Understanding Appraisals and Property Value with Sean Tiwanak

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Interview Transcription

ADRIENNE:
Welcome back. And thanks for listening to the Team Lally real estate show home of the guaranteed sold program a well buy it. I’m Adrienne and I’m Attilio and if you have any questions just give us a call at 7999596 or check us out online at Team lally.com.

ATTILIO:
Our guest today is a proud Kamehameha Schools graduate earned a business degree from I want to say like woowoo but it’s not woowoo it’s UH West Oahu and became a registered respiratory therapists at KCC. With deep roots in Hawaii, he was inspired by his mother real estate broker and appraiser in the 70s and 80s.

ADRIENNE:
Starting as an appraisal research assistant in 2006. He dedicated 15 years to the fields in 2020. He earned his appraiser certification and revitalized his mother’s company Appraise It! Hawaii in her honor. Please welcome a dedicated professional committed to excellence in real estate, Sean Tiwanak.

ATTILIO:
Hey, Sean, you there?

SEAN:
I am here.

ATTILIO:
All right,

SEAN:
Adrienne Attilio Nice to be here to today.

ATTILIO:
Hey, show

ADRIENNE:
excited to have you and excited to have you appraisals because this is you know, like first of all everyone gets gets one when they own a home or refinance a home and there’s probably other reasons that they would need it. Yeah, you know, even

ATTILIO:
even like, like, you know, like there was a guy in Austin Powers The bullhead guy with a cat with no hair.

ADRIENNE:
Good day, Mr. evil

ATTILIO:
doctor, you

ADRIENNE:
are evil anyway, even

ATTILIO:
Dr. Evil, he had to get one appraisal on his extinct volcano because, you know, he financed it. And so if you had to appraise Dr. Evil’s extinct volcano, would you appraise it? How would you get the

SEAN:
question because you bring up an issue with an appraisal, you think you want to generally stay within your area, but depending on the type of property in this case of volcano, you may have to look outside that area.

ATTILIO:
You might have to look the mainland.

SEAN:
Yeah, yeah. Wherever there volcanoes, you have to expand your market area. To do that, shopping malls or churches and

ATTILIO:
things like that. Yeah. So let’s talk about appraisals based. Well, they got the those questions will be here, but let’s break it down. What is an appraisal?

SEAN:
Now, the first thing I think to mention is, it is not an exact science, it is really boils down to it is a formulated opinion. So it’s not necessarily a fact that it is, you know, like price is a is a fact, sales price is a fact. But value is always an opinion. So

ATTILIO:
that I think I’ll use that with my daughter. If you bring on one boyfriend, I say, You know what, I got a bad credit, no, my job, I have a formulated opinion that you should no longer see him anymore.

SEAN:
Yeah, he has very little value in your eyes. We

ATTILIO:
got no comps on this on this kid, get him out of here

SEAN:
want to touch on something you mentioned earlier is there’s a lot of reasons to get an appraisal. And generally, people are familiar with purchasing a home and the needing an appraisal or maybe they’re getting a HELOC or refinancing cash out or a reverse mortgage and those kinds of things. Nowadays, a lot of if your loan to value is is low, meaning your value is a lot greater than what you owe on your loan, require appraisals for a lot of those loans anymore. But when you have a higher loan to value, or you have a very expensive home, over 2 million gonna require an appraisal for that. And that’s typically what people encounter. And our job is to do is to make sure that the client at the bank, for example, you know, a bank wants to lend money, but they want to be sure that the value is is going to cover the loan. Yeah, that happen. So someone defaults, yeah.

ATTILIO:
banks out there. Yeah, loaning money on houses, for more or less, you know, if the house is a million, they’re not going to give you a $2 million loan.

ADRIENNE:
Alignment.

SEAN:
This is what happened in the early 2000s, when there was a real estate bubble. And in 2008, when there was a big crash, actually, there’s, there’s some members of Congress put the blame basically, on appraisers shoulders, saying that values were too high. And part of the reason for that is because there was a lot of influence and a lot of collusion and you know, people trying to get higher values of banks want to sell loan, so they would try to influence that and sometimes try to pay people money. And then my mom was one of those people who would never take the bribe, you know, that’s just unethical, right? And it is against what we call use pap. And that’s a universal standards of professional appraisal practice. And that’s

ATTILIO:
what’s been put in place because now it’s a different system. Appraisal

SEAN:
I mentioned that is because now it’s become very important for the appraiser to be independent, unbiased, uninfluenced and objective. And that’s why a bank will or a lender will seek the services of an appraiser because they want an independent value valuation so they can be sure that they’re entering into a good deal. And they mentioned that actually goes and applies to a lot of people that are purchasing homes or selling homes to each other friends or they’re not going through a real estate agent. So sometimes we get calls from people like that they want to know you know, is what price should I sell it at or is this a good deal? You know, for me, I make sure I’m not paying too much. Yeah,

ATTILIO:
but correct me if I’m wrong, you can appraise it when the bank needs to hire an appraisal then I like oh, yeah, Ah, god, Charlie, just get one case green bottle, he will give them the value. They have to call a

ADRIENNE:
third party and then the third party decides. So that is credit.

SEAN:
Lending that’s a difference between mortgage lending and personal appraisals for anybody in the public out there? So nowadays, since 2008, they have a new the legislation that had taken place that prevents a lender or an appraiser or bank from communicating at all. Yeah, so they, they’ve created this new industry called appraisal management companies that are third party. And they act as a go between between the lender, so there’s any contact, there isn’t any kind of influence. And appraiser independence is a very key thing. In fact, you have to certify those in our reports.

ATTILIO:
It’s kinda like, it’s kind of like the dating game, you know, from the 70s. And like, you get the bank and then you get the tree appraisers behind the curtain, and they’re like, appraiser number one. Oh, what is the most humorous situation you’ve been in when you’re looking at a home? And it’s like the dating? No, no, they don’t do that. They just it’s next though, right? Yeah, well,

ADRIENNE:
yeah. And random,

SEAN:
I think. I think the important thing is, as an appraiser, who do we represent? Yeah. Okay. So in any any any situation, I’m never representing the buyer, I’m not representing the seller. I’m not representing the bank, although I take those people’s interests into account. And it’s very serious because the end of the day I’m writing a report for an underwriter to understand what I’m so but who do I represent? My sister, we talked about it. I represent the house. I’m speaking, I’m the voice for the the house with a house that has no voice of its own. Yeah. So essentially, I’m representing the house that dwelling the land, the condo, and with the type of certification that I have as a certified residential appraiser. I’m only allowed to do single family type dwellings up to four, like income properties and beyond that commercial building. No, no, no, you need.

ATTILIO:
That’s a general specialization. Yeah, focus.

ADRIENNE:
That we like briefly touched on reasons why people would need appraisals. Let’s let’s go through all of them.

ATTILIO:
Well, let’s go through most of them or as many as we can. So in a one hour show,

SEAN:
no, I think it’s I think it’s a really good thing because people don’t always realize about it get worse.

ATTILIO:
So So wait a minute, before we get started, I have a recording of the houses that you’ve appraised here’s one house well, you know, my owners, they would pay me every seven years they address all the leaks. They really took care of me you know, I really feel good about myself and I really feel in good shape I’ve been working out I look pretty jacked up. Sean, can you give me all good value and then here’s the other one. Oh, these owners this all lazy my roof is leaking. Now they have paint job in almost 20 years already and then you know that back bathroom debacle been leaking since 1986. But do your best you can show I really appreciate it

SEAN:
you guys have been in the business a long time and I know you’ve seen it all. Yes, you know, we and we see it all we see the most beautiful homes, the $28 million homes and then the homes that are almost a nightmare to walk into and you want to take a bath afterward because it’s gotta be the shoes on. Not even I was in the house yesterday. I don’t don’t step on the deck and it’s like a 20 foot drop

ADRIENNE:
and like a safety hazard a little bit of distance. Oh, I

SEAN:
watch every step you know so you got it you know there’s a we you see it all

ADRIENNE:
up a dangerous this could be dangerous field depending on the homes that you’re working through. Yeah,

ATTILIO:
yeah. Like

SEAN:
you never know. There could be people living there that aren’t supposed to be there. That’s true. Yeah. So that once in a while, I had to accompany people on appraisals just to get some

ATTILIO:
reef shoes. You tell them I have a foot condition. Oh, what’s your foot condition? I don’t want to walk out of here with looking like I’m part of the Blackfoot tribe.

ADRIENNE:
So let’s go through some of the reasons why people would need to get appraisal. So we’ve already talked about Robin Yep. So yeah, go ahead. First

SEAN:
thing you mentioned already we kind of touched on was if somebody is buying or purchasing a property with friends are they’re paying cash and they’re not a bank? Yeah, sometimes they want to get an appraisal just to make sure they’re not paying too much and those other ways for personal reasons you know, divorce is a common one that people want to settle

ADRIENNE:
to you need two appraisals usually one from each side. Yeah, you can’t usually Yeah,

SEAN:
it depends on if they’re gonna go to the judge or route or not. Sometimes I get contacted by a couple they just want to work it out with themselves or cordial and just want to get an idea of market value. So that’s what we provide another

ATTILIO:
call up the Life Hello, this is Sally are gonna be Sally T Winnetka gonna be doing your period then you call her husband. Hey, this is Sean and we’ll be doing your appraisal. Yeah,

SEAN:
you All right, I gotta tell you something, though, you know, it’s very uncomfortable doing a lot of these type of personal appraisals, because somebody’s always unhappy. They want to party. Bro not gonna be happy.

ATTILIO:
No. appraisal. No, that’s her appraisal. Okay. Yeah, the divorce is important. Purchase, or refinance, he locks. What else? Yeah.

ADRIENNE:
And then the most recent one, Shawn did was that a time of death. I love that. What is that? Right tactless?

SEAN:
That’s what we call an estate appraisal. So when somebody inherits a property, at whenever they dispose of it, like, it could be in a trust, or it could just be in their name. And when they dispose of it, they’re going to be having to take care of any capital gains of that tax of that property. And the proceeds are also very important. If you’re using it, and rental, yeah, you need to get this appraisal, because as of the date of death, or whenever you inherited that property, it sets a new tax basis. So this is one of the few times that the federal government actually gives you money. So if a house is your, let’s say, you want to dispose of it, and it’s a million dollars, well, you got to take care, that million dollar capital gain. But if you if you get if you inherited it and was 800,000, you only have to take care of a couple 100,000 of that. And I think government gives you a couple 100,000 at the top anyway, for really any interest or any even if it’s in a trust, and I see this a lot where there’s two or three or four family members that own a property, and two of them want to get cashed out. So they want to they want a date of death appraisal, because they’re going to need that for the for the taxes that people that are getting cashed out. And they also want a current market once they know what what to charge their family members.

ATTILIO:
So there’s all kinds of appraisals, you know, if you need one, you’re gonna give us a call, give Sean a call. But let’s

ADRIENNE:
just make sure that people knew when they needed to get one because you may not even know this time of death thing.

ATTILIO:
One of the things we recommend is getting an appraisal if you’re listing it for sale and making it part of the documents to market property. Yeah, certified pre certified pre you want to

SEAN:
make this point. It’s a very to me, it’s very important because I do a lot of estate work, and people call me. And sometimes I’m doing appraisals where they inherited the data death was 1994. They’ve done it. I just finished one today. 2011. So the as soon as you have a family member that passes away, the sooner you do the appraisal the better. Yes, it’s a more accurate appraisal, it’s easier to do. So and it’s gold when you finally need to use it, even if it’s years down the line. It’s going to Yeah, and it’s it’s I mean, I was told this go to by a CPA. And we were discussing all of this. So I just urge people to get that appraisal done right away as if possible as soon as possible. But I do have clients that call me within weeks. And that’s huge. That’s the best.

ATTILIO:
Somebody’s hearing.

ADRIENNE:
Really good advice. Yeah, don’t drag your feet on it. And like wait until you know you need to

ATTILIO:
20 years like God does not have a hot dog, a hot dog that takes him back in time. That’s,

ADRIENNE:
I mean, he can go look back on but it’s just like, what he’s saying is that the accuracy is going to be so much better if you just take care of early Yeah, and this

SEAN:
data is not as robust. Like if you look back at MLS, you know, beyond like 2011 or you know, your 2000s or 1990s you don’t have all the photos so you don’t make

ADRIENNE: 
assumptions I don’t even think was did we even have the

ATTILIO: 
map then we wrote covered wagons and by torch. That’s how we build homes back then.

SEAN: 
The MLS allows you to go back to 1993. They never get rid of that data. But the problem is you’re on all the photos. So you can’t really verify the quality conditions that type of

ATTILIO: 
upgrades. Do the best you can. Yeah.

SEAN: 
What’s something we want to talk about? Actually, what what do we look at? Right? Yeah,

ATTILIO: 
let’s talk about what affects value because we this show, this show goes fast. In fact, we only got about like eight minutes left. But let’s talk about what are the things that affect values on properties go?

SEAN: 
Well, the first thing is the lot size and the type of zoning that it is that determines a lot of things whether you can have a adu or not if it’s single family, or an effort or if it’s condo per se. But the key thing is always going to be gross living area which we call GLA and the room column and primarily bedrooms and bathrooms those have the highest value because they offer will be called greater utility The there’s a big difference between a two bedroom house and a three bedroom house. Because the average family generally, two bedroom houses aren’t as common for us. Yeah, but generally three bedroom house is kind of a minimum. So you see that there’s a more marginal difference between three and four bedroom. And I want you to get above these five 610, no 11 bedroom, a marginally actually diminishes the value of a

ADRIENNE: 
big difference between the two and the three bedroom as well. Yeah, it

SEAN: 
can be actually detrimental there but 11 bedroom house, so it’s, it’s over improved in it, your buyers are going to be different. So those are the main factors. But we look at what we call quality and condition. And those are two different things. Quality relates to the type of architecture and the way it’s built single wall versus, you know, custom home or houses that have external ornamentation, and a little bit higher degree of construction. And we have a rating system from one to six. And then the other is condition brand new house versus second owner versus a house that is starting to see a little bit of deferred maintenance, but it’s pretty new in your just what we call kind of like average home where hasn’t had any major upgrades in the last 10 or 15 years. That’d be like a C four, all the way down a C six where it is not habitable anymore.

ATTILIO: 
Yeah. So put that into context like, Yeah, is that house? Like? Is that house like DadBod? Or is that is that house all jacked up?

ADRIENNE: 
You know, Sean, when you come across homes that have added bedrooms and bathrooms without proper permitting, talk about that? Yeah, can you put a value to because you can see it’s there? And owners can use Oh,

ATTILIO: 
are non permitted areas of any home treated in an appraisal?

SEAN: 
That’s a great question. Because that’s why a mortgage lender, for example, and we’re talking about mortgage lending for a lot of our stuff. That is That is why they hire us because oftentimes, and then a lot in Hawaii, right? We there are people who have living areas that are non permitted. Yeah. So what is on public record? Does it match what really exists? So it’s our job to go out there and actually physically measure and see what what is really there and report that to the lender? Now, it depends on the underwriting guidelines for the individual lender, but I would say 98% of the time, they just want to know what’s there. Even if it’s different, we just have to state that it’s different. And then how is it being marketed? You know, you guys put things on MLS a certain way. And that’s how it’s being marketed. So that is the, you know, the that that really sets the whole market value.

ADRIENNE: 
Well, if we market it as the tax records don’t match the house, but there’s, you know, four bedrooms, tax records, say three. So there’s physically you can see your credit for that fourth bedroom, or you just have to

ATTILIO: 
jot it in the appraised value of the fourth bedroom.

SEAN: 
No, no, no, yes, you can, it depends on if it is consistently built, like the rest of the dwelling in terms of finishing and construction and materials and quality. And the the the main thing is, is there’s only been one instance that I can think of and it’s that, you know, 18 years, whatever I know of where a lender was so strict on their guidelines, it may have been a certain type of loan, and I remembered it’s real clearly. There were five bedrooms in the home, but there’s only permitted for three. So the lender would only accept what was permitted. And that’s pretty rare anymore. And that even goes for accessory dwelling units. You know, Fannie Mae changed their their guidelines last year, even so you don’t have to be permitted anymore to get a mortgage loan on a non permitted accessory dwelling unit, or what we used to call an ohana unit. But it’s that’s different. Yeah. So the lending guidelines, I think are trying to follow the trends of you know, society in general is so common people need homes, they need housing. We don’t have the land here. And so just there’s tends to be more density and neighborhoods and that it’s national. It’s not just a thing here. So I mean, that’s a good news for people. I’m not saying don’t get your, you know, should get your work permit and that is always the best, and there’s probably other repercussions. Like you could potentially run into issues with insurance or you click that too. But you could run into some issues with insurance coverage or perhaps, you know, you do have some lenders with their underwriting guidelines that are Be like,

ADRIENNE: 
Yeah, we had one of our lender, whenever our team members had a neighbor, a disgruntled neighbor, and they reported to DPP and it’s been a complete nightmare trying to get this thing fixed. Yeah. So yeah, your stuff permitted, even if you can, even if it counts in the appraisal, it’s, there’s other problems. Yeah, along with that. That’s

SEAN: 
absolutely correct. You know, I know people that have, like you said DPP isn’t getting involved because of neighbors. You know, that’s the Department of Planning and permitting for the folks out there that don’t know what that is. But yeah, you want to get your work, permit it as and do it. Right. Yeah.

ATTILIO: 
All right, Sean. So again, appraisals, if you had to share one last thing about appraisals, if you couldn’t, like if this whole farm it out, if this whole radio show got erased, and you only had a sentence or two to to keep and go inside the time capsule, to be opened by Charlton Heston, Charles tall, Charles offered his last name, he was in Planet of the Apes. And he’s over there. And he sees the Statue of Liberty. He’s opening up the time capsule and then inside it is a message from a from from appraiser Sean Tiwanak from 150 years ago, what would be that advice?

SEAN: 
be nice to your appraiser, the hard job. And sometimes things take a little bit longer than you want. There’s a lot of data out there and AI and mass appraisal models and all of these things, but they’re nothing beats the expertise of a human walking into that home. Yeah, and seeing what’s really there

ATTILIO: 
and clear all that stuff away. So you can see the place.

SEAN: 
Just yeah, it’s a shrinking field. So you know, and part of that has to do with technology. But at the end of the day, you know it is

ADRIENNE: 
to have the human touch. We work.

ATTILIO: 
Okay, well, thank you, Sean, for being on the show. Thank you, Sean. Thank you for all that information. Thanks, Sean.

SEAN: 
Okay, guys, have a great day. Mahalo. And Aloha to everyone out there. Thank you.

ADRIENNE: 
Alright, that’s Sean Tiwanak of Appraise It! Hawaii appraiser.

ATTILIO: 
Oh, if you want to get hold of Sean, all you got to do is give us a call 808-799-9596 Send us an email info at Teamlally.com Or what’s the website Adrienne?

ADRIENNE: 
Teamlally.com.

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