-Freda

says. When there are no recent sales of similar houses near the

subject

house, she turns to sections of town — or a nearby town —

that are the most similar. Among the factors she considers are traffic

patterns, and walking distance to shopping, schools, and services.

Often, when nearby comparables are slim, she "mixes and

matches,"

using one close neighbor, and other houses from a different part of

town. In those cases, she may use more comparables — perhaps three

or four, instead of two — to establish a value.

Asked the most difficult house for which she had to find a match,

Ogilvie-Freda says: "A one-bedroom mill house in Trenton on one

acre of ground. It was historically certified; it was right on the

canal. It had everything." Everything, that is, but anything even

vaguely resembling a mate nearby. When she gets jobs like this,

Ogilvie-Freda

says she likes to go away and think a bit. "I have to wait; I

have to digest those for a little while." In the case of the

little

mill house in Trenton, she had to cross the city line, and go into

nearby Ewing Township to find comparables.

The current bidding-war real estate environment enters into the choice

of comparables, too, making it important to gather sale price data

well before it makes it into online databases. Here, it helps to be

intimately familiar with the area, and to have friends in the know.

If Ogilvie-Freda finds out there is there is a sale pending, she often

can call the real estate agent involved to get the number, thereby

netting a fresh comparable to gauge the value of any nearby sales.

Homes offered FSBO, for sale by owner, also are

important

sources of comparables, but information on the sale prices of these

homes does not go into MLS databases. Ogilvie-Freda sees an increasing

trend toward this type of sale, and uses FSBO comparables when she

can. They are especially crucial in neighborhoods made up of a melange

of houses in many different styles, sizes, and states of repair.

Recently she was appraising a two-family house in the tree street

section of Princeton. "Houses are all very different there, block

by block," she says. She needed to find comparables, and recalled

seeing a FSBO sign on a house on Linden Lane not long before. "It

was a two-family she says, and there aren’t many two families."

"I knew I had done it before," she says of the house. "I

had all the interior information." When she drove by the house,

the FSBO sign was gone. "I went to Borough Hall to see if it had

closed," she says. Sure enough, it had, and she had netted her

comparable. "It was very helpful," she says.

Establishing comparables is the most difficult part of residential

appraisal in most cases. After these similar houses with a recent

sale in their background are found, it is a matter of adjusting the

subject house’s valuation up or down. Factors that add to, or detract

from, the final appraisal number include amenities, condition, size,

number of rooms, and position on a block.

Ogilvie illustrates by pulling out an appraisal form for a house near

her own, in the area on the north side of Harrison Street in Princeton

Borough near the shopping center. The subject house, a four bedroom

Colonial, was new construction, a rare thing in Princeton Borough.

One of the comparables she chose was a 50 year-old house in Princeton

Township. The borough and township share schools and other important

services, and Ogilvie-Freda says there is little difference between

them in housing values.

She added $15,000 to the price of the subject house, as compared with

the older house, for its youth. It also got $5,000 for an extra

bathroom,

$3,000 for a fireplace, and $10,000 for a one-car garage. It lost

$1,000 for a slightly smaller lot — .03 acres smaller, to be

exact.

It also lost $16,500, figured at $36 a square foot, for being smaller

inside. A location facing traffic knocked off another $10,000.

Ogilvie-Freda hastens to explain that these amounts are figured on

a percentage basis for location elements. The subject house, and its

comparables, are valued at something over $400,000. You wouldn’t take

the same $10,000 from an $80,000 house that faces traffic, she says.

Adjustments for amenities are more straightforward, but still involve

as much art as science. In some neighborhoods, for example, decks

or pools or three-car garages, are the norm, and a house without one

could be adjusted downward more than the same house in a neighborhood

where these amenities are rare. And a house with a small brick

fireplace

in a neighborhood of two-story-high fieldstone fireplaces would get

a smaller upward adjustment, as would a house with a gas fireplace

in a neighborhood of wood-burning fireplaces.

Homeowners have long been told that installing a pool — at least

in the Northeast — is iffy in terms of the value it adds to a

house, and Ogilvie-Freda confirms this. "If the pool takes up

the whole backyard, it could be a negative," she says, especially

in neighborhoods that draw families with small children. If, on the

other hand, it sits in the ground on a large lot separated from the

house, it could add value.

Another iffy amenity, at least in terms of appraised value, is

something

that can cost a mint and adds tremendously to curb appeal.

"Landscaping

is such a gray area," Ogilvie-Freda says of all those rose gardens

and perennial beds. "It takes a lot of maintenance," she

explains.

"It can depreciate very quickly if you don’t maintain it."

It is her job to look out for the mortgage company’s interest, she

says, and while there is insurance to cover "anything that goes

drastically wrong inside the house," ornamental bushes come with

no such guarantee. "I give landscaping some value," she says,

"but not a whole lot."

Along with making adjustments for amenities, or lack

of same, appraisers take condition into account. And once again, it

all comes down to knowing the area. "Average," says

Ogilvie-Freda,

"means average for the neighborhood." If a spit-polish

appearance

is the norm for the block, that’s what it takes to earn

"average."

Going all the way up to "good," the highest rating, would

require exceptional condition. But a house that earned only a

"fair,"

the step below average, in an upscale neighborhood of carefully-tended

homes, could go a notch or two higher in a less house-proud part of

town.

The time required to gather, keep track of, and transmit all this

data has been cut in half in the 16 years she has been in the

industry,

Ogilvie-Freda says. "I used to have to develop photos, manually

do sketches, manually compute square footage, manually do the

maps,"

she says. Once upon a time, way back in the ’80s, she even had to

hire a typist. Back then, rather than looking up comparables on the

computer, "I used comp books that were so out of date," she

says. "I’m 50 percent more efficient now that everything is done

electronically." Everything she needs, all the information sources

and all the tools needed to produce and send reports, are now online

or on software.

Still, she doesn’t tote a laptop along as she does appraisals,

preferring

to schedule appointments back to back and then draw up reports when

she gets home. Some appraisers have added laptops to their field kits,

though, she says. On the other end of the technology scale are a

number

of appraisers who "still do sketches manually." Some even

avoid digital cameras, preferring to shoot and develop film, she says,

smiling at the thought of this quaint ’90s technology.

Throughout her career, Ogilvie-Freda has done only residential

appraisal,

and most of her work as been for conventional lenders, but she done

some work for FHA mortgages and also for relocation companies that

are buying an employee’s house ahead of a move. "The FHA has

different

requirements," she says. "There are condition requirements;

they are very safety conscious." The biggest issue with FHA

houses,

she finds, is peeling paint. The lead can pose a danger to children,

and the FHA requires that it be replaced before closing. "I did

one," she says, "where there was chipping paint all around

the windows." The buyer said he was putting on vinyl windows.

Still, she had to write her appraisal subject to the paint being

removed.

Of the buyer’s reaction in that case she says, "Nobody likes a

messenger."

Relocation appraisals pose difficulties of their own. "The

relocation

companies have two or three appraisals done," Ogilvie-Freda says.

They want to make very sure they are paying no more for the

transferred

employee’s house than it will fetch in the market.

In a straight what-the-market-will-fetch-sale, not directed by a

relocation

company or regulated by a government agency, there are pressures too.

Many parties have an interest in the apppraisal. Among them are the

real estate agents. If an appraisal comes in below the sale price

agreed to in a contract, the mortgage, the sale — and the agent’s

commission, could go out the window.

When she does appraisals, "the realtor meets me at the door,"

Ogilvie-Freda says. In her experience, some appraisers have an

adversarial

relationship with realtors, but she says she is happy to have their

input. A key to her good relationship with realtors, she says, is

that she does her research first, arriving at the house already

knowledgeable

about comparable sales in the neighborhood.

Then she asks agents and brokers if they know of anything that could

affect the market value of the house, perhaps a pending sale on a

comparable. "A lot of agents bring me information," she says.

Beyond their personal interest in seeing the sale go through, real

estate agents have a powerful force on their side, especially in this

market. If the buyer seeking the mortgage can’t get it, "there

are five more waiting behind him," Ogilvie says. "It’s hard

to ignore the hard fact of what things are selling for," she says.

And the bottom line is that the market value of a house is what a

buyer will pay.

Still, Ogilvie-Freda does occasionally come in with an appraisal that

is lower than the price offered for a house. "It’s no fun to cut

a value," she says. "I agonize. I exhaust all my

resources."

So involved was she in her work, in the career that came to her by

accident, that "I identified myself as a professional

appraiser,"

Ogilvie-Freda says. Gradually, however, a new thought occurred: "I

don’t want my obituary to read `appraiser,’" she says. Spurred

on by this realization, she is including new interests in her life.

Already on Princeton’s Community Housing Board, where she is active

in working for affordable housing for lower income Princeton residents

and workers, she took a master gardener course through the Mercer

County Extension Service. She hopes to use her newfound skill to help

landscape Elm Court II, a low income housing complex to be built next

to Elm Court.

She is passionate about the need for affordable housing in Princeton.

One of her brothers, Bob Ogilvie, an ETS employee, who is deaf and

aphasic, lives in an affordable condominium. "If programs like

this weren’t in effect, he wouldn’t be able to live in the

community,"

she says. "It means so much to our family." In general, she

says, a starter home for a family in Princeton now costs between

$250,000

and $350,000, well beyond the reach of many people who grew up in

Princeton, and who work there.

While landscaping Elm Court II, which has yet to be built, is still

in the future, Ogilvie-Freda is helping Littlebrook kindergarten

students

create a memorial garden for the late John Simone, a longtime

Princeton

resident and the school’s custodian.

In another new endeavor, Ogilvie-Freda just took up cycling so she

could participate in a 350-mile bike ride from West Point to Boston

to raise money for AIDS research. She will be riding with her brother,

Bradley Ogilvie, a counselor in a Chicago resident AIDS community,

and her step-father. The family decided that whoever didn’t ride would

stay home to watch the children. "`I’ll ride!’" she reports

her step-father quickly volunteering, so her mother is the default

babysitter. Her husband will ride along on his Harley-Davidson

motorcycle

as part of the riders’ assistance team.

Back home, Ogilvie-Freda lives in a fast changing community, where

the value of a house truly is whatever prospective neighbors put on

it. Young families, she says, are eager to move into her neighborhood,

in many cases taking the place of owners who occupied the houses in

the ’50s, back when they were new construction. Just two houses near

her home have `For Sale’ signs outside. And both of have had `Sold’

added to the bottom. Around the corner, where Princeton Borough

becomes Township, astoundingly large homes are rising from the shells

of much more modest dwellings.

Even as far afield as Trenton, site of that unique one-bedroom mill

house, homes are moving fast in a number of neighborhoods,

Ogilvie-Freda

says, giving Glen Afton, Hiltonia, Villa Park, "and even

Chambersburg,"

as examples. She says the real estate market is different now than

it was during the last boom period. "In the late ’80s people

didn’t

see that the market was going to correct itself," she says.

"They

know now, but they want the house anyway."

— Kathleen McGinn Spring


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